# Bollinger Innovations, Inc.: Form 10-Q/A for the period ended Mar 31, 2022

- Company: [Bollinger Innovations, Inc.](/companies/bini.md) (CIK 1499961)
- Form: 10-Q/A
- Filed: 2022-05-17
- Accepted by EDGAR: May 17, 2022, 13:26 ET
- Period: 2022-03-31
- Accession: 0001558370-22-009134
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1499961/000155837022009134/muln-20220331x10qa.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1499961/000155837022009134/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2022-01-01 to 2022-03-31 | $1.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2021-10-01 to 2022-03-31 | $2.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$30.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2021-10-01 to 2022-03-31 | −$44.5m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$32.6m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2021-10-01 to 2022-03-31 | −$69.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.63 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2021-10-01 to 2022-03-31 | −$1.99 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.63 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2021-10-01 to 2022-03-31 | −$1.99 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 51,392,988 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2021-10-01 to 2022-03-31 | 34,639,857 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2021-10-01 to 2022-03-31 | −$24.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2021-10-01 to 2022-03-31 | $10.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $65.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $83.8m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $105.2m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $43.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $55.6m | us-gaap:Liabilities |
| Long-term debt | at 2022-03-31 | $5.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-03-31 | $16.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-03-31 | $49.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,227 characters.

*You should read the following discussion in conjunction with the financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and with our audited financial statements and other information presented in our Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2021.This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward- looking statements as a result of many factors, including but not limited to those under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2021.*

*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 March 31 to September 30, effective for our fiscal year ended September 30, 2021. As a result, and unless otherwise indicated, references to our fiscal year 2021 and prior years mean the fiscal year ended on September 30 of such year.*

### Basis of Presentation

As a pre-revenue company with no commercial operations, our activities to date have been limited and were conducted primarily in the United States and our historical results are reported under accounting principles generally accepted in the United States ("*GAAP"* or "*U.S. GAAP"*) and in United States ("*U.S."*) dollars. Upon commencement of commercial operations, we expect to expand our operations substantially into the European Union ("*E.U.")* and, as a result, we expect our future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in our historical financial statements. As a result, we expect that the financial results our reports for periods after we begin commercial operations will not be comparable to the financial results included in this Quarterly Report.

### 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.

### Revenues

We have not begun commercial operations and do not currently generate any revenue. Once we commence production and commercialization of our vehicles, we expect that the significant majority of our revenue will be initially derived from direct sales of Sport Utility Vehicles ("*SUVs"*) and, subsequently, from flexible leases of our electric vehicles ("*EVs").*

### Cost of Goods Sold

To date, we have not recorded cost of goods sold, as we have not recorded commercial revenue. Once we commence the commercial production and sale of our EVs, we expect cost of goods sold to include mainly vehicle components and parts, including batteries, direct labor costs, amortized tooling costs, and reserves for estimated warranty expenses.

### General and Administrative Expense

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. Advertising costs are expensed as incurred and are included in G&A expenses. We expense advertising costs as incurred in accordance with ASC 720-35, “*Other Expenses – Advertising Cost.”*

### Research and Development Expense

To date, our research and development expenses have consisted primarily of external engineering services in connection with the design of our initial EV and development of the first prototype. As we ramp up for commercial operations, we anticipate that research and development expenses will increase for the foreseeable future as we expand our hiring of engineers and designers and continues to invest in new vehicle model design and development of technology.

### Income Tax Expense / Benefit

Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not.

### Results of Operations

### Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021

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

*(dollar amounts, except percentages)*

| ​ ​ ​ ​ ​ Operating costs and expenses: | ​ ​ ​ ​ | ​ ​ Three Months Ended March 31, 2022 ​ | ​ | ​ 2021 ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ Change ​ | ​ ​ ​ ​ ​ ​ % Change ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| General and administrative | ​ | $29,269,433 | ​ | $4,676,740 | ​ | $24,592,693 |  | 526% |
| Research & development | ​ | 1,183,437 | ​ | 538,271 | ​ | 645,166 |  | 120% |
| Total operating costs and expenses | ​ | 30,452,870 | ​ | 5,215,011 | ​ | 25,237,859 |  | 484% |
| Loss from operations | ​ | $(30,452,870) | ​ | (5,215,011) | ​ | (25,237,859) |  | 484% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Other income (expense):** | ​ |  | ​ |  | ​ |  |  | ​ |
| Interest expense | ​ | (2,120,515) | ​ | (4,092,759) | ​ | 1,972,244 |  | (48)% |
| Loss on debt settlement | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | 0% |
| Gain on extinguishment of indebtedness, net | ​ | — | ​ | 10,000 | ​ | (10,000) |  | (100)% |
| Total other income (expense) | ​ | (2,120,515) | ​ | (4,082,759) | ​ | 1,962,244 |  | (48)% |
| **Net loss** | ​ | $(32,573,385) | ​ | $(9,297,770) | ​ | $(23,275,615) |  | 250% |

#### General and Administrative

General and administrative expenses increased by $24.6 million or 526% to $29.3 million in the three months ended March 31, 2022 from $4.7 million in the three months ended March 31, 2021, primarily due to increases in professional services, marketing, and compensation related expenses associated with the growth of personnel and resources.

#### Research and Development

Research and development expenses increased by $0.6 million or 120% to $1.2 million in the three months ended March 31, 2022 from $0.5 million in the three months ended March 31, 2021. During the quarter ended March 31, 2022, the Engineering Team has been working on battery development and initial stages of program car development.

Research and development costs are expensed as incurred. Research and development expenses primarily consist of the Mullen FIVE EV car development and are primarily comprised of personnel-related costs for employees and consultants. These costs are expected to rise in the future with continuing development of the Mullen FIVE car program.

#### Interest Expense

Interest expense decreased by $1.97 million or -48% to $2.1 million in the three months ended March 31, 2022 from $4.1 million in the three months ended March 31, 2021, primarily due to the decrease in the convertible debt portfolio, as well as the paydown of debt principal during the current fiscal year.

#### Net Loss

Net loss was $32.6 million for the three months ended March 31, 2022, an increase of $23.3 million or 250% from $9.3 million in the three months ended March 31, 2021, mainly for the reasons discussed above.

### Comparison of the Six Months Ended March 31, 2022 to the Six Months Ended March 31, 2021

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

*(dollar amounts, except percentages)*

| ​ ​ ​ ​ ​ Operating costs and expenses: | ​ ​ ​ ​ | ​ ​ Six Months Ended March 31, 2022 ​ | ​ ​ | ​ ​ 2021 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| General and administrative | ​ | $42,170,516 | ​ | $7,629,418 | ​ | $34,541,098 |  | 453% |
| Research & development | ​ | 2,340,761 | ​ | 1,056,294 | ​ | 1,284,467 |  | 122% |
| Total operating costs and expenses | ​ | 44,511,277 | ​ | 8,685,712 | ​ | 35,825,565 |  | 412% |
| Loss from operations | ​ | (44,511,277) | ​ | (8,685,712) | ​ | (35,825,565) |  | 412% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Other income (expense):** | ​ |  | ​ |  | ​ |  |  | ​ |
| Interest expense | ​ | (24,559,459) | ​ | (6,499,089) | ​ | (18,060,370) |  | 278% |
| Gain on extinguishment of debt | ​ | (41,096) | ​ | - | ​ | (41,096) |  | (100)% |
| Other income (expense), net | ​ | 74,509 | ​ | 890,581 | ​ | (816,072) |  | (92)% |
| Total other income (expense) | ​ | (24,526,046) | ​ | (5,608,508) | ​ | (18,917,538) |  | 337% |
| **Net loss** | ​ | $(69,037,323) | ​ | $(14,294,220) | ​ | $(54,743,103) |  | 383% |

#### General and Administrative

General and administrative expenses increased by $34.5 million or 453% from $7.6 million in the six months ended March 31, 2021 to $42.2 million in the six months ended March 31, 2022, primarily due to increases in professional services, marketing, and compensation related expenses associated with the growth of personnel and resources.

#### Research and Development

Research and development expenses increased by $1.3 million or 122% from $1.1 million through the six months ended March 31, 2021 to $2.3 million through the six months ended March 31, 2022. During the six month period ended March 31, 2022, the development of the Mullen FIVE show cars was completed in November 2021, and the Engineering Team has been working on battery development and initial stages of program car development.

Research and development costs are expensed as incurred. Research and development expenses primarily consist of the Mullen FIVE EV show car development and are primarily comprised of personnel-related costs for employees and consultants. These costs are expected to rise in the future with continuing development of the Mullen FIVE car program.

#### Interest Expense

Interest expense increased by $18.1 million or 278% from $6.5 million through the six months ended March 31, 2021 to $24.6 million through the six months ended March 31, 2022, primarily due to the significant increase in the convertible debt portfolio, coupled with the conversion of these financial instruments to equity due to merger with Net Element. The conversion to preferred C stock increased the amortization expense.

#### Gain on extinguishment of debt

During November 2020, the U.S. Small Business Administration (“*SBA”*) approved the CARES Act loan forgiveness amount of $875,426 in principal and accrued interest on November 20, 2020.

#### Net Loss

Net loss was $69.0 million for the six months ended March 31, 2022, an increase of $54.7 million or 383% from $14.3 million in the six months ended March 31, 2021, mainly for the reasons discussed above.

### Liquidity and Capital Resources

As of the date of this Quarterly Report, we have yet to generate any revenue from our business operations. To date, we have funded our capital expenditure and working capital requirements through equity and debt capital, as further discussed below. Our ability to successfully commence commercial operations and 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.

As of March 31, 2022, our cash and cash equivalents amounted to $65.2 million primarily due to $43.9 million from the issuance of 4,974,214 Series C Preferred Stock and 14,922,667 in associated warrants to the selling stockholders that were listed within the S-3 Registration Statement, deemed effective on April 15, 2022. Additionally, the Company received $29.6 million in net proceeds under the $30 million Esousa Equity Line, dated September 1, 2021.

Total debt of $22.1 million continues its downward trend. Debt has decreased significantly from September 30, 2021 due to principal paydowns, debt payoffs, and conversion of convertible debt to equity. Tax liabilities slightly decreased to $2.8 million from $4.2 million, which is comprised of IRS and other tax jurisdictions related to payroll taxes and sales and use taxes. On April 14, 2022, the Company signed an IRS installment agreement to pay the remaining balance for federal payroll related liabilities via monthly payments of $45,000.

We expect our capital expenditures and working capital requirements to increase substantially in the near term, as we seek to produce our initial EVs, develop our customer support and marketing infrastructure and expand our research and development efforts. We may need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or scale back our operations, which could have an adverse impact on our business and financial prospects. See Note 1 to the consolidated financial statements included elsewhere in this Quarterly Report.

### Debt

To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness and Common Stock. Short-term debt comprises a significant component of our funding needs. Short-term debt is generally defined as debt with principal maturities of one-year or less. Long-term debt is defined as principal maturities of one year of more.

#### Short and Long-Term Debt

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 loans are secured by substantially all the Company’s assets. Several principal shareholders have provided loans to and hold convertible debt of the Company and are related parties.

The following is a summary of our debt as of March 31, 2022:

| ​ ​ ​ Type of Debt | ​ ​ | ​ ​ Net Carrying Value Unpaid Principal Balance | ​ ​ | ​ ​ ​ ​ ​ ​ Current | ​ ​ | ​ ​ ​ ​ ​ ​ Long-Term | ​ ​ | ​ ​ ​ ​ ​ Interest Rate | ​ ​ Contractual Maturity |
| --- | --- | ---: | --- | --- | --- | --- | --- | --- | --- |
| Matured Notes | ​ | $3,051,085 | ​ | $3,051,085 | ​ | $— | ​ | 0.00% - 15.00% | 2016 - 2021 |
| Promissory Notes | ​ | 19,331,912 | ​ | ​ 14,331,912 | ​ | ​ 5,000,000 | ​ | 8.99% - 28.00% | 2021 – 2024 |
| Real Estate Note | ​ | 265,973 | ​ | ​ 37,185 | ​ | ​ 228,788 | ​ | 5.00% | 2023 |
| Loan Advances | ​ | 557,800 | ​ | ​ 557,800 | ​ | ​ — | ​ | 0.00% - 10.00% | 2019 – 2020 |
| Less: Debt Discount | ​ | (1,118,902) | ​ | ​ (1,118,902) | ​ | ​ — | ​ | NA ​ | NA |
| **Total Debt** | **​** | **$22,087,868** | **​** | **$16,859,080** | **​** | **$5,228,788** |  | **NA** | **NA** |

The following is a summary of our debt as of September 30, 2021:

| ​ ​ ​ Type of Debt | ​ ​ | ​ ​ Net Carrying Value Unpaid Principal Balance | ​ ​ | ​ ​ ​ ​ ​ ​ Current | ​ ​ | ​ ​ ​ ​ ​ ​ Long-Term | ​ ​ ​ ​ ​ ​ Contractual Interest Rate | ​ ​ Contractual Maturity |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- |
| Matured Notes | ​ | $5,838,591 | ​ | $5,838,591 | ​ | $— | 0.00% - 15.00% | 2016 - 2021 |
| Promissory Notes | ​ | 23,831,912 | ​ | 23,831,912 | ​ | — | 28.00% | 2021 – 2022 |
| Demand Note | ​ | 500,000 | ​ | 500,000 | ​ | — | 27.00% | 2020 |
| Convertible Unsecured Notes | ​ | 15,932,500 | ​ | 15,932,500 | ​ | — | 15.00%-20.00% | 2021 - 2022 |
| Real Estate Note | ​ | 283,881 | ​ | 36,269 | ​ | 247,612 | 5.00% | 2023 |
| Loan Advances | ​ | 1,122,253 | ​ | 1,122,253 | ​ | — | 0.00% - 10.00% | 2019 – 2020 |
| Less: Debt Discount | ​ | (8,060,555) | ​ | (8,060,555) | ​ | — | NA | NA |
| **Total Debt** | **​** | **$39,448,582** | **​** | **$39,200,970** | **​** | **$247,612** | **NA** | **NA** |

### Cash Flows

The following table provides a summary of Mullen’s cash flow data for the six months ended March 31, 2022 and 2021:

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six Months Ended March 31, 2022 ​ | ​ | ​ ​ 2021 | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Net cash used in operating activities | ​ | $24,871,780 | ​ | $5,619,717 | ​ |
| Net cash used in investing activities | ​ | 10,737,679 | ​ | 102,068 | ​ |
| Net cash provided by financing activities | ​ | 100,849,172 | ​ | 6,540,725 | ​ |

### 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. As we continue to ramp up hiring ahead of starting commercial operations, we expect our cash used in operating activities to increase significantly before we start to generate any material cash flow from our business.

Net cash used in operating activities was $24.9 million in the six months ended March 31, 2022, an increase from $5.6 million net cash used in activities in the six months ended March 31, 2021.

### Cash Flows used in Investing Activities

Our cash flows used in investing activities increased due to the purchase of the Tunica, MS manufacturing plant in November 2021 by our wholly owned subsidiary, Mullen Investment Properties, LLC. We expect these costs to increase substantially in the near future as we ramp up activity ahead of commencing commercial operations and build out the manufacturing facility.

Net cash used in investing activities was $10.7 million in the six months ended March 31, 2022, an increase from $0.1 million used in investing activities in the six months ended March 31, 2021.

### Cash Flows provided by Financing Activities

Through March 31, 2022, we have financed our operations primarily through the issuance of convertible notes equity securities, and warrants registered under the S-3 Registration Statements deemed effective February 3, 2022 and April 15, 2021, respectively.

Net cash provided by financing activities was $100.9 million for the six months ended March 31, 2022 primarily due to issuance of equity, as compared to $6.5 million net cash provided by financing activities for the six months ended March 31, 2021, which included (i) $12.1 million net proceeds from issuance of notes payable, which was partially offset by $15.1 million of payments of notes payable; (ii) $40.1 million in net proceeds from issuance of Common Stock; and (iii) $63.9 million in proceeds to issue preferred C shares.

### Contractual Obligations and Commitments

The following tables summarizes our contractual obligations and other commitments for cash expenditures as of March 31, 2022, and the years in which these obligations are due:

### Operating Lease Commitments

| ​ ​ Years Ended March 31, | ​ ​ | ​ ​ Scheduled Payments |
| --- | --- | ---: |
| 2022 (6 months) | ​ | $602,568 |
| 2023 | ​ | 1,157,693 |
| 2024 | ​ | 824,287 |
| 2025 | ​ | 436,156 |
| 2026 | ​ | 222,787 |
| 2027 and Thereafter | ​ | — |
| **Total Future Minimum Lease Payments** | **​** | **$3,243,491** |

We currently lease our headquarters space in the Los Angeles area under a single lease classified as an operating lease expiring in March 2026. We have not executed any binding agreement for leases beyond 2026.

### Scheduled Debt Maturities

The following are scheduled debt maturities:

| ​ ​ ​ | ​ ​ | ​ ​ Years Ended March 31, 2022 (6 months) | ​ | ​ ​ 2023 | ​ | ​ ​ 2024 | ​ | ​ ​ 2025 | ​ | ​ ​ 2026 | ​ | ​ ​ 2027 | ​ | ​ ​ Thereafter | ​ | ​ ​ Total |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| **Total Debt** | ​ | $16,859,080 | ​ | $228,788 | ​ | $5,000,000 | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $22,087,868 |

### 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 condensed consolidated financial statements included elsewhere in this Quarterly Report. Because we are a pre-revenue company without commercial operations, management believes it does not currently have any critical accounting policies or estimates. Management believes that the accounting policies most likely to become critical in the near future are those described below.

### Stock-Based Compensation

We recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. Our management reverses previously recognized costs for unvested options in the period that forfeitures occur. Mullen determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the following assumptions:

- *Expected Term—*We use the simplified method when calculating the expected term due to insufficient historical exercise data.
- *Expected Volatility—*As our shares were not actively traded during the periods presented, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries.
- *Expected Dividend Yield—*The dividend rate used is zero as we have never paid any cash dividends on Common Stock and does not anticipate doing so in the foreseeable future.
- *Risk-Free Interest Rate—*The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

### Recent Accounting Pronouncements

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU will be effective for fiscal years beginning after December 15, 2021, (December 15, 2023 for smaller reporting companies). We have issued debt and equity instruments, the accounting for which could be impacted by this update. Company management is evaluating the impact this guidance on our financial condition and results of operations.

## Controls and procedures

As filed, 2,735 characters.

### Evaluation of Disclosure Controls and Procedures

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 time periods specified in the Commission’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. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. Management has designed disclosure controls and procedures that reasonably enable the management including the CEO and CFO to deliberate and take timely decisions regarding required disclosure.

As required by the SEC Rules 13a-15(b) and 15d-15(b), we are obligated to conduct an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three and six months ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

## Risk factors

As filed, 639 characters.

In addition to the information set forth in this Report, you should read and consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2021 filed with the SEC, which could materially affect our business, financial condition, or future results of operation. The risks described in such report 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.

Filed May 17, 2022.
Source: SEC EDGAR, the filing index for accession 0001558370-22-009134. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.