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

- Company: [Bollinger Innovations, Inc.](/companies/bini.md) (CIK 1499961)
- Form: 10-Q
- Filed: 2023-02-14
- Accepted by EDGAR: Feb 14, 2023, 11:10 ET
- Period: 2022-12-31
- Accession: 0001558370-23-001277
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1499961/000155837023001277/muln-20221231x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1499961/000155837023001277/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2022-10-01 to 2022-12-31 | $8.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-10-01 to 2022-12-31 | −$73.6m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2022-10-01 to 2022-12-31 | −$376.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-10-01 to 2022-12-31 | −$0.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-10-01 to 2022-12-31 | −$0.28 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-10-01 to 2022-12-31 | 1,360,570,075 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-10-01 to 2022-12-31 | −$33.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-10-01 to 2022-12-31 | $726.5k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-12-31 | $68.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-12-31 | $135.6m | us-gaap:AssetsCurrent |
| Total assets | at 2022-12-31 | $441.0m | us-gaap:Assets |
| Current liabilities | at 2022-12-31 | $397.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-12-31 | $420.2m | us-gaap:Liabilities |
| Long-term debt | at 2022-12-31 | $4.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-12-31 | $93.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-12-31 | $20.7m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 20,397 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, as amended, filed with the SEC for the year ended September 30, 2022. 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, as amended, filed with the SEC for the year ended September 30, 2022.*

### 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.

### 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 majority of our revenue will be initially derived from direct sales of Commercial Delivery Vehicles (Class 1 – 6), Sport Utility Vehicles ("SUVs") and, subsequently, from flexible leases of our electric vehicles ("EVs").

### Firm Order Agreement

On December 12, 2022, the Company entered into a Firm Order Agreement (the “Order Agreement”) with Randy Marion Isuzu, LLC (“RMI”) pursuant to which RMI agreed during the period ending on December 31, 2023 (unless terminated earlier pursuant to the terms of the Order Agreement) to purchase a total of not less than 6,000 units of the initial production 6,800 units of the vehicles manufactured and produced by the Company. Contemporaneous with the execution of the Order

Agreement, RMI issued a purchase order for 1,000 vehicles and agreed to issue another purchase order on or before May 1, 2023, for no less than 1,000 vehicles. All additional purchase orders required to fulfill the order requirement are required to be issued no later than August 1, 2023. Products and vehicles with less than 500 miles that are not sold after 12 months can be returned to the Company at original pricing, subject to certain conditions. The Agreement may be terminated, among other reasons, if RMI ceases to be an authorized Mullen dealer or fails to function in the ordinary course of business or maintain its dealership facilities, voluntary or involuntary bankruptcy, RMI’s conduct adversely affects the Company, or an impairment of RMI’s reputation or financial standing.

### 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 December 31, 2022 to the Three Months Ended December 31, 2021

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

| ​ ​ ​ ​ ​ Operating costs and expenses: | ​ ​ ​ ​ | ​ ​ Three Months Ended December 31, 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| General and administrative | ​ | $64,996,011 | ​ | $12,901,084 | ​ | $52,094,927 |  | 404% |
| Research & development | ​ | 8,622,009 | ​ | 1,157,323 | ​ | 7,464,686 |  | 645% |
| Total operating costs and expenses | ​ | 73,618,020 | ​ | 14,058,407 | ​ | 59,559,613 |  | 424% |
| Loss from operations | ​ | $(73,618,020) | ​ | (14,058,407) | ​ | (59,559,613) |  | 424% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Other income (expense):** | ​ |  | ​ |  | ​ |  |  | ​ |
| Other financing costs - initial recognition of derivative liabilities | ​ | ​ (255,960,025) | ​ | ​ (108,979,229) | ​ | ​ (146,980,796) | ​ | 135% |
| Gain / (loss) extinguishment of debt, net | ​ | (6,412,170) | ​ | ​ 74,509 | ​ | (6,486,679) |  | (8,706)% |
| Revaluation of derivative liabilities | ​ | ​ (40,781,976) | ​ | ​ (10,618,382) | ​ | ​ (30,163,594) |  | 284% |
| Interest expense | ​ | (2,828,089) | ​ | (3,226,769) | ​ | 398,680 |  | (12)% |
| Loan amortization expense | ​ | ​ — | ​ | ​ (19,212,176) | ​ | ​ 19,212,176 |  | (100)% |
| Deferred tax benefit | ​ | ​ 493,654 | ​ | ​ — | ​ | ​ 493,654 | ​ | —% |
| Other income (expense), net | ​ | 645,881 | ​ | (41,096) | ​ | 686,977 | ​ | (1,672)% |
| Total other expense | ​ | (304,842,725) | ​ | (142,003,143) | ​ | (162,839,582) |  | 115% |
| **Net loss before accrued preferred dividends and noncontrolling interest** | ​ | $(378,460,745) | ​ | $(156,061,550) | ​ | $(222,399,195) |  | 143% |

#### Net loss before accrued preferred dividends and noncontrolling interest

Net loss before accrued preferred dividends and noncontrolling interest was $378.5 million and $156.1 million for the three months ended December 31, 2022 and 2021, respectively.

The $222.4 million or 143% increase in Net loss before accrued preferred dividends and noncontrolling interest was primarily due to a $162.8 million increase in non-cash financing expenses and $59.6 million increase in operating losses to ramp up of development efforts and reflecting the addition expenses from the purchase of Bollinger Motors and the purchase of ELMS assets.

#### General and Administrative

General and administrative expenses increased by $52.1 million or 404% to $65.0 million for the three months ended December 31, 2022, from $12.9 million in the three months ended December 31, 2021, primarily due to increases in professional services, marketing, and stock compensation related expenses associated with the growth of personnel and resources necessary to develop and launch our electric vehicles.

#### Research and Development

Research and development expenses increased by $7.5 million or 645% to $8.6 million for the three months ended December 31, 2022, versus $1.2 million in the three months ended December 31, 2021. Research and development expenses primarily consist of external engineering, homologation, and prototyping costs. These costs are expected to rise with continuing development of our electric vehicle programs. There will also be incremental research and development costs associated with the recent acquisition of Bollinger Motors for the B1/B2 and Class 4 delivery chassis as well as research and development for the assets acquired in the ELMS asset purchase.

#### Other financing costs – initial recognition of derivative liabilities

Other financing costs for the initial recognition of derivative liabilities increased $147 million from $109 million for the three months ended December 31, 2021, to $256.0 million for the three months ended December 31, 2022. This was primarily due to recognition of derivative liabilities upon receipt of the $150 million convertible note.

#### Gain / (loss) on extinguishment of debt, net

The loss on debt settlement increased $6.5 million from a gain of $74.5 thousand for the three months ended December 31, 2021, to a loss of $6.4 million for the three months ended December 31, 2022 primarily due to a 2022 settlement with investors claiming losses caused by the Company (23,000,000 common shares issued) and the exchange of old note to Esousa for new replacement note to Esousa.

#### Revaluation of derivative liabilities

The revaluation of derivative liabilities increased $30.2 million from $10.6 million for the three months ended December 31, 2021 to $40.8 million for the three months ended December 31, 2022.

#### Interest expense

Interest expense decreased by $0.4 million or 12% to $2.8 million for the three months ended December 31, 2022 from $3.2 million for the three months ended December 31, 2021, primarily due to the decrease in the convertible debt balance as well as from the paydown of debt principal during the quarter ended December 31, 2022.

#### Loan amortization expense

Loan amortization expense decreased $19.2 million to zero for the three months ended December 31, 2022, from $19.2 million for the three months ended December 31, 2021.

#### Deferred tax benefit

Deferred tax benefit increased $0.5 million to $0.5 million for the three months ended December 31, 2022 as compared to zero for the three months ended December 31, 2021 due to an adjustment in permanent timing differences for amortization expense.

#### Other income (expense), net

Other income (expense), net increased $0.7 million to $0.6 million for the three months ended December 31, 2022 as compared to $41 thousand of other expense, net for the three months ended December 31, 2021. Activity for the three months ended December 31, 2022 includes an $8.9 million financing loss from conversion of excess stock issued and a $10 million gain on conversion of convertible notes into common shares of the Company.

### 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 December 31, 2022, our cash and cash equivalents (excluding restricted cash) amounted to $68 million primarily due to $150 million from the issuance of convertible notes.

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. See Note 1 to the condensed 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. For further information on the Company’s debt, see Note 6 – Debt.

#### 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 stockholders have provided loans to and hold convertible debt of the Company and are related parties.

### Cash Flows

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

| ​ ​ Net cash provided by (used in): ​ | ​ ​ ​ | ​ ​ Three Months Ended December 31, 2022 ​ | ​ | ​ ​ 2021 | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Operating activities | ​ | $(33,227,692) | ​ | $(14,712,803) | ​ |
| Investing activities | ​ | (93,718,182) | ​ | (10,462,219) | ​ |
| Financing activities | ​ | 150,000,000 | ​ | 25,194,308 | ​ |

### 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 $33.2 million for the three months ended December 31, 2022, a 126% increase from $14.7 million net cash used in activities in the three months ended December 31, 2021.

### Cash Flows used in Investing Activities

Our cash flows used in investing activities increased due to the ELMS asset purchase (see NOTE 4 – Purchase of assets from ELMS).

Net cash used in investing activities was $93.7 million in the three months ended December 31, 2022, an increase from $10.5 million used in investing activities in the three months ended December 31, 2021.

### Cash Flows provided by Financing Activities

Through December 31, 2022, we have financed our operations primarily through the issuance of convertible notes equity securities, and warrants. Net cash provided by financing activities was $150 million for the three months ended December 31, 2022, an increase of $124.8 million over the three months ended December 31, 2021.

### Contractual Obligations and Commitments

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

### Operating Lease Commitments

| ​ ​ Years Ended December 31, | ​ ​ | ​ ​ Scheduled Payments |
| --- | --- | ---: |
| 2023 (9 months) | ​ | $2,134,292 |
| 2024 | ​ | 2,700,815 |
| 2025 | ​ | 2,088,711 |
| 2026 | ​ | 243,539 |
| 2027 | ​ | 15,173 |
| Thereafter | ​ | — |
| **Total Future Minimum Lease Payments** | **​** | **$7,182,530** |

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.

On June 29, 2022, the Company signed a lease with the Lakeview Business Center, LLC. The leased property is located at Suite 100, 100 Technology Drive, Irvine, CA 92618. The approximate rentable space is 31,603 rentable square feet of office space. The new lease will expire in July 2025, with an option to renew for a further 36 months. Under this lease arrangement, the present value of future lease payments is $654,636.

### Scheduled Debt Maturities

The following are scheduled debt maturities:

| ​ ​ ​ | ​ ​ | ​ ​ Years Ended December 31, 2023 (9 months) | ​ | ​ ​ 2024 | ​ | ​ ​ 2025 | ​ | ​ ​ 2026 | ​ | ​ ​ 2027 | ​ | ​ ​ 2028 | ​ | ​ ​ Thereafter | ​ | ​ ​ Total |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| **Total Debt** | ​ | $93,837,257 | ​ | $4,890,475 | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $98,727,732 |

### 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

Accounting standard updates issued but not yet added 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, 3,866 characters.

### Disclosure Controls and Procedures

We are subject to the periodic reporting requirements of the Exchange Act that requires designing disclosure controls and procedures to provide reasonable assurance that information we disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer each concluded, as of the end of the period, our disclosure controls and procedures were not effective as of December 31, 2022, due to material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, and as described below.

### Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in our Annual report on Form 10-K filed with the SEC, we identified material weaknesses in our internal control over financial reporting during the preparation of our financial statements for the year ended September 30, 2022. Under standards established by the PCAOB, 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 annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

The material weaknesses in financial reporting as of September 30, 2022, are summarized as follows:

- We determined that we did not have sufficient accounting systems and procedures in place, particularly in the areas of specialized accounting for complex debt and equity transactions.
- We determined that we did not have sufficient policies and procedures to ensure the appropriate review and approval of user access rights to our accounting system; and lack of approval of journal entries and segregation of duties in our financial reporting process.
- We determined that our information technology infrastructure does not provide sufficient safeguards required by the COBIT framework.

### Remediation Efforts to Address Previously Identified Material Weaknesses

As previously described in Item 9A of our Annual Report on Form 10-K for the year ended September 30, 2022, we began implementing remediation plans to address the material weaknesses. The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period and management has concluded, through testing, that these controls are operating effectively. We expect that most of the remediation of these material weaknesses will be completed by the end of fiscal 2023.

### Changes in Internal Control over Financial Reporting

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

## 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, 2022 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 Feb 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-001277. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.