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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ___

Commission file number: 001-34887

MULLEN AUTOMOTIVE INC.

(Exact name of registrant as specified in its charter)

Delaware

    

86-3289406

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1405 Pioneer Street
Brea, California 92821

(Address of principal executive offices)

Registrant’s telephone number, including area code: (714) 613-1900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001

MULN

The Nasdaq Stock Market, LLC (Nasdaq Capital Market)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES   NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES   NO

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES   NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES   NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  NO

The aggregate market value of the registrant’s common equity, other than shares held by persons who may be deemed affiliates of the registrant, as of March 31, 2021 was approximately $47.1 million.

The registrant had 23,383,202 shares of common stock outstanding as of December 27, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

TABLE OF CONTENTS

  

    

    

Page

PART I

6

Item 1.

Business

6

Item 1A.

Risk Factors

17

Item 1B.

Unresolved Staff Comments

39

Item 2.

Properties

39

Item 3.

Legal Proceedings

39

Item 4.

Mine Safety Disclosures

40

PART II

41

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

41

Item 6.

[Reserved]

42

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

49

Item 8.

Financial Statements and Supplementary Data

49

Item 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

49

Item 9A.

Controls and Procedures

49

Item 9B.

Other Information

50

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

50

PART III

50

Item 10.

Directors, Executive Officers and Corporate Governance

50

Item 11.

Executive Compensation

55

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

59

Item 13.

Certain Relationships and Related Transactions, and Director Independence

61

Item 14.

Principal Accountant Fees and Services

62

PART IV

63

Item 15.

Exhibits and Financial Statement Schedules

63

Item 16.

Form 10-K Summary

68

Signatures

72

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (the “Annual Report” or “Report”) contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Annual Report, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Report include but are not limited to:

We have incurred significant losses since inception and expect that we will continue to incur losses for the foreseeable future;
We have not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles;
Our limited operating history makes it difficult for us to evaluate our future business prospects;
Our auditor has expressed substantial doubt about our ability to continue as a going concern;
We require substantial additional financing to effectuate our business plan;
Certain of our lenders and the Internal Revenue Service have liens on our assets; and
We have not paid and does not plan to pay cash dividends on our common stock, so any return on investment may be limited to the value of our common stock.
We have a substantial amount of debt;
We may not generate sufficient cash to service all of our debt or refinance our obligations;
We may not be able to develop, manufacture and obtain regulatory approvals for a car of sufficient quality to appeal to customers on schedule or at all;
Our currently planned vehicles rely on lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame, potentially subjecting us to litigation, recall, and redesign risks;
The efficiency of a battery’s use will decline over time, which may negatively influence customers’ decisions whether to purchase an electric vehicle;
We rely on our OEMs, suppliers and service providers for parts and components, any of whom could choose not to do business with us;
We will rely on complex machinery for its operations and production, which involve a significant degree of risk and uncertainty in operational performance and costs;
Complex software and technology systems need to be developed in coordination with vendors and suppliers, and there can be no assurance that such systems will be successfully developed;
We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of its vehicles, which could harm our business and prospects;
The inability of our suppliers, including single or limited source suppliers, to deliver components in a timely manner or at acceptable prices or volumes could have a material adverse effect on our business and prospects;
Financial distress of our suppliers could necessitate that we provide substantial financial support, which could increase our costs, affect our liquidity or cause production disruptions;
We have a limited operating history and face significant challenges as a new entrant into the automotive industry;
We have a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future, casting doubt on our ability to continue as a going concern;
Our business model is untested and it may fail to commercialize our strategic plans;
Our operating and financial results forecast relies on assumptions and analyses we developed and may prove to be incorrect;
We may be unable to accurately estimate the supply and demand for our vehicles;

2

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Increased costs or disruptions in supply of raw materials or other components could occur;
Our vehicles may fail to perform as expected;
Our services may not be generally accepted by our users;
The automotive market is highly competitive;
The automotive industry is rapidly evolving and demand for our vehicles may be adversely affected;
We may be subject to risks associated with autonomous driving technology;
Our distribution model is different from the predominant current distribution model for auto manufacturers;
Our future growth is dependent on the demand for and consumers’ willingness to adopt electric vehicles;
Government and economic incentives could become unavailable, reduced or eliminated;
Our failure to manage our future growth effectively;
We may establish insufficient warranty reserves to cover future warranty claims;
We may not succeed in establishing, maintaining and strengthening our brand;
We initially will be dependent upon revenue generated from a single model;
Doing business internationally may expose us to operational and financial and political risks;
We are highly dependent on the services of David Michery, our Chief Executive Officer;
Our business may be adversely affected by labor and union activities;
We faces risks related to health epidemics, including the recent COVID-19 pandemic;
Reservations for our vehicles are cancellable;
We may face legal challenges relating to direct sales to customers;
We face information security and privacy concerns;
We may be forced to defend ourselves against alleged patent or trademark infringement claims and may be unable to prevent others from unauthorized use of our intellectual property;
Our patent applications may not issue as patents, the patents may expire, our patent applications may not be granted, and our rights may be contested;
We may be subject to damages resulting from trade secrets;
Our vehicles are subject to various safety standards and regulations that we may fail to comply with;
We may be subject to product liability claims;
We are or will be subject to anti-corruption, bribery, money laundering, and financial and economic laws;
Risk of failure to improve our operational and financial systems to support expected growth;
Risk of failure to build our financial infrastructure and improve our accounting systems and controls;
Our management has limited experience in operating a public company;
The concentrated voting control of David Michery, Mullen’s founder;
The priority of the holders of our debt over the holders of our common stock in the event of liquidation, dissolution or winding up;
The number of shares of common stock underlying our outstanding warrants and preferred stock is significant in relation to our currently outstanding common stock;
The dearth of analyst coverage; and
other risks and uncertainties, including those listed under Part I, Item 1A of this Annual Report titled “Risk Factors.”

These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, so you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in one or more of the forward-looking statements we make in this Annual Report. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We have included important factors in the cautionary statements included in this Annual Report, particularly in Part I, Item 1A, titled “Risk Factors,” that could cause actual future results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements in this Annual Report do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

3

Table of Contents

You should read this Annual Report and the documents that we have filed as exhibits to this Annual Report with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, except as required by applicable law.

4

Table of Contents

WEBSITE AND MEDIA DISCLOSURE

We use our website (www.mullenusa.com) and various social media channels as a means of disclosing information about the company and its products to our customers, investors, and the public (e.g.,  Instagram: @mullenusa; Twitter: @mullen_usa; Facebook: @MullenUSA; LinkedIn: @mullen-technologies; and Youtube: @mullenautomotive). The information provided on social media channels is not incorporated by reference in this report or in any other report we fie with the SEC.

The information we post throughout these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to our following press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address and other information by visiting “Investor Resources” section of our website at www.mullenusa.com.

5

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PART I

ITEM 1. BUSINESS.

References in this Annual Report to the “Company”, “we”, “us”, “our” or similar references, or “Mullen,” mean Mullen Automotive Inc., a Delaware corporation, and its subsidiary/ies Ottava Automotive, Inc., a California corporation, and Mullen Investment Properties LLC .

Background

The Company was originally formed on April 20, 2010 as a blank check company incorporated as a Cayman Islands exempted company. On October 2, 2012, the Company completed a merger with Net Element, Inc. changing its jurisdiction of incorporation to Delaware. On November 5, 2021, we closed a merger (as described below) with Mullen Technologies, which was formed in 2018. We are a Southern California-based electric vehicle company that operates in various verticals of businesses focused within the automotive industry.

On November 5, 2021, we closed a merger pursuant to a Second Amended and Restated Agreement and Plan of Merger dated July 20, 2021, and as amended by a First Amendment dated August 18, 2021 (together, the “Merger Agreement”), with Mullen Technologies, Inc., a California corporation (“Mullen Technologies”), Mullen Acquisition, Inc., a California corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Mullen Automotive, Inc., a California corporation (“Mullen Automotive-California”) and a wholly-owned subsidiary of Mullen Technologies, providing for the merger of Merger Sub with and into the Mullen Automotive (the “Merger”), with Mullen Automotive-California, which changed its name to “Ottava Automotive Inc.”,  surviving the Merger as a wholly-owned subsidiary of the Company. The Company also changed its name from “Net Element, Inc.” to “Mullen Automotive Inc.” and The Nasdaq Stock Market, LLC (Nasdaq Capital Market) ticker symbol for the Company’s Common Stock changed from “NETE” to “MULN” at the opening of trading on November 5, 2021. The new CUSIP number of the Common Stock is 62526P 109.

Pursuant to the Merger, the Company issued, or reserved for future issuance pursuant to outstanding warrants, an aggregate of 43,971,895 shares, which represented 85% of the combined company. The Merger was accounted for as a reverse merger transaction, in which Mullen Automotive-California is treated as the acquirer for financial accounting purposes.   For more information on the Merger, see “The Merger and Related Transactions” on page 15 of this Annual Report.

In connection with the Merger Agreement, and as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)  on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 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.

The Company

Mullen Automotive Inc. operates a Southern California-based electric vehicle company that operates in various verticals of businesses focused within the automotive industry. The Company has two electric vehicles under development, one of which we expect to begin delivery of in the second quarter of 2024. Mullen has several divisions that operate synergistic businesses, being: CarHub, a digital platform that leverages artificial intelligence to offer an interactive solution for buying, selling and owning a car, and Mullen Energy, a division focused on advancing battery technology and emergency point-of-care solutions.

Company Overview

Our Strength and Strategy

Experienced and proven team in the Electric Vehicle (“EV”) space. Our executive team has extensive experience in the automotive original equipment manufacturing ("OEM") space. They have a detailed understanding of the product development cycle from blank sheet to post launch activities in both the high and low volume segments – knowing the different economies of scale which is vital to creating a high-quality

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profitable product. The team brings expertise in studio design, engineering, manufacturing, energy storage systems, market analysis, corporate development, strategic planning and investment strategies.
Design. Our platform architecture creates the opportunity for vehicles with unique aspect ratios - low roof line, wide track width, svelte body, and a long wheelbase. The vehicle will be a top safety plus pick and will have a five-star crash rating. To achieve this target, we will use next generation ultra-high strength steel alloys. The entire structure will use mixed materials.
Unique plan. Our approach is speed-to-market with lower capital investment requirements compared to other startup EV companies. Our plan includes launch the Mullen FIVE Crossover in 36 months from program start (with start of production in Q4 of 2024), while keeping expenditures low by utilizing strategic partnerships in engineering and manufacturing, while implementing rigorous spending controls and traceability to mitigate extraneous spending.

For our initial launch we will use state-of-the-art Li-Ion technology, but we believe that our future battery technology will eventually allow us to deliver our high voltage batteries under $100 per kWh at over two times the energy density of current commercially available lithium batteries. We anticipate the batteries used in our cars will be able to withstand extreme abuse testing, which we believe should make them safer than other commercially available lithium batteries. We plan to utilize a more environmentally sustainable chemistry that does not have a high content of rare precious materials.

Our Market Opportunity

Sustainable vehicles are the future of transportation

In the last few years, we have observed a significant transformation in the motor vehicle landscape. Electric cars, which were once only a fringe element in a market dominated by major global automakers, are quickly becoming mainstream. Along with Tesla, which has been public since 2010, many major automakers are transitioning towards electric models. Joining them, our company and several other start-ups are developing EV offerings.

In our view, this trend is driven by several factors. A rising environmental consciousness is encouraging customers to weigh their emission footprint. As a zero-emission alternative to traditional internal combustion engine (“ICE”) options, an EV that can match or exceed an ICE in performance is a natural choice. Assisting with that choice, local and national governments are offering various forms of rebates and credits for the purchase of an EV and have otherwise begun to support the rise of e-mobility by accelerating the push for zero emission vehicles due to increased awareness of the impacts of global warming. As EV sales grow, parts volume is expected to grow in tandem, allowing automakers to purchase parts at a lower cost and further accelerating the switch to EVs. Lastly, the continuing improvement in battery technology,

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continuing build-out of electric charging infrastructure, and the growing comfort with EV range capabilities could ease “range anxiety” and facilitate adoption.

CHART

DESCRIPTION AUTOMATICALLY GENERATED

Source: Derived from data in Bloomberg Electric Vehicle Outlook 2020

The rise of the Sports Utility Vehicle

When designing our first EV offering, our team elected to develop a Sport Utility Vehicle (“SUV”) because of the recognized growth in SUV sales. According to market research, today’s customers increasingly prefer SUVs to traditional sedans or crossovers. According to JATO, an automotive market research firm, 2018 SUV sales globally, in the United States and the European Union were 29.8 million, 7.8 million and 5.4 million vehicles, respectively. According to Research Nester, a strategic market research and consulting firm, the global SUV market is forecasted to be 53.2 million SUVs in 2027.

Our Vehicles

Our initial entry into the EV and Crossover market will be designed, engineered, and manufactured in the United States. Our business model for entry into the EV market consists of core tenets that include speed-to-market (36 months), efficient use of funds and investments, experienced leadership and engineering, designed to US market needs, and complemented with a portfolio of competitively priced vehicles (multiple vehicles on one platforms) in the fast-growing ESUV segment.

We expect our products and services will include the following:

Mullen FIVE: The Mullen FIVE represents Mullen Automotive’s entry into the full-electric, mid-size luxury SUV market. The Mullen FIVE is competitively priced starting at $55,000 - for the United States market before federal and state incentives are applied. Offering at least two optional packages, with a price range from a base price of $55,000 to $75,000 (for additional features), will allow customers to purchase a vehicle with options that best fit their budgetary and performance needs. Product validation is expected to begin in the 4th quarter of 2023 with the first sellable vehicles available in the fourth quarter of 2024.
The Mullen FIVE is expected to deliver an electric range up to 325 miles. We intend to focus more on efficiency rather than extreme performance. We expect to achieve this by optimizing battery capacity, vehicle aerodynamics, rolling inertia, and software controls.

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Our Growth Strategy

We intend to leverage the following growth strategies to drive stakeholder value:

Continue to develop the Mullen FIVE. We intend to continue to invest in research and development and work on establishing partnerships that would enable us to commence customer deliveries of the vehicle model named the Mullen FIVE as early as fourth quarter of 2024. As part of this plan, we expect to begin building prototype Mullen FIVEs in 2022.
Develop additional high value, sustainable EV models. We believe the combination of our design expertise, along with the expected power and versatility of a new platform, will enable us to efficiently achieve our goal of providing a fleet of high value, sustainable EVs. We intend to utilize one or more platforms over time to develop additional vehicles to complement the Mullen FIVE.

Our Manufacturing Approach

We have recently purchased a 124,700 sq ft facility located in Tunica, Mississippi. This property will be the site for both advanced manufacturing engineering center and vehicle production. This location will allow the development team to prove out our flexible manufacturing technologies and product design capability (e.g., strategic use of off-the-shelf components combined with in house developed critical components and software), while affording us the opportunity to customize and innovate our manufacturing processes and optimize our product design with simultaneous engineering efforts, thereby serving as Mullen’s Advanced Manufacturing Engineering Center (“AMEC”).

A PICTURE CONTAINING TEXT, SKY, GRASS, OUTDOOR

DESCRIPTION AUTOMATICALLY GENERATED

In support of the speed-to-market strategy, building a full-scale production facility is a significant milestone for our vehicle development and manufacturing teams. Building a production facility includes expansion of the existing 124,700 sq ft by an additional 1.2M sq ft; designing assembly lines (Body, Paint, General, and Offline); and preparing for the complexities of the manufacturing processes, while ensuring flexibility for critical changes. This plan includes utilizing existing assets that are currently in place for initial validation, and in parallel, begin efforts to design, develop, build, and equip the facility to support our planned production for Mullen FIVE and all other upcoming vehicles. We are currently in negotiations with several manufacturing integration companies that will assist in all aspects of design and development of the facility with completion by Q1 of 2024. The final constructed facility will be the location for testing functional vehicle prototypes as well a high-volume production assembly plant.

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Marketing and Brand Awareness

We plan to hire several key agencies to draw, solidify and execute our marketing plan, coexisting and succeeding across different consumer verticals: Social, Influencer, Search, Online, Podcast, TV, Print and Radio.

We will also utilize strategic regional and national tradeshows, sporting and automotive events to showcase our vehicles in person and generate further interest, reservations and vehicle orders.

We also intend to increase our online focus in 2023 to include online vehicle ordering, allowing customers full online vehicle purchase, with trade-in quote, financing and insurance options. Customer delivery is planned to be scheduled for “Mullen At Home” delivery or delivered to closest Mullen Lounge Point location, as described below.

Extended Warranty and Insurance

We intend to use a combination of third-party extended warranty, insurance and self-warranty and self-insurance mechanisms, potentially including (if financially feasible and in compliance with regulatory requirements) a wholly owned captive insurance subsidiary to provide for the insurance against certain risks, including auto liability and physical damage, general liability and products liability.

We are also planning to offer both financing and insurance of our vehicles. We believe we can reduce the total cost of ownership (“TCO”) for our customers and potentially generate additional sources of revenue by providing both financing and insurance for our vehicles.

We plan to keep introducing new customer programs and services to further define the Mullen customer experience. As described elsewhere in this Annual Report, we also plan to keep our lean sales, lease, and service model in order to be able to continue to offer great value to our customers regardless of the segment Mullen enters.

Direct Sales and Service

We are planning on launching with a direct sales model where we are the direct seller and servicer of our vehicles to consumers. This model is planned to be applied in states where direct sales models are legal and not challenged by typical franchise laws written for automotive franchise dealers.

Mullen Lounge Point

Lounge Point is expected to be the retail center experience for our retail sales network in North America and is planned to feature full vehicle sales interaction: including test drives, reservations, orders, trade-in, finance, insurance and delivery.

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Our approach is planned to be focused on superior consumer experience, in an easily accessible retail environment with a no pressure sales approach.

A ROOM WITH CHAIRS AND A TABLE

DESCRIPTION AUTOMATICALLY GENERATED WITH LOW CONFIDENCE

Our focus will be on delivering a premium vehicle experience while fitting nicely into everyday consumer life. Overall, the intention is to build vehicle sales opportunities upon awareness and involvement in customer communities.

It is expected that our initial set of retail Lounge Points will be established in high foot traffic centers where consumers visit daily and not off on a distance dealer row. This could be Main Street, outdoor based malls, entertainment complexes, commuter hubs and weekend leisure destinations.

Mullen Service Point and Mobile Service

It’s envisioned that Mullen Service Points will be established in close proximity to our planned retail sales Lounge Points, but not directly in the same location. Our sales and service locations are expected to serve different customer opportunities, and require drastically different layouts and square footage requirements. Establishing Service Points away from sales lowers our square footage cost and is expected to allow us to focus entirely on the customer in front of us.

It is expected that Mullen Service Points will be outfitted with the latest tools and repair service technology to efficiently service our vehicles. We also envisions offering vehicle collision repair and detailing services.

We also envision operating a mobile fleet of service vehicles that will be available on demand for offsite vehicle repair and service. It is expected that our mobile service technicians will be able to address and resolve most vehicle repairs while at the customer home or place of work.

It is expected that over-the-air (“OTA”) software updates and repairs will be made available to our vehicles via Wi-Fi or cellular connection. We believe we will be able to address specific vehicle alerts, allowing us to diagnosis and possibly fix the vehicle remotely, depending on the problem. It is also expected that general software updates will be conducted OTA as well. In general, OTA repairs and updates require less service visits for customers and better overall customer experience.

Research and Development

As an emerging automaker, we will rely heavily on research and development to establish and strengthen our market position. We will primarily conduct our research and development activities at our headquarters in Brea, California, and at our partners’ facilities with the majority of the activities focused on the research and development of our EVs and software technology platforms. During the fiscal year ended September 30, 2021, we incurred research and development

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expense of $3.0 million, which includes the development of 2 Mullen Five show cars that were debuted at the Los Angeles Auto Show in November 2021. We will strive to undertake significant testing and validation of our products in order to ensure that we meet the demands of our customers.

Intellectual Property

Our success depends in part upon our ability to protect our core technology and intellectual property. We attempt to protect our intellectual property rights, both in the United States and abroad, through a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure and invention assignment agreements with our consultants and employees, and we seek to control access to and distribution of our proprietary information through non-disclosure agreements with our vendors and business partners.

Trademarks

We have developed and use trademarks in our business, particularly relating to our corporate and product names. We own 7 trademarks that are registered with the United States Patent and Trademark Office, plus 42 trademarks registered across the foreign jurisdictions of China, the EU, Hong Kong, Israel, Mexico, South Korea, and Singapore.

We plan to file additional applications for the registration of our trademarks in foreign jurisdictions as our business expands under current and planned distribution arrangements. Protection of registered trademarks in some jurisdictions may not be as extensive as the protection provided by registration in the United States.

The following tables summarize information regarding our patents and patent applications. There are no assurances given that the pending applications will be granted or that they will, if granted, contain all of the claims currently included in the applications.

Patents.

We have 5 patents issued in the United States, and 7 patents pending. At foreign patent offices, we have 7 patents issued and 117 patents pending.

Trade Secrets. We own certain intellectual property, including trade secrets, which we seek to protect, in part, through confidentiality agreements with employees and other parties. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.

We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.

Government Regulation and Credits

We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue our operations.

Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, including standards adopted by regulatory agencies as well as the permits and licenses required by such agencies. Each of these sources is subject to periodic modifications and we anticipate increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, and possibly orders

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to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.

Emissions

In the Unites States, Europe and China, there are vehicle emissions performance standards that may provide an opportunity for us to sell emissions credits.

United States

California has greenhouse gas emissions standards that closely follow the standards of the United States Environmental Protection Agency (the "EPA"). The registration and sale of Zero Emission Vehicles (“ZEVs”) in California will earn us ZEV credits that we can sell to other OEMs. Other states within the United States have adopted similar standards including Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont. We intend to take advantage of these regimes by registering and selling ZEVs in these other states.

ZEV credits in California are calculated under the ZEV Regulation and are paid in relation to ZEVs sold and registered in California including Battery Electric Vehicles (“BEVs”) and Fuel Cell Electric Vehicles (“FCEVs”).

The ZEV program assigns ZEV credits to each vehicle manufacturer. Vehicle manufacturers are required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold and registered in California.

Each vehicle sold and registered in California earns a number of credits based on the drivetrain type and the all-electric range (“AER”) of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle. Plug-in hybrid vehicles (“PHEVs”) receive between 0.4 and 1.3 credits per vehicle sold and registered in California. Battery electric and fuel cell vehicles receive between one and four credits per vehicle sold in California, based on range.

The credit requirement was 7% in 2019 which required about 3% of sales to be ZEVs. The credit requirement will rise to 22% in 2025, which will require about 8% of sales to be ZEVs.

If a vehicle manufacturer does not produce enough EVs to meet our quota, it can choose to buy credits from other manufacturers who do, or pay a $5,000 fine for each credit such manufacturer is short. This should provide an opportunity for us to sell credits to other manufacturers that may not have met their quota.

EPA Emissions and Certificate of Conformity

The United States Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by the California Air Resources Board (“CARB”) concerning emissions for our vehicles. A Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act’s standards and an Executive Order is required for vehicles sold in states that have sought and received a waiver from the EPA to utilize California standards. CARB sets the California standards for emissions control for certain regulated pollutants for new vehicles and engines sold in California. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. There are currently four states which have adopted the California standard for heavy-duty vehicles.

The Greenhouse Gas Rule was incorporated into the Clean Air Act on August 9, 2011. Even though Mullen’s vehicles have zero-emissions, Mullen is still required to seek an EPA Certificate of Conformity for the Greenhouse Gas Rule and a CARB Executive Order for the CARB Greenhouse Gas Rule.

Vehicle Safety and Testing

Our vehicles will be subject to, and will be required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including applicable United States federal motor vehicle safety standards (“FMVSS”). We intend that the Mullen FIVE will fully comply with all applicable FMVSSs without the

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need for any exemptions and expect our future vehicles to either fully comply or comply with limited exemptions related to new technologies. Additionally, there are regulatory changes being considered for several FMVSS, and while we anticipate compliance, there is no assurance until final regulation changes are enacted.

As a manufacturer, we must self-certify that our vehicles meet all applicable FMVSSs, as well as the NHTSA bumper standard, or otherwise are exempt, before the vehicles can be imported or sold in the U.S. Numerous FMVSSs will apply to our vehicles, such as crash-worthiness requirements, crash avoidance requirements and EV requirements. We will also be required to comply with other federal laws administered by the NHTSA, including the Corporate Average Fuel Economy (“CAFE") standards, Theft Prevention Act requirements, consumer information labeling requirements, Early Warning Reporting requirements regarding warranty claims, field reports, death and injury reports and foreign recalls and owner’s manual requirements.

The Automobile Information and Disclosure Act requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. In addition, this law allows inclusion of city and highway fuel economy ratings, as determined by the EPA, as well as crash test ratings as determined by the NHTSA if such tests are conducted.

Our vehicles that may be sold outside of the United States are subject to similar foreign safety, environmental and other regulations. Many of those regulations are different from those applicable in the United States and may require redesign and/or retesting. The European Union has established new rules regarding additional compliance oversight that were scheduled to commence in 2020, and there is also regulatory uncertainty related to the United Kingdom’s withdrawal from the European Union. These changes could impact the rollout of new vehicle features in Europe.

In addition to the various territorial legal requirements Mullen is obligated to meet, we plan to engineer the Mullen 5 to deliver 5-star performance in the two main voluntary vehicle safety performance assessment programs, United States New Car Assessment Program (“NCAP”) and Euro NCAP. Five-star is the maximum attainable score. These independent organizations have introduced a number of additional safety related tests aimed at improving the safety of passenger vehicles, both for occupants and pedestrians involved in collisions with vehicles. Some of these tests are derived from the legal tests, such as side impact, but have higher performance requirements. Others are unique to the program. Areas covered by these tests in 2020 include:

Mobile Progressive Deformable Barrier
Full Width Rigid Barrier
Mobile Side Impact Barrier
Side Pole
Far Side Impact
Whiplash
Vulnerable Road Users (Pedestrians and Cyclists)
Safety Assist
Rescue and Extrication

We intend that the Mullen FIVE will also be equipped with certain advanced driving assistance features which may allow us to garner further Euro NCAP awards for features which are not yet a formal part of the 5 Star rating. This will help promote the advanced societal benefits of the Mullen FIVE.

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Exercise of Warrants by ESOUSA Holdings, LLC

As previously reported, on December 29, 2017, the Company entered into, and consummated the transactions contemplated by a Unit Purchase Agreement (the “Purchase Agreement”) with ESOUSA Holdings, LLC, a New York limited liability company (“ESOUSA”). Pursuant to the Purchase Agreement, on December 29, 2017, the Company sold to ESOUSA, among other securities, 404,676 five-year warrants to purchase shares of Common Stock (the “Purchase Warrants”) at a purchase price of $0.125 per share and exercise price of $11.12 per share.

On November 3, 2021, the Company and ESOUSA agreed to reduce the exercise price of the Purchase Warrants from $11.12 to $6.796 per share (the “Reduced Exercise Price”) in consideration for the exercise in full of all, but not less than all, Purchase Warrants by ESOUSA to acquire shares of the Company’s Common stock. The Company entered into an exercise price reduction offer letter agreement (the “Letter Agreement”) with ESOUSA to purchase a total of 404,676 shares of the Company’s Common Stock. Pursuant to the Letter Agreement, ESOUSA and the Company agreed that ESOUSA would exercise its Purchase Warrants with respect to all of the shares of the Company Common Stock underlying such Purchase Warrants for the Reduced Exercise Price. The Company expects to receive aggregate gross proceeds of approximately $2,750,178 from the exercise of the Purchase Warrants by ESOUSA. After the full exercise of the Purchase Warrants by ESOUSA, no Purchase Warrants will be outstanding.

Entry into Master Exchange Agreement with ESOUSA Holdings, LLC

On July 9, 2021, the Company entered into a new Master Exchange Agreement, (the “New ESOUSA Agreement”) with ESOUSA. Prior to entering into the New ESOUSA Agreement, ESOUSA agreed to acquire the existing promissory notes that had been previously issued by the Company, of up to $15,000,000 in principal amount outstanding plus interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the New ESOUSA Agreement, the Company has the right, at any time prior to July 8, 2022, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange such promissory notes in tranches on the dates when the Company instructs ESOUSA, for such number of shares of Common Stock as determined under the New ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such exchange amount from RBL, with each such tranche to be in an amount equal to $100,000 unless otherwise agreed to in writing by the Company and ESOUSA.

The Merger and Related Transactions

On August 4, 2020, the Company, as Net Element, Inc., entered into the Merger Agreement with Mullen Technologies, Merger Sub, and Mullen Automotive-California, providing for the Merger, with Mullen Automotive-California surviving the Merger as a wholly-owned subsidiary of the Company.

On November 3, 2021, the Company filed an amendment to our Amended and Restated Certificate of Incorporation with the Delaware Secretary of State, pursuant to which the Company’s name was changed from “Net Element, Inc.” to “Mullen Automotive Inc.”  In connection with the Name Change, The Nasdaq Stock Market, LLC (“Nasdaq Capital Market”) ticker symbol for the Company’s Common Stock changed from “NETE” to “MULN.”

On November 5, 2021 (the “Closing Date”), pursuant to the terms of the Merger Agreement, the Company closed the Merger whereby Merger Sub merged with and into the Mullen Automotive-California, with Mullen Automotive-California surviving as a wholly-owned subsidiary of the Company and changed its name to “Ottava Automotive Inc.” At the effective time of the Merger, each share of Mullen Automotive-California common stock, Mullen Automotive-California Series A Preferred Stock, Mullen Automotive-California Series B Preferred Stock and Mullen Automotive-California Series C Preferred Stock issued and outstanding immediately prior to the Merger, other than dissenting shares, were canceled and converted automatically into the right to receive a number of shares of Company Common Stock, Company Series A Preferred Stock, par value $0.001 ("Series A Preferred"), Series B Preferred Stock, par value $0.001 ("Series B Preferred"), and Series C Preferred Stock, par value $0.001 ("Series C Preferred"), as the case may be, determined in accordance with the Merger Agreement and as provided in Schedule A to the Merger Agreement. As a result, the Company issued an aggregate of 15,647,321 shares of Common Stock, 15,367 shares of Series A Preferred (which converts into

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1,536,692 shares of Common Stock), 5,567,319 shares of Series B Preferred, and 4,973,093 shares of Series C Preferred. Pursuant to the Merger, an aggregate of 43,971,895 shares, which represented 85% of the combined company, were allocated to holders of Common Stock, Preferred Stock and reserved for issuance under outstanding warrants.

On the Closing Date, the board of directors of the Company (the “Board of Directors”) approved a change in the Company’s fiscal year end from December 31 to September 30, the fiscal year end of Mullen Automotive-California.

Also on the Closing Date, the Company filed a Second Amended and Restated Certificate of Incorporation (the “Second Amended and Restated Certificate of Incorporation”) with the Delaware Secretary of State of the State to effectuate the following changes, which were approved at a special meeting of the Company’s stockholders held on August 26, 2021 (the “Special Meeting”):

change the par value of and increase the number of authorized shares of Common Stock from 100,000,000 shares, par value $0.0001, to 500,000,000 shares, par value $0.001;
to change the par value and increase the number of authorized shares of preferred stock from 1,000,000, par value $0.01, to 58,000,000 shares, par value $0.001; (b) to authorize the issuance of up to 200,000 shares of Series A Preferred, which series carries 1,000 votes per share and converts into Common Stock on a 100-for-1 basis; (c) to authorize the issuance of up to 12,000,000 shares of Series B Preferred, which series carries one vote per share and converts into Common Stock on a 1-for-1 basis; and (d) to authorize the issuance of up to 40,000,000 shares of Series C Preferred, which series carries one vote per share and converts into Common Stock on a 1-for-1 basis;
classify the Board of Directors; and
other changes, including removal of the restriction on the right for stockholders to act by written consent.

Also on the Closing Date, and as contemplated by the terms of the Merger Agreement, Oleg Firer, John Roland, Jon Najarian, and Todd Raarup each resigned as a director of the Company (including any committee of the Board of Directors) and Jeffrey Ginsberg, Andrey Krotov, Vlad Sadovskiy, and Steven Wolberg resigned as officers of the Company. At such time, as approved at the Special Meeting, David Michery, Jerry Alban, Mary Winter, Kent Puckett, Mark Betor, William Miltner and Jonathan New became directors of the Company to serve until the annual meeting of the year designated to their respective Director Class and until their respective successors are duly elected and qualified. Furthermore, David Michery was appointed as Chief Executive Officer of the Company, Kerri Sadler was appointed as Chief Financial Officer of the Company, Jerry Alban was appointed as Chief Operating Officer of the Company, and Mary Winter was appointed as Secretary of the Company.

The foregoing description of the Merger and related transactions does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement dated July 20, 2021, as amended August 18, 2021, copies of which are filed as Exhibits to the Company’s Current Reports on Form 8-K filed with the SEC on July 21, 2021 and August 19, 2021.

Human Capital Resources

Talent Attraction and Capability Assessment

In an environment where many employees are no longer bound to physical locations, where and how we source our talent is evolving. From a capability perspective, we are leveraging best practices in assessments and talent management to current capabilities and future pipeline while reinforcing a culture of belonging, empowerment, and innovation.

Diversity and Inclusion

We strive to attract a pool of diverse and exceptional candidates and support their career growth once they become employees. In addition, we seek to hire based on talent rather than solely on educational pedigree. We also believe that

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our ability to retain our workforce is dependent on our ability to foster an environment that is sustainably safe, respectful, fair, and inclusive of everyone and promotes diversity, equity and inclusion inside and outside of our business.

Our Employees

As of September 30, 2021, we employed 44 full-time employees based primarily in our headquarters and engineering offices, in Brea and Anaheim, California, respectively. A majority of our employees are engaged in automotive, finance, and engineering related functions. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are represented by a labor union or subject to a collective bargaining agreement.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and file or furnish reports, proxy statements, and other information with the SEC. You can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. Our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, also are available free of charge on the investors section of our website at www.mullenusa.com when such reports are available on the SEC’s website. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of business conduct and ethics, is also available on the investors section of our website.

The contents of the websites referred to above are not incorporated into this filing or in any other report or document we file with the SEC, and any references to these websites are intended to be inactive textual references only.

ITEM 1A. RISK FACTORS.

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, as well as the preceding “Business” section of this Report, before engaging in any transaction in our securities. Any of the following risks could materially and adversely affect our business, financial condition, results of operations and/or prospects, and cause the value of our securities to decline, which could cause you to lose all or part of your investment.

Summary

Risks Related to Mullen’s Capital Requirements and Financial Condition

We have incurred significant losses since inception and we expect that we will continue to incur losses for the foreseeable future;
We will require substantial additional financing to effectuate our business plan;
We have not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles;
Our limited operating history makes it difficult for us to evaluate our future business prospects;
Our auditor has expressed substantial doubt about our ability to continue as a going concern;
Certain of our lenders and the Internal Revenue Service have liens on our assets;
We have not paid, and do not plan to pay, cash dividends on our Common Stock, so any return on investment may be limited to the value of our Common Stock;
We have a substantial amount of debt; and
We may not generate sufficient cash to service all of our debt or refinance our obligations.

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Risks Related to Mullen’s Business and Operations

We may not be able to develop, manufacture and obtain regulatory approvals for a car of sufficient quality to appeal to customers on schedule or at all;
Our currently planned vehicles rely on lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame, potentially subjecting us to litigation, recall, and redesign risks;
The efficiency of a battery’s use will decline over time, which may negatively influence customers’ decisions whether to purchase an electric vehicle;
We rely on our original equipment manufacturers, suppliers and service providers for parts and components, any of whom could choose not to do business with us;
We will rely on complex machinery for our operations and production, which involve a significant degree of risk and uncertainty in operational performance and costs;
Complex software and technology systems need to be developed in coordination with vendors and suppliers, and there can be no assurance that such systems will be successfully developed;
We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects;
The inability of our suppliers, including single or limited source suppliers, to deliver components in a timely manner or at acceptable prices or volumes could have a material adverse effect on our business and prospects;
Financial distress of our suppliers could necessitate that we provide substantial financial support, which could increase our costs, affect our liquidity or cause production disruptions;
We have a limited operating history and face significant challenges as a new entrant into the automotive industry;
We have a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future, casting doubt on our ability to continue as a going concern;
Our business model is untested and we may fail to commercialize our strategic plans;
Our operating and financial results forecast relies on assumptions and analyses developed by us and may prove to be incorrect;
We may be unable to accurately estimate the supply and demand for our vehicles;
Increased costs or disruptions in supply of raw materials or other components could occur;
Our vehicles may fail to perform as expected;
Our services may not be generally accepted by our users;
The automotive market is highly competitive;
The automotive industry is rapidly evolving and demand for our vehicles may be adversely affected;
We may be subject to risks associated with autonomous driving technology;
Our distribution model is different from the predominant current distribution model for auto manufacturers;
Our future growth is dependent on the demand for and consumers’ willingness to adopt electric vehicles;
Government and economic incentives could become unavailable, reduced or eliminated;
Our failure to manage our future growth effectively;
Our failure to establish warranty reserves sufficient to cover future warranty claims;
We may not succeed in establishing, maintaining and strengthening the Mullen brand;
We will initially depend on revenue generated from a single model;
Doing business internationally creates operational and financial risks;
We are highly dependent on the services of David Michery, our Chief Executive Officer;
Our business may be adversely affected by labor and union activities;
We face risks related to health epidemics, including the recent COVID-19 pandemic;
Reservations for our vehicles are cancellable;
We may face legal challenges relating to direct sales to customers;
We face information security and privacy concerns;
We may be forced to defend ourselves against patent or trademark infringement claims and may be unable to prevent others from unauthorized use of our intellectual property;
Our patent applications may not issue as patents, the patents may expire, our patent applications may not be granted, and our rights may be contested;

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We may be subject to damages resulting from unintended disclosure of trade secrets;
Our vehicles are subject to various safety standards and regulations that we may fail to comply with;
We may be subject to product liability claims;
We are, or may be subject to, anti-corruption, bribery, money laundering, and financial and economic laws;
Risk of failure to improve our operational and financial systems to support expected growth;
Risk of failure to build our financial infrastructure and improve our accounting systems and controls;
Our management has limited experience in operating a public company;
The concentrated voting control of David Michery, Mullen’s founder;
The priority of our debt over our Common Stock in the event of liquidation, dissolution or winding up;
The number of shares of Common Stock underlying our outstanding warrants and Preferred Stock is significant in relation to our currently outstanding Common Stock; and
The dearth of analyst coverage on Mullen.

Risk Factors

Risks Related to our Capital Requirements and Financial Condition

We have incurred significant losses since inception and we expect that we will continue to incur losses for the foreseeable future, which makes it difficult to assess our future viability.

We have not been profitable since operations commenced, and we may never achieve or sustain profitability. In addition, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields such as the electric vehicle (“EV”) industry. Development and deployment of EV technology and vehicles is a highly speculative undertaking and involves a substantial degree of risk. We have not yet commercialized any of our proposed EV products or generated any revenue from sales of such products. We have devoted significant resources to research and development and other expenses related to our ongoing operations.

We will require significant additional capital to continue operations and to execute on our current business strategy. Mullen cannot estimate with reasonable certainty the actual amounts necessary to successfully complete the development and commercialization of our proposed products and there is no certainty that we will be able to raise the necessary capital on reasonable terms or at all.

We will require substantial additional financing to effectuate our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development efforts or other operations.

For the years ended September 30, 2021 and 2020, we incurred net losses of $44.2 million and $30.2 million, respectively, and net cash used in operating activities was $17.5 million and $10.8 million, respectively. At September 30, 2021, we had an accumulated deficit of $150.4 million and a working capital deficit of $64.4 million. We will need significant capital to, among other things, conduct research and development, increase our production capacity and expand our sales and service network. We expect to continue to incur substantial operating losses for the next several years as we advance our product development and commercialization efforts. No substantial revenue from operations will likely be available until, and unless, such efforts are successful.

We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business, and that once our cars are in production our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We will likely need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner, or on terms that are acceptable to us, or at all.

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Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. In particular, recent disruptions in the financial markets and volatile economic conditions could affect our ability to raise capital. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through public or private equity offerings, the ownership interest of our stockholders will be diluted, and the terms of any new equity securities may have preferential rights over our Common Stock and further may restrict our ability to obtain additional financing even if needed to continue operations. Further, the ability to fund our needs through equity issuances, warrants or convertible debt is or may be limited by covenants in certain of our existing and future funding or other agreements. If we raise additional capital through debt financing, we would have increased debt service obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidates or operate as a business.

Additional capital may not be available when we need it, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our establishment of sales and marketing, manufacturing or distribution capabilities, development activities or other activities that may be necessary to commercialize our proposed products or other development activities. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.

We have not yet manufactured or sold any production vehicles to customers and may never develop or manufacture any vehicles.

We have no experience as an organization in high volume manufacturing of the planned electric vehicles and we cannot assure you that us or our partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market our EVs. Even if we are able to successfully develop and sell or lease our vehicles, there can be no assurance that we will be commercially successful and achieve or sustain profitability. As a new entrant into our industry, we will face significant risks and challenges to our business and prospects, including, among other things, with respect to our ability to:

design and produce safe, reliable and quality vehicles on an ongoing basis;
obtain the necessary regulatory approvals in a timely manner;
build a well-recognized and respected brand;
establish and expand our customer base;
successfully market our vehicles and the other services we intend to provide;
properly price our services, including our charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;
successfully service our vehicles after sales and maintain a good flow of spare parts and customer goodwill;
establish and maintain our operational efficiency;
predict our future revenues and appropriately budget for our expenses;

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attract, retain and motivate talented employees;
anticipate trends that may emerge and affect our business; and
anticipate and adapt to changing market conditions, including technological developments and changes in the competitive landscape.

If we fails to adequately address any or all of these risks and challenges, our business may be materially and adversely affected.

Our limited operating history makes it difficult for us to evaluate our future business prospects.

As we attempt to transition from research and development activities to commercial production and sales, it is difficult, if not impossible, to forecast our future results, and we have limited insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed to reach full scale commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development activities to the large-scale manufacture and sale of vehicles. There can be no assurance that our estimates related to the costs and timing necessary to complete design and engineering of our EVs and to tool our facilities will prove accurate. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. For example, the tooling required within our facilities may be more expensive to produce than predicted, or have a shorter lifespan, resulting in additional replacement and maintenance costs, which could have a material adverse impact on our results of operations and financial condition. Similarly, we may experience higher raw material waste in the composite process than we expect, resulting in higher operating costs and hampering our ability to be profitable.

In addition, market conditions, many of which are outside of our control and subject to change, including general economic conditions, the availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for our electric vehicles, and ultimately our success.

Our auditor has expressed substantial doubt about our ability to continue as a going concern.

The audit report on our financial statements for the years ended September 30, 2021 and 2020 includes an explanatory paragraph related to our recurring losses from operations and dependence on additional financing to continue as a going concern. In view of these matters, our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity financings or enter into strategic partnerships. Since our inception, we have financed our operations through convertible debt financings. We intend to continue to finance our operations through debt or equity financing and/or strategic partnerships. The failure to obtain sufficient financing or strategic partnerships could adversely affect our ability to achieve our business objectives and continue as a going concern.

Our senior lender has a security interest on all our assets and the Internal Revenue Service has liens on our assets, and if these lienholders foreclose, that would be detrimental to our business, our financial condition and our ability to continue as a going concern.

Our senior lender has a security interest on all of our assets. In addition, the Internal Revenue Service (the “IRS”) has liens of $3.8 million on our assets. We are in default on such loan. Should either our senior lender or the IRS foreclose, each could secure judgments against our assets. This would be materially detrimental to our business, our financial condition and our ability to operate as a going concern.

We have not paid cash dividends on our Common Stock in the past and do not expect to pay dividends on our Common Stock in the future. Any return on investment may be limited to the value of our Common Stock.

We have never paid cash dividends on our Common Stock and do not anticipate paying cash dividends in the near future. The payment of dividends on our Common Stock will depend on earnings, financial condition and other business and

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economic factors affecting us at such time as the Board of Directors may consider relevant. If we do not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

We have a substantial amount of debt which is considered significant for a company of our size and which could adversely affect our financial condition and our ability to react to changes in our business.

As of September 30, 2021, we had an aggregate principal amount of debt outstanding of approximately $39.5 million. We believe that this is a substantial amount of indebtedness, which is considered significant for a company of our size and current level of operations. Our substantial debt could have important consequences to us. For example, it could:

make it more difficult for us to satisfy our obligations to the holders of our outstanding debt, resulting in possible defaults on and acceleration of such indebtedness;
require us to dedicate a substantial portion of any future cash flows from operations and from the issuance of equity or debt securities to make payments on our debt, which would reduce the availability of our cash flows to fund working capital, and capital expenditures or other general corporate purposes;
increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations;
place us at a competitive disadvantage to our competitors with proportionately less debt for our size;
limit our ability to refinance our existing indebtedness or borrow additional funds in the future;
limit our flexibility in planning for, or reacting to, changing conditions in our business; and
limit our ability to react to competitive pressures or make it difficult for us to carry out capital spending that is necessary or important to our growth strategy.

Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to generate sufficient cash to service all of our debt or refinance our obligations and we may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.

Our ability to make scheduled payments on our indebtedness or to refinance our obligations under our debt agreements, will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and business risk factors we face as described in this section, many of which may be beyond our control. We may not be able to achieve or maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures or planned growth objectives, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for payments of interest on and principal of our debt, and such alternative measures may not be successful and may not permit us to meet scheduled debt service obligations. In addition, the recent worldwide credit crisis could make it more difficult for us to refinance our indebtedness on favorable terms, or at all. In the absence of such operating results and resources, we may be required to dispose of material assets to meet our debt service obligations. We may not be able to consummate those sales, or, if we do, we will not control the timing of the sales or whether the proceeds that we realizes will be adequate to meet debt service obligations when due.

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Risks Related to our Business and Operations

We may be unable to develop, manufacture and obtain required regulatory approvals for a car of sufficient quality to appeal to customers on schedule or at all, or may be unable to do so on a large scale.

Our business depends in large part on our ability to develop, manufacture, market and sell or lease our EVs. Our ability to effectively compete in the EV market will depend in large part on our entry into the ESUV market through the offering of competitively priced vehicles to a wider variety of potential buyers.

We initially plan to manufacture vehicles in collaboration with one or more automotive component and engineering services suppliers, including large OEMs or tier-one automotive suppliers. We have not yet executed definitive supply or manufacturing agreements with any OEM or tier-one automotive supplier for the supply of parts for production of our initial proposed ESUVs or any of our other future vehicle offerings. If we are unable to negotiate and finalize such supply and manufacturing agreements with an OEM or a tier-one automotive supplier, we will not be able to produce any ESUVs and will not be able to generate significant revenue, or the vehicles may become more expensive to deliver with a higher bill of materials, which would have a material adverse effect on our business, prospects, operating results and financial condition.

The continued development and the ability to start manufacturing our vehicles are and will be subject to risks, including with respect to:

our ability to secure necessary funding;
our ability to accurately manufacture vehicles within specified design tolerances;
obtaining required regulatory approvals and certifications;
compliance with environmental, safety, and similar regulations;
securing necessary components, services, or licenses on acceptable terms and in a timely manner;
delays by we in delivering final component designs to our suppliers;
our ability to attract, recruit, hire, retain and train skilled employees;
quality controls that prove to be ineffective or inefficient;
delays or disruptions in our supply chain including raw material supplies;
our ability to maintain arrangements on reasonable terms with our manufacturing partners and suppliers, engineering service providers, delivery partners, and after sales service providers; and
other delays, backlog in manufacturing and research and development of new models, and cost overruns.

Our ability to develop, manufacture and obtain required regulatory approvals for a vehicle of sufficient quality to appeal to customers on schedule and on a large scale is unproven, and the business plan is still evolving. We may be required to introduce new vehicle models and enhanced versions of existing models. To date, we have limited experience, as a company, designing, testing, manufacturing, marketing and selling or leasing our electric vehicles and therefore cannot assure you that we will be able to meet customer expectations. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines would have a material adverse effect on our business, prospects, operating results and financial condition.

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Our vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame, and, if such results occur, bodily injury or death could result and could subject us to lawsuit, product recalls, or redesign efforts.

The battery packs within our proposed vehicles will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, once our vehicles are commercially available, a field or testing failure of battery packs in our vehicles could occur, which could result in bodily injury or death and could subject us to lawsuit, product recalls, or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, the social and environmental impacts of cobalt mining, or any future incident involving lithium-ion cells, such as a vehicle or other fire, could seriously harm our business and reputation.

The efficiency of a battery’s use over time when driving electric vehicles will decline over time, which may negatively influence potential customers’ decisions whether to purchase an electric vehicle.

The cells used in EV battery modules degrade over time, influenced primarily by the age of the cells and the total energy throughput over the life of the EV. This cell degradation results in a corresponding reduction in the vehicle’s range. Although common to all EVs, cell degradation, and the related decrease in range, may negatively influence potential customer’s EV purchase decisions.

We are substantially reliant on our relationships with OEMs, suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these OEMs, suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.

Collaboration with third parties for the manufacturing of vehicles is subject to risks with respect to operations that are outside our control. We could experience delays to the extent our current or future partners do not continue doing business with us or fail to meet agreed upon timelines, experience capacity constraints or otherwise are unable to deliver components or manufacture vehicles as expected. There is risk of potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us. In addition, although we intend to be involved in material decisions in the supply chain process, given that we also rely on our partners to meet our quality standards, there can be no assurance that we will be able to maintain high quality standards.

We may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party, and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business.

We will rely on complex machinery for our operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.

We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. It is expected that our manufacturing plant will consist of large-scale machinery combining many components. The manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, and seismic activity and natural disasters. Should operational risks materialize, they may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated

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fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.

There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our EVs, and there can be no assurance such systems will be successfully developed.

Our vehicles will use a substantial amount of third-party and in-house software codes and complex hardware to operate. The development of such advanced technologies is inherently complex, and we will need to coordinate with our vendors and suppliers in order to reach production for our EVs. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our potential inability to develop the necessary software and technology systems may harm our competitive position.

We are relying on third-party suppliers to develop a number of emerging technologies for use in our products, including solid-state polymer battery technology. These technologies are not today, and may not ever be, commercially viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted, and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects, and results of operations.

We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.

Any delay in the financing, design, manufacture, regulatory approval or launch of our vehicles, including entering into agreements for platform sharing, supply of component parts, and manufacturing, could materially damage our brand, business, prospects, financial condition and operating results and could cause liquidity constraints. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our vehicles, our growth prospects could be adversely affected as we may fail to establish or grow our market share. We rely on third-party suppliers for the provision and development of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.

We will be dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our vehicles in a timely manner and at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.

While we plan to obtain components from multiple sources whenever possible, many of the components used in our vehicles will be purchased by us from a single source. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable to us. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or experience capacity constraints.

Any disruption in the supply of components, whether or not from a single source supplier, could temporarily disrupt production of our vehicles until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially and adversely affect our results of operations, financial condition and prospects.

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If any of our suppliers become economically distressed or goes bankrupt, we may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase our costs, affect our liquidity or cause production disruptions.

We expect to purchase various types of equipment, raw materials and manufactured component parts from our suppliers. If these suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, we may be required to provide substantial financial support to ensure supply continuity or would have to take other measures to ensure components and materials remain available. Any disruption could affect’s our ability to deliver vehicles and could increase our costs and negatively affect our liquidity and financial performance.

We have a limited operating history and face significant challenges as a new entrant into the automotive industry, our vehicles are in development, and we do not expect our first vehicle to be produced until the second quarter of 2024, at the earliest, if at all.

We have a short operating history in the automobile industry, which is continuously evolving. We have no experience as an organization in high volume manufacturing of the planned EVs. We cannot assure you that us or our partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass-market future vehicles. You should consider our business and prospects in light of the risks and significant challenges we face as a new entrant into our industry, including, among other things, with respect to our ability to:

design and produce safe, reliable and quality vehicles on an ongoing basis;
obtain the necessary regulatory approvals in a timely manner;
build a well-recognized and respected brand;
establish and expand our customer base;
properly price our services, including our charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;
successfully service our vehicles after sales and maintain a good flow of spare parts and customer goodwill;
improve and maintain our operational efficiency;
maintain a reliable, secure, high-performance and scalable technology infrastructure;
predict our future revenues and appropriately budget for our expenses;
attract, retain and motivate talented employees;
anticipate trends that may emerge and affect our business;
anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and
navigate an evolving and complex regulatory environment.

If we fail to adequately address any or all of these risks and challenges, our business may be materially and adversely affected.

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We are an early-stage company with a history of losses and expects to incur significant expenses and continuing losses for the foreseeable future. There is substantial doubt about our ability to continue as a going concern.

We have incurred a net loss since our inception. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our vehicles. Even if we are able to successfully develop, manufacture, and sell or lease our vehicles, there can be no assurance that they will be commercially successful.

We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things: design, develop and manufacture our vehicles; build up inventories of parts and components for our vehicles; increase our sales and marketing activities, including opening new Mullen Experience Centers; develop our distribution infrastructure; and, increase our general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.

Our independent registered public accounting firm has included an emphasis of matter paragraph regarding our ability to continue as a going concern in its opinion on our September 30, 2021 consolidated financial statements due to insufficient capital for us to fund our operations.

Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses while establishing or entering new markets, setting up operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays, and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business model will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.

We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We will be required to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our prospective customers. Currently, there is no historical basis for making judgments on the demand for our vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our business, financial condition and operating results.

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We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles. If we are unable to establish an arrangement for the sustainable supply of batteries for our vehicles, our business would be materially and adversely harmed.

We may be unable to adequately control the costs associated with our operations. We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. The prices for these raw materials fluctuate depending on factors beyond our control. Our business also depends on the continued supply of battery cells for our vehicles. We are exposed to multiple risks relating to availability and pricing of quality solid-state polymer battery cells and lithium-ion battery cells.

Furthermore, currency fluctuations, tariffs or shortages in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs and could reduce our margins. In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages, which would result in increased costs in raw materials to us or impact our prospects.

If our vehicles fail to perform as expected, our ability to develop, market, and sell or lease our electric vehicles could be harmed.

Once production commences, our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair, recalls, and design changes. Our vehicles will use a substantial amount of software code to operate and software products are inherently complex and often contain defects and errors when first introduced. We have a limited frame of reference by which to evaluate the long-term performance of our systems and vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If any of our vehicles fail to perform as expected, we may need to delay deliveries or initiate product recalls, which could adversely affect our brand in our target markets and could adversely affect our business, prospects, and results of operations.

Our services may not be generally accepted by our users. If we are unable to provide quality customer service, our business and reputation may be materially and adversely affected.

Our servicing may primarily be carried out through third parties certified by us. Although such servicing partners may have experience in servicing other vehicles, they will initially have limited experience in servicing our vehicles. There can be no assurance that our service arrangements will adequately address the service requirements of our customers to their satisfaction, or that us or any of our proposed service partners will have sufficient resources to meet these service requirements in a timely manner as the volume of vehicles we deliver increases.

The automotive market is highly competitive, and we may not be successful in competing in this industry.

Both the automobile industry generally, and the electric vehicle segment, in particular, is highly competitive, and we will be competing for sales with both internal combustion engine (“ICE”) vehicles and other EVs. Many of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products, including their electric vehicles. We expect competition for electric vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects.

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The automotive industry and our technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for our electric vehicles.

We may be unable to keep up with changes in EV technology or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the ICE, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to successfully react to changes in existing technologies could materially harm our competitive position and growth prospects.

We may be subject to risks associated with autonomous driving technology.

It is expected that our proposed vehicles will be designed with connectivity for future installation of an autonomous hardware suite and we plan to partner with a third-party software provider in the future to implement autonomous capabilities. However, we cannot guarantee that we will be able to identify a third party to provide the necessary hardware and software to enable autonomous capabilities in an acceptable timeframe, on terms satisfactory to us, or at all. Autonomous driving technologies are subject to risks and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on drive interactions, and drivers may not be accustomed to using or adapting to such technologies. To the extent accidents associated with our autonomous driving systems occur, we could be subject to liability, negative publicity, government scrutiny, and further regulation. Any of the foregoing could materially and adversely affect our results of operations, financial condition, and growth prospects.

Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating our business, operating results and future prospects difficult.

Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating our business, operating results and future prospects difficult. Our distribution model is not common in the automotive industry today. We plan to conduct vehicle sales directly to users rather than through dealerships. This model of vehicle distribution is relatively new and, with limited exceptions, unproven, and subjects us to substantial risk. For example, we will not be able to utilize long established sales channels developed through a franchise system to increase sales volume. Moreover, we will be competing with companies with well established distribution channels. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies. If we are unable to achieve this, it could have a material adverse effect on our business, prospects, financial results and results of operations.

We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could result in our failure to accurately or timely report our financial condition or results of operations, which could have a material adverse effect on our business and stock price.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Management is working to remediate our current material weaknesses and prevent potential future material weaknesses by hiring additional qualified accounting and financial reporting personnel, and further reviewing and enhancing our accounting processes. We may not be able to fully remediate any future material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. If we are not able to maintain effective internal control over financial reporting, our financial statements and related disclosures may be inaccurate, which could have a material adverse effect on our business and our stock price.

Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.

Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt electric vehicles, and even if electric vehicles become more mainstream, consumers choosing us over other EV manufacturers. Demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and

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governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition, and operating results.

In addition, the demand for our vehicles and services will highly depend upon the adoption by consumers of new energy vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards, and changing consumer demands and behaviors.

Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:

perceptions about EV quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other manufacturers;
range anxiety;
the availability of new energy vehicles, including plug-in hybrid EVs;
the availability of service and charging stations for EVs;
the environmental consciousness of consumers, and their adoption of EVs;
perceptions about and the actual cost of alternative fuel; and
macroeconomic factors.

Any of the factors described above may cause current or potential customers not to purchase EVs in general, and our EVs in particular. If the market for EVs does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be affected.

The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.

Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or for other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.

While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.

In addition, we may apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies, and our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.

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If we fail to manage our future growth effectively, we may not be able to develop, manufacture, market and sell or lease our vehicles successfully.

We intend to expand our operations significantly, which will require hiring, retaining and training new personnel, controlling expenses, establishing facilities and experience centers, and implementing administrative infrastructure, systems and processes. In addition, because our electric vehicles are based on a different technology platform than traditional ICE vehicles, individuals with sufficient training in electric vehicles may not be available to be hired, and we will need to expend significant time and expense training employees we hire. We also require sufficient talent in additional areas such as software development. Furthermore, as we are a relatively young company, our ability to train and integrate new employees into our operations may not meet the growing demands of our business which may affect our ability to grow. Any failure to effectively manage our growth could materially and adversely affect our business, prospects, operating results and financial condition.

For example, to manage the expected growth of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.

Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.

Once our cars are in production, we will need to maintain warranty reserves to cover warranty-related claims. If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

We may not succeed in establishing, maintaining and strengthening the Mullen brand, which would materially and adversely affect customer acceptance of our vehicles and components and our business, revenues and prospects.

Once our cars are in production, our business and prospects will heavily depend on our ability to develop, maintain and strengthen the Mullen brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Our ability to develop, maintain and strengthen the Mullen brand will depend heavily on the success of our marketing efforts. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.

We will initially depend on revenue generated from a single model and in the foreseeable future will be significantly dependent on a limited number of models.

We will initially depend on revenue generated from a single vehicle model and in the foreseeable future will be significantly dependent on a limited number of models. Historically, automobile customers have come to expect a variety of vehicle models offered in a manufacturer’s fleet and new and improved vehicle models to be introduced frequently. Given that for the foreseeable future our business will depend on a single or limited number of models, to the extent a particular model is not well-received by the market, our sales volume, business, prospects, financial condition, and operating results could be materially and adversely affected.

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Doing business internationally creates operational and financial risks for our business.

Our business plan includes eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which we sell our products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.

We are highly dependent on the services of David Michery, our Chief Executive Officer.

We are highly dependent on the services of David Michery, our founder and Chief Executive Officer. Mr. Michery is the source of many, if not most, of the ideas and execution driving us. If Mr. Michery were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.

Our business may be adversely affected by labor and union activities.

Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results.

We face risks related to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the recent pandemic of respiratory illness caused by a novel coronavirus known as COVID-19. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers and has led to a global decrease in vehicle sales in markets around the world.

The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures may adversely impact our employees and operations and the operations of our customers, suppliers, vendors and business partners, and may negatively impact our sales and marketing activities. In addition, various aspects of our business cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our manufacturing plans, sales and marketing activities, business and results of operations.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, recommending that all non-essential personnel work from home and cancellation or reduction of physical participation in sales activities, meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, suppliers, vendors and business partners. The reduction of economic activity also disrupted some contractual obligations due to work stoppage requirements. Some employees chose the option to work from home rather than come to the office. As a result, there were some reductions in employee productivity, employee layoffs and employee salaries.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and spread of the

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pandemic, our severity, the actions to contain the virus or treat our impact, and how quickly and to what extent normal economic and operating activities can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of our global economic impact, including any recession that has occurred or may occur in the future.

Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment, or a decline in consumer confidence as a result of the COVID-19 pandemic could have a material adverse effect on the demand for our vehicles. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing our vehicles for other traditional options or may choose to keep their existing vehicles and cancel reservations.

There are no comparable recent events that may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain.

Reservations for our vehicles are cancellable.

The potentially long wait from the time a reservation is made until the time the vehicle is delivered, and any delays beyond expected wait times, could impact user decisions on whether to ultimately make a purchase. Any cancellations could harm our financial condition, business, prospects, and operating results.

We may face legal challenges in one or more states attempting to sell directly to customers which could materially adversely affect our costs.

Our business plan includes the direct sale of vehicles to business customers, and potentially, to individual customers. Most, if not all, states require a license to sell vehicles within the state. Many states prohibit manufacturers from directly selling vehicles to customers. In other states, manufacturers must operate a physical dealership within the state to deliver vehicles to customers. As a result, we may not be able to sell directly to customers in each state in the United States.

For customers residing in states in which we will not be allowed to sell or deliver vehicles, we may have to arrange alternate methods of delivery of vehicles. This could include delivering vehicles to adjacent or nearby states in which we are allowed to directly sell and ship vehicles and arranging for the customer to transport the vehicles to their home states. These workarounds could add significant complexity, and as a result, costs, to our business.

Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

We expect to face significant challenges with respect to information security and privacy, including the storage, transmission and sharing of confidential information. We will transmit and store confidential and private information of our customers, such as personal information, including names, accounts, user IDs and passwords, and payment or transaction related information.

We have adopted information security policies and deployed measures to implement the policies, including, among others, encryption technologies, and plans to continue to deploy additional measurers as we grow. However, advances in technology, an increased level of sophistication and diversity of our products and services, an increased level of expertise of hackers, new discoveries in the field of cryptography or other factors can still result in a compromise or breach of the measures that we use. If we are unable to protect our systems, and hence the information stored in our systems, from unauthorized access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to our liabilities to the owners of confidential information or even subject us to fines and penalties. In addition, complying with various laws and regulations could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business.

In addition, we will need to comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the United States, Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018 and the State of California

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adopted the California Consumer Privacy Act of 2018 (“CCPA”). Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and recently enacted laws (including implementation of the privacy and process enhancements called for under the GDPR) and regulations can be costly; any failure to comply with these regulatory standards could subject us to legal and reputational risks.

Compliance with any additional laws and regulations could be expensive and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, and damage to our reputation and credibility, and could have a negative impact on revenues and profits.

Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, could cause our customers to lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.

We may need to defend ourselves against patent or trademark infringement claims, and we may not be able to prevent others from unauthorized use of our intellectual property, which may be time-consuming and would cause us to incur substantial costs and harm our business and competitive position.

Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell, lease or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating to our design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:

cease selling or leasing, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;
pay substantial damages;
seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;
redesign our vehicles or other goods or services; or
establish and maintain alternative branding for our products and services.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.

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Further, we may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely or will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses, and other contractual rights to establish and protect our rights in our technology. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take may not prevent misappropriation. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.

Patent, trademark, and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which, would adversely affect our business, prospects, financial condition and operating results.

Patent applications that we may file may not issue as patents and any patents that may be granted to us may expire and may not be extended, our rights may be contested, circumvented, invalidated or limited in scope, or our rights may not protect us effectively, all of which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to theirs.

We cannot be certain that we are the first inventor of the subject matter to which we may file a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application for the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results.

We cannot assure you that we will be granted patents pursuant to any applications that we may file. Even if we file patent applications and we are issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented or invalidated in the future. In addition, the rights granted under any issued patents may not provide we with meaningful protection or competitive advantages. The claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from licensing and exploiting any patents that issue from our applications. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and is developing our technology. These patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may claim priority, any of our patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.

Many of our employees were previously employed by other automotive companies or by suppliers to automotive companies. We may be subject to claims that us or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

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Our vehicles are subject to motor vehicle standards and substantial regulation, and the failure to satisfy such mandated safety standards or regulations, or unfavorable changes to such regulations, would have a material adverse effect on our business and operating results.

All vehicles sold must comply with international, federal, and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have our future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.

Additionally, our electric vehicles, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations.

To the extent the laws change, our vehicles may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.

Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell or lease vehicles directly to consumers could have a negative and material impact on our business, prospects, financial condition and results of operations.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may become subject to product liability claims, even those without merit, which could harm our business, prospects, operating results, and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given we have limited field experience for our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates, which would have material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.

We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that

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accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibit non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.

Failure to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements and rules governing revenue and expense recognition and any inability to do so will adversely affect our billing and reporting.

To manage the expected growth and increasing complexity of our operations, we will need to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense reco0gntion for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.

Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.

As a public company, we will operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the regulations of the Nasdaq CM, the rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. Commencing with our fiscal year ending the year in which the Merger Agreement is completed, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. Prior to the Closing, we have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

We anticipate that the process of building our accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. We expect that we will need to implement a new internal system to combine and streamline the management of our financial, accounting, human resources and other functions. However, such a system would likely require us to complete many processes and procedures for the effective use of the system or to run our business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, we may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

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If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by the Nasdaq CM, the SEC or other regulatory authorities.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the combined company. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the combined company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations, which will increase our operating costs in future periods.

The voting structure of our Preferred Stock has the effect of concentrating voting control with David Michery, our founder. Until the voting rights of the Series A Preferred Stock are reduced, this will limit or preclude stockholders’ ability to influence corporate matters, including the outcome of important transactions, including a change in control.

Shares of our Series A Preferred currently have 1,000 votes per share and convert into our Common Stock on a 100-for-1 basis, while shares of our Series B and Series C Preferred and Common Stock have one vote per share. David Michery, our founder and Chief Executive Officer, holds substantially all of the issued and outstanding shares of our Series A Preferred and currently holds voting power over the Series B and Series C Preferred. Accordingly, Mr. Michery holds approximately 73% of the voting power of our capital stock. As such, Mr. Michery is able to control or exert significant influence over matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. Mr. Michery may have interests that differ from yours and may vote in a way with which you disagree, and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company, and might ultimately affect the market price of shares of our Common Stock.

All of our debt obligations and our senior equity securities will have priority over our Common Stock with respect to payment in the event of liquidation, dissolution or winding up, and our outstanding senior securities restrict our ability to pay dividends on our Common Stock.

If we were to liquidate, dissolve or wind up, our Common Stock would rank below all debt claims against us and claims of all of our outstanding shares of preferred stock. As a result, holders of Common Stock of the combined company will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the combined company until after all our obligations to our debt holders have been satisfied and holders of senior equity securities have received any payment or distribution due to them.

In addition, our Certificate of Incorporation currently requires us to pay substantial monthly dividends on our Series C Preferred in cash or in stock. Although we can pay such amount in shares of our Common Stock, the issuance of additional shares may dilute the company’s equity and adversely affect the trading price of shares of our Common Stock.

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If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline.

The trading market for our Common Stock will depend on the research and reports that securities or industry analysts publish about us or our business. Currently, we do not have any analyst coverage and may not obtain analyst coverage in the future. In the event we obtain analyst coverage, we will not have any control over such analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

Our corporate headquarters is located in Brea, California, where we occupy facilities totaling approximately 24,730 rentable square feet under a sublease that expires in March 2026 with lease payments of $33,136 per month. We use these facilities primarily for our management, technology, product design, sales and marketing, finance, legal, human resources, general administrative and information technology teams.

We own a manufacturing facility located in Tunica, Mississippi, which was purchased in November 2021. Further manufacturing facilities must be acquired or developed in order to meet our anticipated manufacturing needs. It is currently anticipated that such facilities will also be located in Tunica, MS.

We believe that our current facilities are suitable and adequate for our present purposes, and we anticipate that we will be able to extend our existing leases on terms satisfactory to us or relocate to new facilities on acceptable terms.

ITEM 3. LEGAL PROCEEDINGS.

Mullen Technologies, Inc. v. Qiantu Motor (Suzhou) Ltd.

This claim was filed in the United States District Court for the Southern District of California (Case No. 3:19-cv-01979-W-DEB) on October 11, 2019. This matter arises out of contract dispute between Mullen and Qiantu related to the engineering, design, support, and homologation of Qiantu’s K50 vehicle by Mullen. On July 1, 2020, the court ordered this matter to arbitration. It was submitted to the American Arbitration Association on February 9, 2020, for arbitration in Denver, Colorado. Mullen filed its Demand for Arbitration on February 16, 2021. Arbitration proceedings were then stayed for 90 days to accommodate settlement discussions. On November 3, 2021, Qiantu filed an Arbitration Answering Statement and Counterclaim or Joinder/Consolidation Request. Mullen is in the process of preparing a response. This matter is set for hearing on August 1, 2022.

4Wall Entertainment, Inc. v. Mullen Technologies, Inc.

This claim was filed in the Orange County Superior Court (Case No. 30-2021-01191251-CU-BC-CJC) on March 23, 2021. The matter arises out of the alleged breach of an equipment lease. Mullen filed its Answer to the Complaint on May 6, 2021. It is set for jury trial on October 11, 2022.

Mullen Technologies, Inc., et al. v. Scott LaRue, et al.

This claim was filed in the Orange County Superior Court (Case No. 30-2021-01200080-CU-MC-CJC) on May 5, 2021. The matter arises out of an alleged breached contract. This matter has been settled and is expected to be dismissed by the court shortly. There is a Case Management Conference and Order to Show Cause re: Dismissal hearing set for January 3, 2022.

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The GEM Group

This claim arises out an alleged breached Securities Purchase Agreement dated November 13, 2020. On November 9, 2021, the parties appointed an arbitrator. There are currently no future hearings or appearances scheduled for this matter.

IBM v. Mullen Technologies, Inc.

This claim was filed in the Supreme Court of the State of New York, County of Westchester (Index No. 57306/2019) on May 7, 2019. The matter arises out of an alleged breach of contract and an account unstated. On September 24, 2019, IBM filed a Motion for Summary Judgment. The court granted IBM’s Motion for Summary Judgment as it relates to liability, but denied as to damages on April 21, 2020. The court conducted inquest proceedings on the issue of damages on April 21, 2021. The court entered its judgment on December 1, 2021. Mullen filed a Notice of Appeal on December 2, 2021. There are currently no future hearings or appearances scheduled for this matter.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Common Stock began trading on The NASDAQ Capital Market under the symbol “NETE” on October 3, 2012. In connection with the Name Change, the ticker symbol for the Company’s Common Stock changed from “NETE” to “MULN” at the opening of trading on November 5, 2021.

Holders

As of September 30, 2021, our Common Stock was held by 1,067 registered shareholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies. Our transfer agent is Continental Stock Transfer & Trust Company.

Dividends

We have not historically declared any dividends. We have no present intention of paying any cash dividends on our Common Stock in the foreseeable future, as any earnings will be used to help generate growth. The decision on the payment of dividends in the future rests within the discretion of the Board of Directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other relevant factors. There are no restrictions in our certificate of incorporation or bylaws that restrict us from declaring dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

The information included under Item 12 of Part III of this Report is hereby incorporated by reference into this Item 5 of Part II of this Report.

Recent Sales of Unregistered Securities

Sale of Unregistered Securities

Information required by Item 701 of Regulation S-K as to other unregistered equity securities we sold during the period covered by this Report that were not registered under the Securities Act has been previously reported in the Company’s Current Reports on Form 8-K filed with the Commission, in addition to the following:

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 31, 2021, in January 2021, we issued 200,000 shares of our Common Stock in exchange for a tranche of $1,960,000 aggregate amount, less any fees, of certain RBL promissory notes purchased by ESOUSA pursuant to the ESOUSA Agreement. Such shares of Common Stock were issued to ESOUSA under an exemption from the registration requirements of the Securities Act in reliance upon Section 3(a)(9) of the Securities Act. See Note 8 to the condensed consolidated financial statements for additional information.

On November 4, 2021, we received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with JADR Consulting Group PTY Limited. The convertible note is issued at OID of 10% ($0.1 million); carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 417,375 shares of MAI common stock.  The warrant exercise price is $8.84 per common share and expires five years from the date of issuance. The number of shares issuable upon conversion of the conversion amount (principal and accrued interest) is determined according to the formula:  Conversion Amount/Conversion Price ($8.83), subject to certain adjustments.  However, upon conversion, JADR Consulting Group PTY Limited (together with its affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding, after giving effect to the

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issuance of common stock issuable upon exercise of the warrants.   The convertible note and warrants were issued pursuant to and in accordance with the exemption from registration under the Securities Act under Section 4(a)(2) and/or Regulation D promulgated under the Securities Act.

On November 4, 2021, the Company received debt financing through MTI entering into an unsecured $110K convertible note agreement with Michael Friedlander. The convertible note is issued with OID of 10% or $10K; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 30,872 shares of MAI common stock.  The warrant exercise price is $8.84 per common share and expires five years from the date of issuance. The number of conversions shares issuable upon conversion of the conversion amount (principal and accrued interest) shall be determined according to the formula:  Conversion Amount/Conversion Price ($8.83), subject to certain adjustments. However, upon conversion, Michael Friedlander (together with his affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.  The convertible note and warrants were issued pursuant to and in accordance with the exemption from registration under the Securities Act under Section 4(a)(2) and/or Regulation D promulgated under the Securities Act.

Issuer Purchases of Equity Securities

For the three months ended September 30, 2021, we did not repurchase any shares of our Common Stock.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes included elsewhere in this Report. This 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 this Report. Certain amounts in this section may not foot due to rounding.

In connection with the Merger Agreement (as defined below), and as disclosed in our Current Report on Form 8-K filed with the SEC on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 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 Annual 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.

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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.

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Results of Operations

Comparison of the Year Ended September 30, 2021 to the Year Ended September 30, 2020

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

Year Ended 

 

September 30,

%

    

2021

    

2020

    

$Change

    

 Change

 

    

(dollar amounts in thousands, except percentages)

 

Operating costs and expenses:

  

  

  

  

 

General and administrative

$

19,394

$

10,427

$

8,846

 

84.84

%

Research & development

 

3,009

 

1,667

 

1,342

 

80.50

%

Total operating costs and expenses

 

22,403

 

12,094

 

10,188

 

84.24

%

Loss from operations

 

(22,403)

 

(12,094)

 

(10,188)

 

84.24

%

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(22,728)

 

(18,094)

 

(4,634)

 

25.61

%

Gain on extinguishment of debt

 

891

 

 

891

 

100.00

%

Loss on disposal of fixed assets

 

 

 

 

  

%

Other income (expense), net

 

 

10

 

(10)

 

100.00

%

Total other income (expense)

 

(21,838)

 

(18,084)

 

(3,753)

 

20.75

%

Net loss

$

(44,241)

$

(30,178)

$

(13,940)

 

46.20

%

General and Administrative

General and administrative expenses increased by $8.8 million or 84.8% from $10.4 million in the twelve months ended September 30, 2021 to $19.4 million in the twelve months ended September 30, 2021, primarily due to increases in professional services, marketing, and payroll related expenses with the growth of personnel and resources.

Research and Development

Research and development expenses increased by $1.3 million or 80.5% from $1.7 million through the twelve months ended September 30, 2020 to $3.0 million through the twelve months ended September 30, 2021. During the year, there was minimal activity due to the COVID-19 pandemic. 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.

Interest Expense

Interest expense increased by $4.6 million or 25.6% from $18.1 million through the twelve months ended September 30, 2020 to $22.7 million through the twelve months ended September 30, 2021, primarily due to an increase in convertible debt.

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 $44.2 million for the twelve months ended September 30, 2021, an increase of $14 million or 46.2% from $30.2 million in the twelve months ended September 30, 2020, mainly for the reasons discussed above.

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Liquidity and Capital Resources

As of the date of this Annual 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 September 30, 2021, our cash and cash equivalents amounted to $0.04 million and our total debt amounted to $39.5 million, of which $3.8 million is owed to the IRS and other tax jurisdictions related to payroll taxes and sales and use taxes.

We agreed to sell $20 million of Series C Preferred with warrants to an unaffiliated investor immediately prior to the Effective Time of the Merger at a per share exercise price of $0.6877, subject to adjustment in accordance with the terms of the Merger Agreement. Mullen and the investor are negotiating an amendment to such agreement whereby such amount may be increased to an aggregate of $60 million by mutual agreement of Mullen and the investor. In addition, we entered into an agreement with ESOUSA to provide us with a $30.0 million equity line of credit on September 1, 2021 and a $15 million note receivable with CEOcast, Inc. on October 8, 2021.

We received $7.4 million in net proceeds from the Net Element merger transaction. We also received an additional $10.6 million in convertible notes from TDR Capital and JADR Consulting Group Pty Limited.

As part of our agreement with NASDAQ, the Company must complete a qualified offering within six months after regulatory approval. Additionally, the Company has committed to file a registration statement for the Series B and Series C shares, which are expected to result in the increase of common shares outstanding and enhance market capitalization.

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 audited consolidated financial statements included elsewhere in this Annual 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.

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

Net Carrying Value

    

Unpaid Principal 

    

    

Long-Term

    

Contractual 

    

Contractual 

Type of Debt

Balance

Current

Interest Rate

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

The following is a summary of our debt as of September 30, 2020:

Net Carrying Value

    

Unpaid Principal 

    

    

Long-Term

    

Contractual 

    

Contractual 

Type of Debt

Balance

Current

Interest Rate

Maturity

Matured Notes

$

4,828,450

$

4,828,450

$

 

0.00% - 15.00

%  

2016 - 2019

Promissory Notes

 

25,288,063

 

25,288,063

 

 

0.00% - 28.00

%  

2021 – 2022

Demand Note

 

500,000

 

500,000

 

 

27.00

%  

2020

Convertible Unsecured Notes

 

1,867,500

 

1,867,500

 

 

20.00

%  

2021-2022

Real Estate Note

 

318,384

 

34,503

 

283,881

 

5.00

%  

2023

Loan Advances

 

1,931,017

 

1,931,017

 

 

0.00% - 10.00

%  

2019 – 2020

Less: Debt Discount

 

(1,401,062)

 

(1,401,062)

 

 

NA

 

NA

Total Debt

$

33,332,352

$

33,048,471

$

283,881

 

NA

 

NA

Cash Flows

The following table provides a summary of Mullen’s cash flow data for the years ended September 30, 2021 and 2020:

Years Ended September 30,

    

2021

    

2020

    

(dollar amounts in thousands)

Net cash used in operating activities

$

(17,522)

$

(10,781)

Net cash used in investing activities

 

(162)

 

(567)

Net cash provided by financing activities

 

17,693

 

9,160

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 starts to generate any material cash flow from our business.

Net cash used in operating activities was $17.5 million in the twelve months ended September 30, 2021, an increase from $10.8 million net cash used in the twelve months ended September 30, 2020.

Cash Flows used in Investing Activities

Our cash flows used in investing activities, to date, have been comprised mainly of purchases of equipment and have not been material. We expect these costs to increase substantially in the near future as we ramp up activity ahead of commencing commercial operations.

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Net cash used in investing activities was $0.2 million in the year ended September 30, 2021, a decrease from $0.6 million used in investing activities the year ended September 30, 2020.

Cash Flows provided by Financing Activities

Through September 30, 2021, we have financed our operations primarily through the issuance of convertible notes and equity securities.

Net cash provided by financing activities was $17.7 million for the year ended September 30, 2021 primarily due to issuance of notes payable, as compared to $9.2 million net cash provided by financing activities for the year ended September 30, 2020, which included (i) $12.8 million net proceeds from issuance of notes payable; (ii) $4.8 million in net proceeds from issuance of Common Stock which was partially offset by $.6 million of payments of notes payable; (iii) $.7 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 September 30, 2021, and the years in which these obligations are due:

Operating Lease Commitments

    

Scheduled 

Years Ended September 30,

Payments

2022

$

1,213,728

2023

 

1,157,693

2024

 

824,287

2025

 

436,155

2026

 

222,787

2027 and Thereafter

 

Total Future Minimum Lease Payments

$

3,854,650

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 as of September 30, 2021:

Years Ended December 31,

    

2021

    

2022

    

2023

    

2024

    

2025

    

2026

    

Thereafter

    

Total

Total Debt

$

39,200,970

$

$

247,612

$

$

$

$

$

39,448,582

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 managemnet 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

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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 audited consolidated financial statements included elsewhere in this Annual 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 and Common Stock Valuation

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.

Common Stock Valuations

The grant date fair value of our Common Stock (pre-merger with Net Element) was typically be determined by our board of directors with the assistance of management and a third-party valuation specialist. Given our pre-revenue stage of development, management believed that an Option Pricing Model (“OPM”) was the most appropriate method for allocating enterprise value to determine the estimated fair value of our Common Stock. Application of the OPM involved the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of future events. Once Mullen’s stock became publicly traded, the Board of Directors elected to determine the fair value of our post-merger Common Stock based on the closing market price the day before the date of grant.

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.

In July 2021, the FASB issued ASU No. 2021-05, Lessors – Certain Leases with Variable Lease Payments (Topic 842). The amendments in this update affect lessors with lease contracts that have (1) have variable lease payments that do not depend on a reference index or a rate, and (2) would have resulted in the recognition of a selling loss at lease commencement if classified a sales-type or direct financing. The ASU will be effective for fiscal years beginning after

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December 15, 2021. Company management is evaluating the impact this guidance will have on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements and notes thereto and the reports of the independent registered public accounting firm are filed as part of this Report and incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

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 carry out 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. Management has not been in a position to make its assessment regarding internal control over financial reporting due to the circumstances described in detail below. Accordingly, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective.

Management’s Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm as we determined that the Company is currently similarly situated to a newly public company due to the relatively recent closing of the Merger, which was accounted for as a reverse merger transaction, in which Mullen Automotive-California is treated as the acquirer for financial accounting purposes. In making this determination, we have considered the timing and effects of the Merger, which closed on November 5, 2021, and after which, there was a complete change in the business, operations, accounting, board of directors and executive management of the Company and all of the business of the Company was that of Mullen Automotive-California. As a result, the internal controls and related material weaknesses previously reported related to the Company’s prior business and no longer exist with respect to the Company’s current business. Management was not in a position to conduct an assessment because of the impending reverse merger transaction which was at an advanced stage at year end. We plan to file our first assessment regarding internal control over financial reporting in the Annual Report on Form 10-K for the year ending September 30, 2022.

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Changes in Internal Control over Financial Reporting

Other than what has been described above, there were no changes in our internal control over financial reporting that occurred during the year ended September 30, 2021, 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.

ITEM 9B. OTHER INFORMATION

On July 23, 2021, we entered into a First Amendment to Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions dated March 9, 2021 and to Lease dated April 28, 2021 with Saleen Motors International, LLC  (collectively, the Purchase Agreement”). Pursuant to the Purchase Agreement, we agreed to purchase an EV car manufacturing facility in Tunica, Mississippi for a purchase price of $12.0 million. The purchase of the manufacturing facility closed on November 12, 2021.

On September 17, 2021, we entered into a one-year Consulting Agreement with Preferred Management Partners Inc. (“PMP”) pursuant to which PMP has agreed to resume negotiations with Quiantu Motor Cars to enable us to procure the complete intellectual property ownership rights related to the K-50 automobile. As compensation for these services, we agreed to issue 750,000 shares of Common Stock to PMP, with a conditional issuance of an additional 750,000 shares of Common Stock if PMP is successful in our obtaining the intellectual property rights.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The directors and executive officers of the Company and their respective ages, and positions with the Company and certain business experience as of the date of this Report are set forth below. There are no family relationships among any of the directors or executive officers.

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There are no material legal proceedings to which any director or executive officer of the Company, or any associate of any director or executive officer of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

Name

    

Age

    

Position

    

Director Class

David Michery

55

Chief Executive Officer, President and Chairman of the Board

Class I

Kerri Sadler

57

Chief Financial Officer

Jerry Alban

65

Chief Operating Officer and Director

Class I

Calin Popa

59

President—Ottava Automotive

Mary Winter

30

Secretary and Director

Class I

Kent Puckett

58

Director

Class II

Mark Betor

65

Director

Class II

William Miltner

 

59

 

Director

Class III

Jonathan New

 

61

 

Director

Class III

On November 5, 2021, upon the filing of the Second Amended and Restated Certificate of Incorporation, the Company’s Board of Directors was classified into three classes with staggered three-year terms (with the exception of the expiration of the initial terms of the Class I and Class II directors). Pursuant to this amendment to our Charter, our Board is now classified into three classes with staggered three-year terms (with the exception of the initial Class I and Class II directors), designated as follows:

Class I - David Michery, Jerry Alban, and Mary Winter, whose terms will expire at our first annual meeting of stockholders to be held after consummation of the Merger;
Class II - Kent Puckett and Mark Betor, whose terms will expire at our second annual meeting of stockholders to be held after consummation of the Merger; and
Class III - William Miltner and Jonathan New whose terms will expire at our third annual meeting of stockholders to be held after consummation of the Merger.

At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until the successors are duly elected and qualified. This classification of the Board may have the effect of delaying or preventing changes in Mullen’s control of management. These directors may be removed for cause by the affirmative vote of the holders of at least two-thirds (2/3) of Mullen’s voting stock.

David Michery has served as the Chairman of the Board, President and Chief Executive Officer of the Company since the closing of the Merger and held those same positions at Mullen Technologies since its inception in 2018. His automotive experience began with the acquisition of Mullen Motor Company in 2012. Mr. Michery brings over 25 years within executive management, marketing, distressed assets, and business restructuring. He acquired the assets of Coda Automotive, formerly an independent EV manufacturer, through bankruptcy as an entryway into the EV business. We believe that Mr. Michery is qualified to serve as a director because of his operational and historical expertise gained from serving as our Chief Executive Officer, and his experience within various businesses, including automotive.

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Kerri Sadler was appointed Chief Financial Officer of Mullen Technologies Inc. in October 2021.  Previously, she served as the internal consultant and interim CFO while leading the finance and accounting team through annual audits, financial reviews. Ms. Sadler has domestic and international experience, which spans commercial and investment banking, automotive, and trading/treasury activities.  From 2016 to present, she has worked with emerging growth companies in developing their finance and accounting departments, the list of clients include Apollo Global Management, Faraday Future, and Mullen Technologies.  Within middle and senior manager roles, Ms. Sadler has worked for KPMG Consulting, Credit Suisse, and Toyota Financial Services.  Her career began with the Federal Deposit Insurance Corporation (FDIC) as a bank examiner/regulator.

Jerry Alban has served as the Chief Operating Officer of the Company since the closing of the Merger and held the same position at Mullen Technologies since June 2021. Prior to that position, he served as Chief Financial Officer at Mullen Technologies from April 2018 until November 2021. Mr. Alban also served as an internal consultant for the Company since January 2018. He brings 35 years of experience within private and public accounting, with the last 20 years serving in senior and executive management roles that spans controlling, processes, financial reporting and M&A activity. Mr. Alban has two undergraduate degrees, B.S. in Accounting from Central Washington University and B.S. in Forestry from Washington State University. We believe that Mr. Alban is qualified to serve as a director because of his experience gained from serving as Chief Financial Officer, and his finance and accounting expertise.

Calin Popa has served as President of the Automotive Electric Vehicles Division of Mullen Technologies since 2017. He has 34 years of experience within the automotive industry. Previously, Mr. Popa was Vice President of Manufacturing Engineering at Karma Automotive, LLC, f/k/a Fisker Automotive, from 2010 to 2017. Mr. Popa has held senior positions within product development, vehicle launch and manufacturing at well-known companies, including MAN, Ford, and Chrysler.

Mary Winter has served as director of the Company since the closing of the Merger and has been a director of Mullen Technologies since 2018. Ms. Winter has been an integral part of Mullen since inception. She currently serves as the Secretary of the Company and Board of Directors. Formerly, she was the Vice President of Operations for Mullen Technologies since 2014. We believe that Ms. Winter is qualified to serve as a director because of her business and operational knowledge of Mullen Technologies.

Kent Puckett has served on Mullen Technologies’ Board of Directors since 2018, serving as the Audit Committee Chair during that time. Previously, he served as the Chief Financial Officer of Mullen Technologies from 2012 to 2018. Mr. Puckett has many years of experience as a CFO with a proven track record of establishing cross-functional partnerships to deliver stellar results. He has led many companies in their audit and disclosure requirements, creating operations, marketing, and sales division budgets of multi-million dollars, and being accountable for the allocation of resources to exceed profit and sales goals. Mr. Puckett has a B.S. in Business Administration from Pensacola Christian College, and Advanced Studies in Management, Finance, Compliance, Insurance, Financial Consulting, Taxation and Financial Reporting, with an emphasis on Public Companies reporting and audit requirements. We believe that Mr. Puckett is qualified to serve as a director because of his finance and accounting background and experience.

Mark Betor has served as a director of the Company since the closing of the Merger and a director of Mullen Technologies since 2018, serving on on the Compensation Committee. Mr. Betor is a retired businessman and law enforcement officer. Since retirement, he has been involved with real estate investments and private business. We believe that Mr. Betor is qualified to serve as a director because of his vast experience within investments and private businesses.

William Miltner has served as a director of the Company since the closing of the Merger. He has served as a litigation attorney for over 30 years. He is the co-founder of Miltner & Menck, APC, a full-service law firm, in San Diego, CA. Mr. Miltner successfully co-founded and co-managed the law firm of Perkins & Miltner, LLP, a respected San Diego litigation firm for 13 years. In 2006, when co-founder David Perkins left the practice of law, Miltner Law Group, APC, was founded. Mr. Miltner has represented many publicly traded and private companies including residential developers, construction contractors, title insurance companies and banking and lending institutions. His substantial experience includes representing and defending clients in complex real property, general business, construction, title insurance and lender litigation and transactional matters. Mr. Miltner is member of the American and San Diego County Bar Associations and American Business Trial Lawyers Association. He was admitted to The State Bar of California in 1988. We believe

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that Mr. Miltner is qualified to serve as a director because of his knowledge and experience within law practice areas and litigation matters.

Jonathan New has served as a director of the Company since the closing of the Merger. He has served as the Chief Financial Officer of Motorsport Games, Inc. since January 2020. Prior to joining the Company, Mr. New was Chief Financial Officer of Blink Charging Co (NASDAQ: BLNK) from July 2018 to January 2020. Prior to Blink Charging Co, Mr. New was Chief Financial Officer of Net Element, Inc. (NASDAQ: NETE) from 2008 to July 2018. Mr. New is an experienced, driven and creative chief financial officer with over 30 years of corporate finance and accounting experience. He has a career of leading rapidly growing businesses through levels of increasing success. Mr. New is a Florida Certified Public Accountant and a member of the American Institute of Certified Public Accountants. We believe that Mr. New is qualified to serve as a director because of his in-depth experience within finance, accounting, and public markets.

Code of Ethics

We have adopted a Code of Ethics and Business Conduct that applies to all of our directors, officers and employees, including our principal executive officer and our principal financial and accounting officer. A copy of our Code of Ethics and Business Conduct has been posted to the "Investor Relations—Governance" section of our Internet website at http://www.mullensua.com. We will provide a copy of our Code of Ethics and Business Conduct to any person without charge, upon written request to our Secretary at 1405 Pioneer Street, Brea, California 92821, phone (714) 613-1900, e-mail address InvestorRelations@mullenusa.com.

Committees of the Board of Directors

The Board of Directors currently has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

Audit Committee

The Audit Committee of the Board of Directors consists of Kent Puckett and Jonathan New, Chair. The primary functions of the Audit Committee include, among other things:

reviewing and approving the engagement of the independent registered public accounting firm to perform audit services and any permissible non-audit services for the Company;
evaluating the performance of the Company’s independent registered public accounting firm and deciding whether to retain their services;
monitoring the rotation of partners on the engagement team of the Company’s independent registered public accounting firm;
reviewing the Company’s annual and quarterly financial statements and reports and discussing the statements and reports with the Company’s independent registered public accounting firm and management, including a review of disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
considering and approving or disapproving all related party transactions for the Company;
reviewing, with the Company’s independent registered public accounting firm and management, significant issues that may arise regarding accounting principles and financial statement presentation, as well as matters concerning the scope, adequacy and effectiveness of the Company’s financial controls;
conducting an annual assessment of the performance of the Audit Committee and its members, and the adequacy of its charter; and

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establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding financial controls, accounting or auditing matters.

Each member of the Audit Committee satisfies the independence requirements under Nasdaq Capital Market listing standards and Rule 10A-3(b)(1) of the Exchange Act and is a person who the Board of Directors has determined has the requisite financial expertise required under the applicable requirements of Nasdaq Capital Market. In arriving at this determination, the Board of Directors examined each Audit Committee member’s scope of experience and the nature of their employment in the corporate finance sector. The Board of Directors has also determined that Jonathan New qualifies as an “audit committee financial expert,” as defined in applicable SEC rules.

Compensation Committee

The Compensation Committee of the Board of Directors consists of Kent Puckett, Chair, Jonathan New, and Mark Betor. The functions of the Compensation Committee include, among other things:

determining the compensation and other terms of employment of the Company’s chief executive officer and our other executive officers and reviewing and approving corporate performance goals and objectives relevant to such compensation;
reviewing and recommending to the full Board of Directors the compensation of the Board of Directors;
evaluating and administering the equity incentive plans, compensation plans and similar programs advisable for the Company, as well as reviewing and recommending to the Board of Directors the adoption, modification or termination of the Company’s plans and programs;
establishing policies with respect to equity compensation arrangements;
if required, reviewing with management the Company’s disclosures under the caption “Compensation Discussion and Analysis” and recommending to the full Board of Directors its inclusion in the Company’s periodic reports to be filed with the SEC; and
reviewing and evaluating, at least annually, the performance of the Compensation Committee and the adequacy of its charter.

The Board of Directors has determined that each member of the Compensation Committee is independent under Nasdaq Capital Market listing standards, a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and an “outside director” as that term is defined in Section 162(m) of the Code.

Nominating and Corporate Governance Committee

The Nominating and Governance Committee of the Board of Directors currently consists William Miltner, Chair, and Mark Betor. The functions of the Nominating and Corporate Governance Committee include, among other things, the following:

reviewing periodically and evaluating director performance on the Board of Directors and its applicable committees, and recommending to the Board of Directors and management areas for improvement;
interviewing, evaluating, nominating and recommending individuals for membership on the Board of Directors;
reviewing and recommending to our board of directors any amendments to the Company corporate governance policies; and

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reviewing and assessing, at least annually, the performance of the Nominating and Corporate Governance committee and the adequacy of its charter.

The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent under Nasdaq Capital Market listing standards.

Compensation Committee Interlocks and Insider

Composition of the Compensation Committee for the combined company has been determined. Each member appointed to the Compensation Committee is an “outside” director as that term is defined in Section 162(m) of the Internal Revenue Code, a “non-employee” director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and independent within the meaning of the independent director guidelines of the Nasdaq Capital Market. None of the Company’s executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who is serves on the Company’s Board of Directors or Compensation Committee following the merger.

Director Independence: Controlled Company Exemption

The Board determined that each of the directors on the Board other than the directors who are considered employees and/or insiders, qualify as independent directors, as defined under the listing rules of the Nasdaq, and the Board consists of a majority of “independent directors” as defined under the rules of the SEC and Nasdaq listing requirements. In addition, we are subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit, as discussed below.

David Michery controls a majority of the voting power of our outstanding capital stock. As a result, we are a “controlled company” under Nasdaq rules. As a controlled company, we are exempt from certain corporate governance requirements, including those that would otherwise require our Board of Directors to have a majority of independent directors and require that we either establish compensation and nominating and corporate governance committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees of directors are determined or recommended to the Board of Directors by independent members of the Board of Directors. While we do not currently intend to rely on any of these exemptions, we will be entitled to do so for as long as we are considered a “controlled company,” and to the extent we rely on one or more of these exemptions, holders of our capital stock will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth certain information about the compensation paid or accrued during the years ended September 30, 2021 and 2020 to our Chief Executive Officer and each of our two most highly compensated executive officers other than our Chief Executive Officer who were serving as executive officers at September 30, 2021, and whose

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annual compensation exceeded $100,000 during such year or would have exceeded $100,000 during such year if the executive officer were employed by the Company for the entire fiscal year (collectively the “named executive officers”).

    

    

  

    

  

    

Stock Awards ($)

  

Salary

Bonus

Common

Preferred

Name and Principal Position

Year

($)(1)

($)

Shares (2)

Shares

Total ($)

David Michery

2021

$

409,485

$

$

1,972,603

$

$

2,514,993

Chief Executive Officer

 

2020

$

263,014

$

25,000

$

2,500,000

$

30,451,000

(3)

$

33,239,014

Jerry Alban

 

2021

$

283,835

 

$

25,000

 

 

$

308,835

Chief Operating Officer

 

2020

$

240,000

 

10,000

 

87,500

 

$

337,500

Calin Popa

 

2021

$

296,969

 

$

87,500

 

$

384,469

President - Ottava Automotive

 

2020

$

304,000

 

 

87,500

 

$

391,500

(1) Effective as of April 10, 2020, Mullen implemented a reduction in salary for the CEO in response to the COVID-19 pandemic. During such time, Mullen reduced the bi-weekly salary payments of Mr. Michery from April 2020 to February 2021. Amounts in this column reflect the temporary reductions of Mr. Michery during this fiscal year.
(2) Represents share-based compensation based on the grant date fair value estimated value of Common Stock at issuance in accordance with FASB ASC Topic 718. For the years ended September 30, 2021 and 2020, Mr. Michery received 789,041 and 1,000,000 shares of Common Stock, respectively, Mr. Alban received 10,000 and 35,000 shares of Common Stock, respectively, and Mr. Popa received 35,000 and 35,000 shares of Common Stock, respectively.
(3) Represents the grant date fair value of 370,000 in Series A Preferred Shares issued to Mr. Michery for his personal guarantee of $50.0 million in Company debt in 2020.

The primary elements of compensation for the Company’s named executive officers are base salary, bonus and equity-based compensation awards. The named executive officers also participate in employee benefit plans and programs that we offer to our other full-time employees on the same basis.

Base Salary

The base salary payable to our named executive officers is intended to provide a fixed component of compensation that reflects the executive’s skill set, experience, role and responsibilities.

Bonus

Although we does not have a written bonus plan, the Board may, in its discretion, award bonuses to our executive officers on a case-by-case basis. These awards are structured to reward named executive officers for the successful performance of Mullen as a whole and of each participating named executive officer as an individual. The bonus amounts awarded in 2020 were on an entirely discretionary basis. In addition, as described under the heading “Employment and Severance Agreements,” each of the named executive officers is eligible under the terms of their respective employment agreements to receive set bonus amounts based on Mullen’s achievement of certain financial milestones.

Share-based Compensation

We do not have a formal policy with respect to the grant of equity incentive awards to our executive officers or any formal equity ownership guidelines applicable to them.

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Outstanding Equity Awards at Fiscal Year End 2021

The following table sets forth information with respect to outstanding equity awards at the end of the Company’s fiscal year 2021 for the “named executive officers”:

    

Stock Awards

Number of shares

Market value of

or units of stock

shares of units of

that have not

stock that have not

Name

vested (#)

vested ($) (1)

David Michery, Chief Executive Officer

750,000

$

1,875,000

Calin Popa, President—Ottava Automotive

75,000

$

187,500

Jerry Alban, Chief Operating Officer

225,000

$

562,500

(1) Values were calculated based on the closing price of shares of common stock on September 30, 2021, which was $8.24.

Employment and Severance Agreements

We have entered into employment agreements with each of our named executive officers described below.

Chairman of the Board, President and Chief Executive

Effective July 1, 2021, the Compensation Committee approved a new employment contract for David Michery. He will receive an annual salary of $750,000 plus incentive compensation and 1,000,000 shares of Common Stock each year. He is entitled to reimbursement compensation for all reasonable expenses up to $500,000 per year.

The agreement contains non-competition and non-solicitation covenants. For one year after voluntary separation from the Company, Mr. Michery cannot engage in competitive business activity within the Company territory; prevents him from participating in any transaction that occurred within 24-month period preceding from incident in questions; and prevents him from contacting employees for any business and employment opportunities.

No other employees have severance agreements with the Company. Employment agreements with other executive officers and key employees are standard terms (“employment at will”) offered to all employees.

Chief Financial Officer

On October 25, 2021, the Company entered into an employment agreement with Kerri Sadler for a term of two years with the option by the Company to renew for up to 60 months. Ms. Sadler will receive an annual salary of $350,000 and 300,000 restricted shares of Common Stock. The annual salary will increase by 3.5% per year. Ms. Sadler also received a one-time signing bonus of 100,000 shares of Common Stock.

If Ms. Sadler is terminated without cause, or if the Company subjects her to a diminution in her title(s), responsibilities, or her then-current annual compensation, fails to provide the compensation as set forth in the agreement, locates place of employment outside the United States, or engages in any material and intentional breach of the Company’s principal obligations under the agreement which is not remedied within 15 business days,  then the Company will pay Ms. Sadler an amount equal to her annual compensation at the time of such termination. If Ms. Sadler is terminated for cause, then the Company pays her annual compensation and any legal benefit up until the termination date. “Cause” means gross negligence in the performance of the material responsibilities, willful misconduct in the performance and discharge of the material duties or that is otherwise materially injurious to the Company’s business, conviction of or a plea of no contest to a felony or incapacity due to alcoholism or substance abuse, or a material and intentional breach of principal obligations that are not remedied within 15 business days. In the event of disability, the Company will pay for three months of salary from the date that the disability is certified plus any prorated amount of incentive compensation.

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Chief Operating Officer

Effective April 15, 2021, the Compensation Committee approved a new employment contract for Jerry Alban for a term of one year. He will receive an annual salary of $350,000 per year and a share-based compensation of 300,000 shares of Common Stock each year. Mr. Alban received a one-time signing bonus of 100,000 restricted shares of Common Stock. If Mr. Alban is terminated without cause, or if the Company subjects him to a diminution in his title(s), responsibilities, or his then-current annual compensation, fails to provide the compensation as set forth in the agreement, locates place of employment outside the United States, or engages in any material and intentional breach of the Company’s principal obligations under the agreement which is not remedied within 15 business days, then the Company will pay Mr. Alban an amount equal to her annual compensation at the time of such termination multiplied by a number of years equal to five and an amount equal to 1 % of the Company’s market capitalization at such time. If Mr. Alban is terminated for cause, then the Company pays his annual compensation and any legal benefit up until the termination date. The meaning of “cause” is the same as described above for Ms. Sadler’s employment agreement. In the event of disability, the Company will pay for one year of salary from the date that the disability is certified plus any prorated amount of incentive compensation.

Upon a change of control of the Company, which includes receipt of a tender offer, a reorganization, such as a merger or stock acquisition, and sale of all or substantially all of the company’s assets, Mr. Alban may terminate his employment and receive payments as though it is a termination without cause by the Company (as described above)

Consulting Agreement

On October 26, 2021, the Company and Mary Winter entered into a Consulting Agreement whereby the Company has agreed to pay Ms. Winter $60,000 for the period from October 1, 2021 to September 30, 2022 for her services as corporate secretary and director.

Potential Payments Upon Termination of Employment or Change in Control

Upon termination from the Company other than for cause, Mr. Michery is entitled to severance from the Company as follows:

An amount equal to his annual compensation multiplied by a number of years equal to 10 minus the number of complete years since hereof (“Salary Termination Payment”). Currently, the annual salary is $750,000.
An amount equal to 10% of the Company’s market capitalization at such time (“Equity Termination Payment").
For example, if 2.5 years have passed the date hereof, the Company’s market capitalization rate is $500,000,000, then the Salary Termination Payment is $500,000 x 8 and an Equity Termination Payment equal to $50,000,000.
Salary termination payment must be paid no later than 90 days after termination, and the Equity Termination Payment no later than 180 days after termination.
If Mr. Michery is fully vested in any retirement plan offered by the Company, the Company shall obtain and pay the premium for an annuity policy to provide Mr. Michery with benefits as though he had been fully vested on date of termination.
If there is a Change in Control of the Company, Mr. Michery may terminate employment at his option. In this situation, the Termination by the Company for Other Than Cause applies.
Upon Termination on Account of Employee’s Death, the Salary Termination Payment and Equity Termination Payment will be paid to beneficiaries named by Mr. Michery or to his estate if he fails to make such designation.

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For disability, Mr. Michery would receive full compensation for his salary for the one-year period next succeeding the date upon which disability was certified, as well as a prorated amount of incentive compensation.

Non-Employee Director Compensation

Beginning in November 2021, in connection with the closing of the Merger, our non-employee directors receive compensation for service on our board of directors and committees of our board of directors as follows:

Each non-employee director is entitled to receive $25,000 annually as a cash retainer for their board service, with additional annual cash retainers of (i) $2,000 for each member of our compensation committee or nominating and governance committee; (ii) $5,000 for the chairman of our compensation committee or nominating and governance committee; (iii) $8,000 for each member of our audit committee; and (iv) $45,000 for the chairman of our audit committee. All cash retainers are paid quarterly in arrears.
Additionally, each non-employee director shall receive an annual stock option award under the Company’s equity plan to purchase such number of shares of our Common Stock that will equal $75,000 divided by the closing trading price of our Common Stock on the date of each such grant, which will vest one year from the date of grant. Upon the occurrence of certain corporate events, including a change of control of the Company, all such stock option awards will immediately vest. The initial annual stock option award will be awarded to each of our non-employee directors in connection with this offering.

Our non-employee directors are entitled to reimbursement of ordinary, necessary and reasonable out-of-pocket travel expenses incurred in connection with attending in-person meetings of our board of directors or committees thereof. In the event our non-employee directors are required to attend greater than four in-person meetings or 12 telephonic meetings during any fiscal year, such non-employee directors will be entitled to additional compensation in the amount of $500 for each additional telephonic meeting beyond the 12 telephonic meeting threshold, and $1,000 for each additional in-person meeting beyond the four in-person meeting threshold.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The table below contains information regarding the beneficial ownership of our Common Stock as of December 27, 2021 by (i) each person who is known to us to beneficially own more than 5% of our Common Stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all of our directors and executive officers as a group.

Each stockholder’s percentage of ownership in the following table is based upon, as applicable, 23,383,202 shares of Common Stock, 15,367 shares of Series A Preferred Stock, 5,567,319 shares of Series B Preferred Stock, and 4,973,093 shares of Series C Preferred Stock outstanding as of December 27, 2021. Each share of Series A Preferred Stock converts into 100 shares of Common Stock. The Series B Preferred Stock and the Series C Preferred are convertible at any time by the holder into shares of Common Stock on a share-for-share basis.  Beneficial ownership is determined in accordance with SEC rules and regulations. In computing the number of shares of our Common Stock beneficially owned by a person and the percentage of beneficial ownership of that person, shares of Common Stock underlying notes, options or shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock held by that person that are convertible or exercisable, as the case may be, within 60 days of December 27, 2021 are included. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person

To our knowledge, except as otherwise noted below and subject to applicable community property laws, each person or entity named in the following table has the sole voting and investment power with respect to all shares that he, she or it

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beneficially owns. Unless otherwise indicated, the address of each beneficial owner listed below is c/o Mullen Automotive Inc. 1405 Pioneer Street, Brea, CA 92821.

Series A

Series C

Total

Preferred

Series B

Preferred

Voting

    

Common Stock

    

Stock

    

Preferred Stock

    

Stock

    

Power (1)

    

Name of Beneficial Owners

    

Shares

    

%  

    

Shares

    

%  

    

Shares

    

%  

    

Shares

    

%  

    

%  

  

Named Executive Officers and Directors

  

  

  

  

  

  

  

  

  

David Michery (2)

10,097,616

43.2

%  

14,289

93.0

%  

5,567,319

100

%  

4,973,093

100

%  

70.1

%  

Jerry Alban

 

12,075

*

 

 

 

 

 

 

  

 

*

 

Kent Pucket

 

18,400

*

 

 

 

 

 

 

  

 

*

 

Mark Betor

 

60,950

*

 

 

 

 

 

 

  

 

*

 

Mary Winter

 

18,400

*

 

 

 

 

 

 

  

 

*

 

William Miltner

 

 

 

 

 

 

 

  

 

*

 

Jonathan New

 

 

 

 

 

 

 

  

 

*

 

Directors and Executive Officers as a Group (7 Persons)

 

10,097,616

62.7

%  

14,289

 

93.0

%  

5,567,319

 

100

%  

4,973,093

 

100

%  

71.1

%  

5% Beneficial Owners:

 

  

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

Drawbridge Investments, LLC 211 Boulevard of the Americas, Suite 205, Lakewood, NJ 08701

 

2,383,155

(3)

9.25

%  

34

*

5,567,319

100

%  

%  

15.4

%

Tiffany Drohan c/o Drohan 2772 Howard Hughes Parkway, Suite 500S, Las Vegas, NV 89169

 

1,288,437

(4)

5.5

%  

245

(5)

1.6

%  

 

%  

 

%  

2.7

%

Acuitas Group Holdings, LLC 2120 Colorado Avenue, #230 Santa Monica, CA 90404

 

14,645,673

(5)

38.5

%  

 

 

 

3,898,913

 

78.4

%  

29.0

%  

TDR Capital Pty Limited 4 Murchison Street Mittagong, New South Wales 2575, Australia

 

2,765,594

(6)

10.6

%  

 

 

 

736,276

 

14.8

%  

6.7

Ault Global Holdings, Inc. (7) 11411 Southern Highlands Parkway, Suite 240 Las Vegas, NV 89141

 

1,376,542

5.6

%  

 

 

 

 

1,195,377

 

20.7

%  

5.0

%  

*

Less than 1%.

(1) Percentage total voting power represents voting power with respect to all outstanding shares of Common Stock, Series A Preferred, Series B Preferred and Series C Preferred. The Common Stock, Series A Preferred, Series B Preferred and Series C Preferred vote together as a single class on all matters submitted to a vote of stockholders, except as may otherwise be required by the terms of the Amended and Restated Certificate of Incorporation of the Company or as may be required by law. Each holder of Series A Preferred is entitled to 1,000 votes per share and each share of the Series B Preferred Stock and the Series C Preferred Stock is entitled to one vote per share.
(2) Consists of (i) 7,421,120 shares of Common Stock held directly by Mr. Michery, (ii) 2,676,496 shares of Common Stock over which Mr. Michery has voting power, and (iii)  1,536,692 shares of Common Stock underlying 15,367 shares of Series A Preferred Stock on an as-converted basis, 5,567,319 shares of Series B Preferred Stock and 4,973,093 shares of Series C Preferred Stock, all of which Mr. Michery has voting power. Effective as of the Closing Date of the Merger, Mr. Michery entered into voting agreements with the holders of all of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock of the Company, some of who own an aggregate of 2,676,496 shares of Common Stock (the “Voting Agreements”).  Pursuant to the Voting Agreements, such stockholders agreed to vote as directed by Mr. Michery, and also granted Mr. Michery an irrevocable proxy, at an annual or special meeting of stockholders or through the solicitation of a written consent of stockholders on any election of directors of the Company or any proposal to approve a change of control of the Company, which includes a merger, sale or other disposition of the securities of the Company or all or substantially all of its assets. The Voting Agreements have a term of three years.
(3) Consists of 2,383,155 shares of Common Stock issuable upon conversion of a convertible note.
(4) Consists of shares of Common Stock owned by entities controlled by Keith Drohan, the spouse of Ms. Drohan, as well as 115 shares of Series A Preferred shares owned by an entity controlled by Mr. Drohan, over all of which Ms. Drohan disclaims beneficial ownership.

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(5) Consists of 14,645,673 shares of Common Stock issuable upon exercise in full of warrants.
(6) Consists of 2,765,594 shares of Common Stock issuable upon exercise in full of warrants.
(7) Based on a Schedule 13G filed with the SEC on November 17, 2021. Represents (i) 398,459 shares of Common Stock issuable upon conversion of 398,459 shares of Series C Preferred Stock, (ii) 1,086,459 shares of Common Stock issuable upon exercise of warrants, (iii) 796,918 shares of Common Stock issuable upon conversion of 796,918 shares of Series C Preferred Stock convertible until November 5, 2022, and (iv) 290,083 shares of Common Stock issuable upon exercise of warrants exercisable until November 5, 2022. Does not include an additional 1,882,835 shares of Common Stock issuable upon exercise of warrants exercisable until November 5, 2022, as the warrants may not be exercised to the extent that such exercise would cause the reporting person and its affiliates to beneficially own more than 9.9% of the Company’s then outstanding Common Stock. Digital Power Lending, LLC, which acquired the securities, is a wholly-owned subsidiary of Ault Global Holdings, Inc.

Equity Compensation Plan Table

The following table summarizes our equity compensation plan information as of September 30, 2021. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders

    

    

    

(c)

(a)

(b)

Number of securities

Number of securities

Weighted-average

remaining available

to be issued upon

exercise price per

for future issuance

exercise of outstanding options,

share of outstanding options,

under equity compensation

Plan Category

warrants and rights

warrants and rights

plans (excluding securities

Equity compensation plans approved by stockholders

154,005

$

10.73

209,693

Equity compensation plans not approved by stockholders

 

$

 

Total

 

154,005

 

10.73

 

209,693

Item 13. Certain Relationships and Related Transactions, and Director Independence.

From time to time, David Michery, the Company’s Chief Executive Officer, provides loans to the Company with interests at 4% -10% per annum. The outstanding balances for these loans as of September 30, 2021 and 2020 are $389,452 and $172,791, respectively.

Director Independence

The Board determined that each of the directors on the Board other than the directors who are considered employees and/or insiders, qualify as independent directors, as defined under the listing rules of the Nasdaq, and the Board consists of a majority of “independent directors” as defined under the rules of the SEC and Nasdaq listing requirements. In addition, we are subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit, as discussed below.

David Michery controls a majority of the voting power of our outstanding capital stock. As a result, we are a “controlled company” under Nasdaq rules. As a controlled company, we are exempt from certain corporate governance requirements, including those that would otherwise require our Board of Directors to have a majority of independent directors and require that we either establish compensation and nominating and corporate governance committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of our executive officers and nominees of directors are determined or recommended to the Board of Directors by independent members of the Board of Directors. While we do not currently intend to rely on any of these exemptions, we will be entitled to do so for as long as we are considered a “controlled company,” and to the extent we rely on one or more of these exemptions, holders of our capital stock will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

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Item 14. Principal Accountant Fees and Services.

Audit Fees. The aggregate fees, including expenses, billed by our principal accountant for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q and other services that are normally provided in connection with statutory and regulatory filings or engagements during each of the fiscal years ended September 31, 2021 and 2020 were $170,000 and $128,000, respectively.

Audit-Related Fees. The aggregate fees, including expenses, billed by our principal accountant for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements not reported under “Audit Fees” above during the fiscal years ended September 31, 2021 and 2020 were $50,000 and $-0-, respectively.

Tax Fees. The aggregate fees, including expenses, billed by our principal accountant for services rendered for tax compliance, tax advice and tax planning during the fiscal years ended September 31, 2021 and 2020 were $0 and $0, respectively.

All Other Fees. The aggregate fees, including expenses, billed for all other products and services provided by our principal accountant during the fiscal years ended September 31, 2021 and 2020 were $0 and $0, respectively.

Audit Committee Pre-Approval Policy

Our audit committee is responsible for approving in advance the engagement of our principal accountant for all audit services and non-audit services, based on independence, qualifications and, if applicable, performance, and approving the fees and other terms of any such engagement. The audit committee may in the future establish pre-approval policies and procedures pursuant to which our principal accountant may provide certain audit and non-audit services to us without first obtaining the audit committee’s approval, provided that such policies and procedures (i) are detailed as to particular services, (ii) do not involve delegation to management of the audit committee’s responsibilities described in this paragraph and (iii) provide that, at its next scheduled meeting, the audit committee is informed as to each such service for which the principal accountant is engaged pursuant to such policies and procedures. In addition, the audit committee may in the future delegate to one or more members of the audit committee the authority to grant pre-approvals for such services, provided that the decisions of such member(s) to grant any such pre-approval must be presented to the audit committee at its next scheduled meeting.

All audit and audit-related services performed by our principal accountant during the fiscal years ended September 31, 2021 and 2020 were pre-approved by our Board of Directors, then acting in the capacity of an audit committee.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as a part of this Annual Report on Form 10-K:
1. Financial Statements.

The consolidated financial statements of Mullen Technologies, Inc. and notes thereto and the reports of the independent registered public accounting firms thereon are set forth beginning on page F-1 and filed as part of this Report.

2. Exhibits.

The exhibits filed or furnished as part of this Annual Report on Form 10-K are those listed in the following Exhibit Index.

EXHIBIT INDEX

Exhibit No.

    

Description of Exhibit

2.1(a)

Second Amended and Restated Agreement and Plan of Merger, dated as of July 20, 2021, among Net Element, Inc., Mullen Technologies, Inc., Mullen Acquisition, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 21, 2021)

2.1(b)

First Amendment, dated as of August 18, 2021, to Second Amended and Restated Agreement and Plan of Merger, dated as of July 16, 2021, among Net Element, Inc., Mullen Technologies, Inc., Mullen Acquisition, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2021)

2.1(c)*

Agreement of Merger between Mullen Automotive Inc., Mullen Acquisition, Inc. and Net Element, Inc. dated November 3, 2021

3.1

Certificate of Corporate Domestication of Cazador, filed with the Secretary of State of the State of Delaware on October 2, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2012)

3.1(a)

Certificate of Merger, filed with the Secretary of State of the State of Delaware on October 2, 2012 (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2012)

3.1(b)

Amended and Restated Certificate of Incorporation of Net Element International, Inc., a Delaware corporation, filed with the Secretary of State of the State of Delaware on October 2, 2012 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2012)

3.1(c)

Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated December 5, 2013, changing the Company’s name from Net Element International, Inc. to Net Element, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2013)

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3.1(d)

Certificate of Amendment to Amended and Restated Certificate of Incorporation, to increase authorized common stock to 200 million shares (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 17, 2014)

3.1(e)

Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2015)

3.1(f)

Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated June 15, 2015, to increase authorized common stock to 300 million shares (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 16, 2015)

3.1(g)

Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s second Current Report on Form 8-K filed with the SEC on May 24, 2016)

3.1(h)

Certificate of Amendment to Amended and Restated Certificate of Incorporation dated June 15, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 16, 2016)

3.1(i)

Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2017)

3.1(j)

Certificate of Amendment to the Amended and Restated Certificate of Incorporation, dated November 3, 2021, changing name to Mullen Automotive Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 12, 2021).

3.1(k)

Second Amended and Restated Certificate of Incorporation of Mullen Automotive Inc., dated November 5, 2021 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the SEC on November 12, 2021).

3.2

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2012)

3.2(a)

Amendment No. 1 to the Bylaws, dated June 15, 2015 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on June 16, 2015)

3.3(b)

Amendment No. 2 to the Bylaws, dated July 10, 2015 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 10, 2015)

4.1

Form of Warrant with an exercise price of $0.6877 per share.

10.1(a)#

2013 Equity Incentive Plan approved on December 5, 2013 (incorporated by reference to Appendix “A” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on November 4, 2013)

10.1(b)#

Amendment to 2013 Equity Incentive Plan approved on December 9, 2014 (incorporated by reference to Appendix “B” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on October 31, 2014)

10.1(c)#

Amendment to 2013 Equity Incentive Plan approved on June 15, 2016 (incorporated by reference to Appendix “B” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 25, 2016)

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10.1(d)#

Amendment to 2013 Equity Incentive Plan approved on October 23, 2019 (incorporated by reference to Appendix “A” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 4, 2019)

10.1(e)#

Amendment to 2013 Equity Incentive Plan approved on December 1, 2020 (incorporated by reference to Appendix “A” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Commission on October 13, 2020)

10.1(f)#

Amendment to 2013 Equity Incentive Plan approved on August 26, 2021 (incorporated by reference to Annex “C” to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on July 27, 2021)

10.1(g)#

Form of Non-Qualified Stock Option Award Agreement Under the Net Element, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2015)

10.1(h)#

Form of Incentive Stock Option Award Agreement Under the Net Element, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2015)

10.1(i)#

Form of Restricted Share Award Agreement Under the Net Element, Inc. 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2015)

10.2

Common Stock Purchase Agreement, dated as of July 6, 2016, between the Company and ESOUSA Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 12, 2016)

10.2(a)

Master Exchange Agreement, dated as of March 27, 2020 between the Company and ESOUSA Holdings, LLC, (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 27, 2020)

10.2(b)

Amendment, dated as of April 23, 2020, to Master Exchange Agreement, dated as of March 27, 2020 between the Company and ESOUSA Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 24, 2020)

10.2(c)

Second Amendment to Master Exchange Agreement, dated as of August 3, 2020, to Master Exchange Agreement, dated as of March 27, 2020, as amended on April 23, 2020, between the Company and ESOUSA Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on August 5, 2020)

10.3#

Employment Agreement, dated as of February 25, 2020, between Net Element, Inc. and Steven Wolberg (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 2, 2020)

10.4

Binding Letter of Intent, dated June 12, 2020, between the Company and Mullen Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 15, 2020)

10.4(a)

Amendment No. 1, dated as of July 10, 2020, to the Binding Letter of Intent, dated June 12, 2020, between the Company and Mullen Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 13, 2020)

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10.5

Promissory Note, dated as of August 11, 2020, between Net Element, Inc. and Mullen Technologies, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed with the Commission on August 8, 2020)

10.6

Divestiture Agreement, dated as of July 20, 2021, between RBL Capital Group, LLC and Net Element, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 21. 2021)

10.7

Master Exchange Agreement, dated as of July 9, 2021, between Net Element, Inc. and ESOUSA Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 12, 2021)

10.8

Secured Convertible Promissory Note and Security Agreement, dated July 23, 2020, by and among Mullen Technologies, Inc. and DBI Lease Buyback Servicing LLC (incorporated by reference to Exhibit 10.4 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.9

Settlement, Termination, Release and Equity Purchase and Loan Agreement, dated as of July 23, 2020, by and between Mullen Technologies, Inc., Drawbridge Investments, LLC, and DBI Lease Buyback Servicing LLC (incorporated by reference to Exhibit 10.5 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.9(a)

Amendment No. 1, dated as of August 12, 2020, to Settlement, Termination, Release and Equity Purchase and Loan Agreement, dated as of July 23, 2020, by and among Mullen Technologies, Inc., Drawbridge Investments, LLC, and DBI Lease Buyback Servicing LLC (incorporated by reference to Exhibit 10.16 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.10

Securities Purchase Agreement, dated as of May 7, 2021, between Mullen Technologies, Inc. and Acuitas Capital, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.10(a)

Exchange Agreement, dated as of May 7, 2021, by and among Mullen Technologies, Inc. and the Holders (incorporated by reference to Exhibit 10.8 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021)

10.10(b)

Amendment No. 1, dated as of May 20, 2021, to the Exchange Agreement, dated as of May 7, 2021, by and among Mullen Technologies, Inc. and the Holders (incorporated by reference to Exhibit 10.9 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.11

Securities Purchase Agreement, dated as of May 16, 2021, between Mullen Technologies, Inc. and TDR Capital Pty Limited (incorporated by reference to Exhibit 10.7 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.12

Form of prior securities purchase agreement, convertible note and warrant (substantially the same in all material respects as the securities purchase agreement, convertible note and warrant filed as Exhibit 10.7 except for dates, investment amounts, warrant numbers, and investors, all of which are generally identified in Schedule 1 to the Exchange Agreement filed as Exhibit 10.8 and Amendment No. 1 thereto filed as Exhibit 10.9, and for other differences that have been superseded by such Exchange Agreement) (incorporated by reference to Exhibit 10.17 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

66

Table of Contents

10.13#

Amended and Restated Employment Agreement, dated as of June 1, 2021, by and between David Michery and Mullen Technologies, Inc. (incorporated by reference to Exhibit 10.10 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.14

Contribution and Spin-Off Agreement, dated as of May 12, 2021, by and among Mullen Technologies, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 10.11 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.15

Master Distribution Agreement, dated as of May 12, 2021, by and between Mullen Technologies, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 10.12 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.16

Separation Agreement, dated as of May 12, 2021, by and between Mullen Technologies, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 10.13 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.17

Transition Services Agreement, dated as of May 12, 2021, by and between Mullen Technologies, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 10.14 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.18

Tax Sharing Agreement, dated May 12, 2021, by and among Mullen Technologies, Inc. and Mullen Automotive Inc. (incorporated by reference to Exhibit 10.15 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.19

Form of Share Escrow Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on July 22, 2021).

10.20

Letter Agreement, dated as of November 3, 2021 between the Company and ESOUSA Holdings, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 4, 2021).

10.21#*

Employment Agreement dated October 25, 2021 between the Company and Kerri Sadler

10.22#*

Employment Agreement dated April 15, 2021 between the Company and Jerry Alban

10.23*

Form of Voting and Support Agreement dated as of October 26, 2021 regarding approval of an amendment to certificate of incorporation to reflect a three-year sunset provision pertaining to the voting rights associated with the Series A Preferred Stock

10.24*

Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions between Mullen Technologies, inc. and Saleen Motors International, LLC, dated as of March 9, 2021, and First Amendment dated as of July 23, 2021

10.25*

Consultant Agreement dated October 26, 2021 between the Company and Mary Winter

10.26*

Consulting Agreement dated September 17, 2021 between the Company and Preferred Management Partners, Inc.

10.27*

Securities Purchase Agreement dated November 4, 2021 between the Company and Michael Friedlander

10.27(a)*

Convertible Note dated November 4, 2021 in the Original Principal Amount of $110,000 payable to Michal Friedlander

10.27(b)*

Warrant dated November 4, 2021 issued to Michael Friedlander

67

Table of Contents

21.1*

List of Subsidiaries

23.1*

Consent of Independent Registered Public Accounting Firm (Daszkal Bolton LLP)

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934

32.1*

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350

101.INS*

The following financial information from the Annual Report on Form 10-K for the fiscal year ended September 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language), is filed electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Loss; (iii) Consolidated Statement of Changes in Stockholders’ Equity (Deficit); (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104*

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101).

# Indicates management contract or compensatory plan or arrangement.

* Filed herewith (furnished herewith with respect to Exhibit 32.1).

Item 16. Form 10-K Summary.

None.

68

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MULLEN AUTOMOTIVE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

MULLEN AUTOMOTIVE, INC.

FINANCIAL STATEMENTS

September 30, 2021 and 2020

   

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Financial Statements:

Consolidated Balance Sheets at September 30, 2021 and 2020

F-4

Consolidated Statements of Operations for the Years Ended September 30, 2021 and 2020

F-5

Consolidated Statements of Deficiency in Stockholders’ Equity for the Years Ended September 30, 2021 and 2020

F-6

Consolidated Statements of Cash Flows for the Years Ended September 30, 2021 and 2020

F-7

Notes to Consolidated Financial Statements

F-8

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Mullen Automotive Inc.

Brea, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of the Mullen Automotive Inc. (the “Company”) at September 30, 2021 and 2020, and the related consolidated statements of operations, deficiency in stockholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company has sustained net losses, has indebtedness in default, and has liabilities in excess of assets of approximately $42.5 million at September 30, 2021, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Financial Statements

As discussed in Note 1, until the consummation of its merger with Net Element, Inc. on November 5, 2021, the Company operated as a component of Mullen Technologies, Inc. and was not a stand-alone entity. The consolidated financial statements of the Company reflect the assets, liabilities and expenses directly attributable to the Company, as well as allocations deemed reasonable by management, to present the financial position, results of operations, and cash flows of Mullen Automotive Inc. on a stand-alone basis, and do not necessarily reflect the financial position, results of operations, and cash flows of Mullen Automotive Inc. in the future or what they would have been had the Company been a separate, stand-alone entity during the periods presented.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-2

Table of Contents

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

FINANCIAL STATEMENT PRESENTATION – ALLOCATION OF SHARED COSTS

Critical Audit Matter Description

As discussed in Note 1 and Note 3 to the financial statements, The historical costs and expenses reflected in these financial statements include an allocation for certain corporate and shared service functions historically provided by Mullen Technologies, Inc., former Parent, including, but not limited to, executive oversight, accounting, treasury, tax, legal, human resources, occupancy, procurement, information technology, and other shared services. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of consolidated headcount, tangible assets or other measures considered to be a reasonable reflection of the historical utilization levels of these services.

We identified the auditing of management’s assumptions regarding the allocation of general corporate expenses from Mullen Technologies, Inc., as a critical audit matter. Auditing management’s allocation of shared costs was especially challenging and highly judgmental because of the assumptions of costs that would have been incurred had Mullen Automotive, Inc. operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Inherent estimation uncertainty was primarily attributed to assumptions used by management in its cost allocation model which involved a high degree of subjectivity.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included:

Obtaining an understanding and evaluating the design over the determination of direct and shared costs
Reviewing contracts for identification of shared costs
Testing the completeness of the underlying data used in management’s cost allocation
Evaluating the reasonableness of management’s assumptions by performing a retrospective review of the prior year assumptions
Evaluating the appropriateness and consistency of management’s methods and assumptions used in developing cost allocation

/s/ Daszkal Bolton LLP

We have served as the Company’s auditor since 2020.

Fort Lauderdale, Florida

December 29, 2021

F-3

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONSOLIDATED BALANCE SHEETS

    

September 30, 

 

    

2021

    

2020

 

ASSETS

 

  

 

  

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

42,174

$

33,368

Materials and supplies

 

55,753

 

43,083

Deferred advertising

 

261,550

 

15,054,000

Prepaid Expenses

 

6,201,247

 

Other current assets

 

250,331

 

201,067

TOTAL CURRENT ASSETS

 

6,811,055

 

15,331,518

Property, equipment and leasehold improvements, net

 

1,181,477

 

1,541,996

Intangibles assets, net

 

2,495,259

 

2,622,796

Right-of-use assets

 

2,350,929

 

1,729,112

Other assets

 

4,333,774

 

762,010

TOTAL ASSETS

 

17,172,494

 

21,987,432

LIABILITIES AND SHAREHOLDERS' EQUITY

 

  

 

  

CURRENT LIABILITIES

 

  

 

  

Accounts payable

 

5,206,310

 

2,688,176

Accrued expenses and other current liabilities

 

19,126,765

 

22,151,589

Liability to issue shares

 

7,027,500

 

Lease liabilities, current portion

 

599,898

 

336,765

Notes payable, current portion

 

39,200,970

 

33,048,471

TOTAL CURRENT LIABILITIES

 

71,161,443

 

58,225,001

Notes payable, net of current portion

 

247,612

 

283,881

Lease liabilities, net of current portion

 

1,857,894

 

1,482,569

Other liabilities

 

5,617,192

 

4,500,000

TOTAL LIABILITIES

 

78,884,141

 

64,491,451

Commitments and Contingencies (Note 16)

 

  

 

  

DEFICIENCY IN STOCKHOLDERS' EQUITY

 

  

 

  

Preferred Stock; $0.001 par value; 58,000,000 shares authorized; 5,667,683 and 5,684,108 shares issued and outstanding at September 30, 2021 and 2020 respectively.

 

5,668

 

5,684

Common Stock; $0.001 par value; 500,000,000 shares authorized; 7,048,386 and 5,086,225 issued and outstanding at September 30, 2021 and 2020 respectively.

 

7,048

 

5,086

Additional Paid-in Capital

 

88,650,286

 

63,619,280

Accumulated Deficit

 

(150,374,649)

 

(106,134,069)

TOTAL DEFICIENCY IN STOCKHOLDERS' EQUITY

 

(61,711,647)

 

(42,504,019)

TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

$

17,172,494

$

21,987,432

F-4

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended September 30,

    

2021

    

2020

OPERATING EXPENSES

 

  

 

  

General and administrative

$

19,393,941

$

10,427,141

Research and development

 

3,009,027

 

1,667,077

Total Operating Expense

 

22,402,968

 

12,094,218

Loss from Operations

 

(22,402,968)

 

(12,094,218)

Interest expense

 

(21,168,232)

 

(18,094,234)

Other financing costs

 

(1,559,961)

 

Gain on extinguishment of indebtedness, net

 

890,581

 

Other income (expense), net

 

 

10,490

Net Loss

$

(44,240,580)

$

(30,177,962)

Net Loss per Share

$

(8.56)

$

(5.23)

Weighted average shares outstanding, basic and diluted

 

5,171,144

 

5,765,148

F-5

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY

    

Preferred Stock

    

    

    

    

    

    

    

    

    

Deficiency in

Series A

Series B

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance, October 1, 2019

 

116,789

$

116

 

$

 

6,444,072

$

6,444

$

42,073,841

$

(75,956,107)

$

(33,875,706)

Shares issued for cash

 

 

 

 

 

30,897

 

31

 

1,628,335

 

 

1,628,366

Warrant issuances

 

 

 

 

 

 

 

2,092,600

 

 

2,092,600

Shares issued for conversion of debt

 

 

 

3,492,707

 

3,493

 

523,129

 

523

 

12,797,024

 

 

12,801,040

Stock-based compensation

 

 

 

 

 

162,739

 

163

 

3,966,121

 

 

3,966,284

Issuance of preferred stock for conversion of common stock

 

 

 

2,074,612

 

2,075

 

(2,074,612)

 

(2,075)

 

 

 

Beneficial conversion feature of convertible debt

 

 

 

 

 

 

 

1,061,359

 

 

1,061,359

Net loss

 

 

 

 

 

 

 

 

(30,177,962)

 

(30,177,962)

Balance, September 30, 2020

 

116,789

 

116

 

5,567,319

 

5,568

 

5,086,225

 

5,086

 

63,619,280

 

(106,134,069)

 

(42,504,019)

Shares issued for cash

 

 

 

 

 

126,119

 

126

 

4,799,948

 

4,800,074

 

  

Shares issued for legal settlement

 

 

 

 

 

39,235

 

39

 

1,259,961

 

1,260,000

 

  

Warrant issuances

 

 

 

 

 

 

 

14,007,258

 

14,007,258

 

  

Issuance of common stock for conversion of preferred stock

 

(16,426)

 

(16)

 

 

 

1,642,563

 

1,643

 

(1,627)

 

 

Stock-based compensation

 

 

 

 

 

154,245

 

154

 

4,965,466

 

 

4,965,620

Net loss

 

 

 

 

 

 

 

 

(44,240,580)

 

(44,240,580)

Balance, September 30, 2021

 

100,363

$

100

 

5,567,319

$

5,568

 

7,048,387

$

7,048

$

88,650,286

$

(150,374,649)

$

(61,711,647)

F-6

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended September 30,

    

2021

    

2020

Cash Flows from Operating Activities

 

  

 

  

Net Loss

$

(44,240,580)

$

(30,177,962)

Adjustments to reconcile net loss to net cash used in operating

 

  

 

  

activities:

 

  

 

  

Depreciation and amortization

 

720,805

 

725,796

Impairment charge - materials

 

74,495

 

93,244

Employee stock compensation

 

2,505,091

 

1,037,105

Issuance of shares for services

 

2,460,530

 

2,929,179

Issuance of stock for legal settlement

 

1,260,000

 

Non-cash interest and other operating activities

 

12,956,583

 

2,019,642

Non-cash lease expense

 

507,189

 

270,854

Amortization of debt discount

 

8,211,648

 

16,008,454

Gain on extinguishment of debt

 

(890,581)

 

Changes in operating assets and liabilities:

 

  

 

  

Material and supplies

 

(87,165)

 

(11,545)

Other current assets

 

(49,265)

 

(9,701)

Other assets

 

(3,571,768)

 

215,336

Accounts payable

 

5,666,261

 

741,215

Accrued expenses and other liabilities

 

(2,554,813)

 

(4,378,816)

Lease liabilities

 

(490,545)

 

(244,257)

Net cash used in operating activities

 

(17,522,115)

 

(10,781,456)

Cash Flows from Investing Activities

 

  

 

  

Purchase of equipment

 

(43,893)

 

(270,501)

Purchase of intangible assets

 

(117,890)

 

(296,511)

Net cash used in investing activities

 

(161,783)

 

(567,012)

Cash Flows from Financing Activities

 

  

 

  

Proceeds from shares issued for cash

 

4,800,074

 

1,628,366

Proceeds from issuance of notes payable

 

12,768,500

 

12,118,309

Proceeds from liability to issue preferred C shares

 

705,000

 

Payment of notes payable

 

(580,870)

 

(4,586,663)

Net cash provided by financing activities

 

17,692,704

 

9,160,012

Increase (decrease) in cash

 

8,806

 

(2,188,456)

Cash, beginning of year

 

33,368

 

2,221,824

Cash, ending of year

$

42,174

$

33,368

Supplemental disclosure of Cash Flow information:

 

  

 

  

Cash paid for interest

$

15,136

$

800,423

Cash paid for taxes

$

$

Supplemental disclosure for non-cash activities:

 

  

 

  

Refinance of existing debt

$

$

43,923,042

Issuance of shares to settle debt

$

$

12,801,040

Liability to issue shares in exchange for prepaid expenses

$

6,322,500

$

Initial recognition of right-of-use assets and lease liabilities

$

$

1,383,447

Right-of-use assets obtained in exchange of operating lease liabilities

$

1,129,003

$

680,144

Indebtedness settled via issuance of stock

$

1,300,000

$

38,912,640

Release of deferred advertising

$

15,054,000

F-7

Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Mullen Automotive, Inc. (“MAI”, “Mullen”, “we” or the “Company”) is a development-stage electronic vehicle (EV) manufacturer. The Company operated as the EV division of Mullen Technologies, Inc. (“MTI”) until November 5, 2021, at which time the Company underwent a capitalization and corporate reorganization by way of a spin-off by MTI to its shareholders, followed by a reverse merger with and into Net Element, Inc. (“NETE”).

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Mullen Investment Properties, LLC. Intercompany accounts and transactions have been eliminated, if any. As of September 30, 2021, Mullen Investment Properties, LLC is only a shell entity.

The financial statements reflect the financial position and results of operations of Mullen, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”).

As MTI has not historically prepared financial statements for Mullen, and Mullen did not exist as a legal entity prior to November 5, 2021, these financial statements have been prepared from the financial records of MTI on a carve-out basis. The consolidated balance sheets include all of the MAI Assets. The consolidated Statements of operations for each of the years ended September 30, 2021 and 2020, reflect all expenses and activities directly attributable to MAI, and an allocation of MTI’s general and administrative expenses incurred in each of those years, as these expenditures were shared by MAI. In some instances, certain expenses were not allocated as they would have related directly to MAI. All inter-entity balances and transactions have been eliminated.

The equity capital presented in the financial statements reflect the retrospective application of the November 5, 2021 capitalization and corporate reorganization arising from the merger transaction with NETE.

These financial statements have been prepared based upon the historical cost amounts recorded by MTI. These financial statements may not be indicative of MAI financial performance and do not necessarily reflect what its financial position, results of operations, and cash flows would have been had Mullen operated as an independent entity during the years presented.

NOTE 2 – LIQUIDITY, CAPITAL RESOURCES, AND GOING CONCERN

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern. Our principal sources of liquidity at September 30, 2021, consists of existing cash of approximately $42,000. During the year ended September 30, 2021, the Company used $19.4 million of cash for operating activities and had a deficiency in working capital of approximately $14.7 million. Subsequent to September 30, 2021, the Company obtained additional financing in the amount of $79.6 million in unsecured convertible notes and equity commitments (See Note 18 – Subsequent Events).

The Coronavirus (“COVID-19”) continues to impact countries, communities, supply chains and markets, global financial markets, and various industries. To date, COVID-19 has had a material and disruptive impact on our strategy in EV product development and the ability to obtain external financing to fund its development activities. Company management is unable to predict whether the global pandemic will continue to have a material impact on our future financial condition and results of operations.

F-8

Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Going Concern

As an early-stage development company, our ability to access capital is critical. Our management plans to raise additional capital through a combination of equity and debt financings, strategic alliances and licensing arrangements. Company management has evaluated whether there are any conditions and events, considered in aggregate, which raise substantial doubt about its ability to continue as a going concern over the next twelve months from the date of filing this report. Since inception, we have incurred significant accumulated losses of approximately $150.1 million, and management expects to continue to incur operating losses over the near future. Proceeds from the business combination with Net Element, the exercise of warrants, and a qualified public offering, should they materialize, are expected to provide Mullen with sufficient liquidity and capital resources to fund its operating expenses and capital requirements for at least the next 12 months from issuance (See Note 18 - Subsequent Events). The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions.

Push-Down Accounting

The carve-out financial statements reflect costs and expenses incurred by MTI on behalf of MAI, including interest costs. As a result, share-based compensation and other equity transactions (such as issuances of warrants and stock conversion rights embedded in issuances of indebtedness) are reflected in these carve-out financial statements. Accordingly, the classification of debt and equity issuances by MTI have been pushed down and reflected with similar classification in these carve-out financial statements. In addition, certain right-of-use assets and related lease liabilities of MTI have been pushed down to MAI.

Reverse Merger and Recapitalization

The November 2021 Business Combination with Net Element was accounted for as a reverse merger and recapitalization, with Net Element treated as the “acquired” company for accounting purposes. The Business Combination was accounted as the equivalent of Mullen Automotive, Inc. issuing stock for the net assets of Net Element, accompanied by a recapitalization. Accordingly, these financial statements reflect the share capital and weighted average shares outstanding via a retrospective recapitalization as shares representing the exchange ratio established in the Business Combination.

Use of Estimates

The preparation of carve-out financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the carve-out financial statements and the reported amounts of total expenses in the reporting periods. Estimates are used for, but not limited to, fair value of long-lived assets, fair value of financial instruments, depreciable lives of property and equipment, income taxes, contingencies, and inputs used to value stock-based compensation, valuation of common and preferred stock issued by MTI.

Additionally, the rates of interest on several debt agreements have been imputed where there was no stated interest rate within the original agreement. The imputed interest results in adjustments to the debt amounts reported in our condensed carve-out financial statements prepared under U.S. GAAP. Loan valuations issues can arise when trying to determine the debt attributes, such as discount rate, credit loss factors, liquidity discounts, and pricing.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for adjustments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results may differ materially from these estimates.

Risks and Uncertainties

We operate within an industry that is subject to rapid technological change, intense competition, and serves an industry that has significant government regulations. It is subject to significant risks and uncertainties, including competitive, financial, developmental, operational, technological, required knowledge of industry governmental regulations, and other risks associated with an emerging business. Any one or combination of these or other risks could have a substantial influence on our future operations and prospects for commercial success.

Cash and Cash Equivalents

Company management considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. We did not have any cash equivalents at September 30, 2021 or September 30, 2020.

Deferred Advertising

At September 30, 2021, deferred advertising consists of upfront costs paid related to auto shows occur during November 2021 and January 2022. At September 30, 2020, deferred advertising represented a marketing campaign, financed by a third party that was carried as a deferred charge on the consolidated balance sheet until the launch of the marketing campaign. These deferred advertising charges of $15 million were associated with the AirSign advertising contract and the RedRock Outdoor Advertising Display advertising contract. The marketing campaigns were not launched, and we received a release of liability from both AirSign, Inc. and RedRock Outdoor Advertising, Inc. Both liabilities, along with the associated deferred advertising were derecognized in January 2021.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various advance payments made for goods or services to be received in the future. These prepaid expenses include insurance and other contracted services requiring up-front payments.

Property, Equipment and Leasehold Improvements, Net

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated economic useful lives of the assets. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred.

Estimated Useful Lives

Description

    

Life

Buildings

30 Years

Furniture and Equipment

5 Years

Computer and Software

1 - 3 years

Machinery and Equipment

5 Years

Leasehold Improvements

Shorter of the estimated useful life or the underlying lease term

Vehicles

5 Years

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expenditures for major improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Company management continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, we assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Income Taxes

Prior to Mullen’s capitalization and corporate reorganization, our operations were included in the tax filings of MTI. The cash and deferred tax positions between us and MTI and are formalized in a tax sharing agreement.

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

There are transactions that occur during the ordinary course of business for which the ultimate tax determination may be uncertain. At September 30, 2021 and 2020, there were no material changes to either the nature or the amounts of the uncertain tax positions.

The Company’s 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 full valuation allowance against the value of our U.S. and state net deferred tax assets because management does not believe the recoverability of the tax assets meets the “more likely than not” likelihood at September 30, 2021 and 2020.

Intangible Assets

Intangible assets consist of acquired and developed intellectual property and website development costs. In accordance with ASC 350, “Intangibles—Goodwill and Others,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. Intangible assets with determinate lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortizable intangible assets generally are amortized on a straight-line basis over periods up to 36 months. The costs to periodically renew our intangible assets are expensed as incurred.

Other Assets

Other assets are comprised primarily of Coda electric vehicles, related parts and security deposits related to the Company’s property leases related to the EV business only.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Extinguishment of Liabilities

The Company derecognizes financial liabilities when the Company’s obligations are discharged, cancelled, or expired.

Leases

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, “Leases” (ASU 2016-02). The core principle of ASU 2016-02 is that lessees should recognize on its balance sheet, assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term. Lessees shall classify all leases as finance or operating leases. The Company adopted ASU 2016-02, on October 1, 2019, which resulted in the recognition of the right-of-use assets and related obligations on its carve-out financial statements.

Accrued Expenses

Accrued expenses are expenses that have been incurred but not yet paid and are classified within current liabilities on the consolidated balance sheets.

General and Administrative Expenses

General and administrative (“G&A”) expenses include all non-production related 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, and licenses. Advertising costs are expensed as incurred and are included in G&A expenses. Other than trade show expenses which are deferred until occurrence of the future event, we expense advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.”

Research and Development Costs

Research and development costs are expensed as incurred and includes impairment charges in the amounts of $74,495 and $93,244 for the years ended September 30, 2021 and 2020, respectively. Research and development expenses primarily consist of costs associated with the development of our Mullen Five show car.

Share-Based Compensation

We account for share-based awards issued by MTI in accordance with ASC Subtopic 718-10, “Compensation – Share Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all common shares of MTI issued to employees, non-employees and directors. The fair value of non-marketable share-based awards has been estimated based on an independent valuation. The MTI common and preferred share valuations have been appraised by an independent financial valuation advisor, based on assumptions management believes to be reasonable. Key assumptions and approaches to value used in estimating fair value, includes economic and industry data; business valuation; prior transactions; option value method and other cost, income and market value approaches. Share-based compensation is included within general and administrative expenses. Beginning on July 1, 2021, share based compensation awards have been valued based on valuation of the trading price of Net Element common stock, as adjusted for the share exchange ratio in the merger. See Note 9 for the amount of share-based compensation expense that is included within General and Administrative expenses for the years ended September 30, 2021 and 2020.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Financing Costs

Pursuant to the terms of the First Amendment to the Company’s Agreement and Plan of Merger with Net Element, we incurred a daily $13,333 penalty for delays in the consummation of the merger transaction. We recorded a charge of approximately $1,560,000 associated with these delays, which is included in the consolidated statement of operations for the fiscal year ended September 30, 2021 and included in accounts payable in the consolidated balance sheet at September 30, 2021.

Related Party Transactions

We have related party transactions with certain of our directors, officers, and principal shareholders. These transactions, which are primarily long-term in nature, include operational loans, convertible debt, and warrants for financial support associated with the borrowing of funds and are entered into in the ordinary course of business.

Fair Value of Financial Instruments

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, Company management considers the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Concentrations of Business and Credit Risk

We maintains cash balances in several financial institutions that are insured by either the Federal Deposit Insurance Corporation or the National Credit Union Association up to certain federal limitations, generally $250,000. At times, our cash balance may exceed these federal limitations and maintains significant cash on hand at certain of its locations. However, we have not experienced any losses in such accounts and management believes we are not exposed to any significant credit risk on these accounts. There were no amounts in excess of insured limitations at September 30, 2021 and 2020.

Recently Issued and Adopted Accounting Standards

In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) (Topic 350), “Intangibles - Goodwill and Others.” ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. We adopted ASU 2017-04, on October 1, 2020, which did not have a material impact on our consolidated balance sheets.

In September 2018, the FASB issued Accounting Standards Update No. 2018-07 (ASU 2018-07) ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. We adopted ASU 2018-07, on October 1, 2020, which did not have a material impact on our consolidated statements of operations.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and early adoption is permitted. Company management is evaluating the future impact this guidance on our consolidated financial statements.

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.

In July 2021, the FASB issued ASU No. 2021-05, Lessors – Certain Leases with Variable Lease Payments (Topic 842). The amendments in this update affect lessors with lease contracts that have (1) have variable lease payments that do not depend on a reference index or a rate, and (2) would have resulted in the recognition of a selling loss at lease commencement if classified a sales-type or direct financing. The ASU will be effective for fiscal years beginning after December 15, 2021. Company management is evaluating the impact this guidance will have on our consolidated financial statements.

NOTE 4 – INTANGIBLE ASSETS

For the years ended September 30, 2021 and 2020, we incurred website development and trademark costs of $117,890 and $296,511, respectively. These costs historically have been capitalized, as the website is in the development stage, resulting in improved functionality. Amortization of the website commenced when the website was placed in service for its intended use during the fourth quarter of 2021. Legal fees incurred for registration of trademarks account for all of the costs of trademark at September 30, 2021. Amortization of these costs will commence when the trademark application and registration process has been completed.

The weighted average useful life of the intellectual property is 3.0 years. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method and the estimated useful lives of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

three years. The straight-line method of amortization represents management’s best estimate of the distribution of the economic value of the identifiable intangible assets.

    

September 30, 2021

    

September 30, 2020

 

Gross

 

 

Net

 

Gross

 

 

Net

 

Carrying

    

Accumulated

    

Carrying

    

Carrying

    

Accumulated

    

Carrying

Finite-Lived Intangible Assets

 

Amount

Amortization

 

Amount

 

Amount

Amortization

 

Amount

Website design and development

$

2,660,391

$

(221,699)

$

2,438,692

$

2,597,091

$

$

2,597,091

Intellectual property

 

71,182

 

(69,205)

 

1,977

 

71,182

 

(45,477)

 

25,705

Trademark

 

54,590

 

 

54,590

 

 

 

Total Finite-Lived Intangible Assets

$

2,786,163

$

(290,904)

$

2,495,259

$

2,668,273

$

(45,477)

$

2,622,796

Total future amortization expense for finite-lived intellectual property is as follows:

Years Ended September 30, 2021

    

Future Amortization

2022

$

888,774

2023

 

886,797

2024

 

719,688

Total Future Amortization Expense

$

2,495,259

For the years ended September 30, 2021 and 2020, amortization expense for the intangible assets was $245,427 and $23,728 respectively.

NOTE 5 – DEBT

Short-term debt comprises a significant component of the Company’s 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 or more.

Short and Long-Term Debt

The following is a summary of our indebtedness at September 30, 2021:

Net Carrying Value

    

Unpaid Principal 

    

    

    

Contractual

    

Contractual 

Type of Debt

    

Balance

    

Current

    

Long-Term

    

 Interest Rate

    

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

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Scheduled Debt Maturities

The following scheduled debt maturities at September 30, 2021:

 

Years Ended September 30,

    

2021

    

2022

    

2023

    

Total

Total Debt

$

39,200,970

$

$

247,612

$

39,448,582

The following is a summary of our indebtedness at September 30, 2020:

Net Carrying Value

    

Unpaid Principal 

    

    

    

Contractual

    

Contractual 

Type of Debt

 

Balance

Current

Long-Term

 

 Interest Rate

 

Maturity

Matured Notes

$

4,828,450

$

4,828,450

$

 

0.00% - 15.00

%  

2016 - 2019

Promissory Notes

 

25,288,063

 

25,288,063

 

 

0.00% - 28.00

%  

2021 – 2022

Demand Note

 

500,000

 

500,000

 

 

27.00

%  

2020

Convertible Unsecured Notes

 

1,867,500

 

1,867,500

 

 

20.00

%  

2021

Real Estate Note

 

318,384

 

34,503

 

283,881

 

5.00

%  

2023

Loan Advances

 

1,931,017

 

1,931,017

 

 

0.00% - 10.00

%  

2019 – 2020

Less: Unamortized Debt Discount

 

(1,401,062)

 

(1,401,062)

 

 

NA

 

NA

Total Debt

$

33,332,352

$

33,048,471

$

283,881

 

NA

 

NA

Notes and Advances

We enter into promissory notes with third parties and company officers to support our operations. Promissory notes typically are for less than three years maturity and carry interest rates from 0% to 28.0%. For many of the notes listed above, the scheduled maturity date has passed, and we currently are in default of the matured loan. Company management is working with the creditors to remediate the $5,960,574 in promissory notes and loan advances that are in default. Promissory notes and loan advances that are in default still accrue interest after their scheduled maturity date. There are no financial covenants associated with the promissory notes and loan advances, and there are no compliance waivers that have been received from creditors. We record imputed interest on promissory notes and advances which are deemed to be below the market interest rate. For the years ended September 30, 2021 and 2020, we recorded interest expense of $21,168,232 and $18,094,234, respectively.

In some instances, MTI issues shares of common stock or warrants along with the issuance of promissory notes, resulting in the recognition of a debt discount which is amortized to interest expense over the term of the promissory note. Debt discount amortization for the fiscal year ended September 30, 2021, and 2020, was $8,211,648 and $16,008,454, respectively.

During 2021, MTI issued shares of stock to certain creditors in satisfaction of debt payments or in settlement of indebtedness. These agreements essentially exchanged a predetermined amount of stock to settle debt. For the fiscal year ended September 30, 2021 and 2020, the carrying amount of indebtedness that was settled via issuance of MTI shares was $1,300,000 and $38,912,640, respectively.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Convertible Debt Issuances and Warrants

TDR Relationship

On May 16, 2021, we received debt financing through MTI entering into an unsecured $4.4 million convertible note agreement with TDR Capital. The convertible note is issued with OID of 10% ($0.4 million); carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 17,446,000 shares of MTI common stock (1,358,112 MAI warrants). The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The value ascribed to the warrants was $24,358,875, resulting in an additional debt discount of $3,726,816 and a beneficial conversion discount of $673,184. These discounts are being amortized over the 12-month term of the debt. The number of shares issuable upon conversion are determined according to the formula:  Conversion Amount/Conversion Price, subject to certain adjustments. However, , ownership in our TDR Capital (together with their affiliates) upon conversion is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

Convertible Debt Issuances and Warrants, continued

On July 26, 2021, we received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with TDR Capital. The convertible note is issued with OID of 10% or $0.1 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 4,361,500 shares of MTI common stock (339,528 MAI warrants). The MTI warrant exercise price is $0.6877(MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion is determined according to the formula:  Conversion Amount/Conversion Price, subject to certain adjustments. However, upon conversion, ownership by TDR Capital (together with their affiliates) is limited to a 9.9% ownership cap in shares of MTI’s (MAI’s) common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On September 3, 2021, we received debt financing through MTI entering into an unsecured $6.6 million convertible note agreement with TDR Capital. The initial sale and purchase is $550,000 principal and detached warrants to acquire up to 2,180,750 shares of MTI stock (169,764 MAI warrants). The second sale and purchase is $6,050,000 principal and detached warrants to acquire up to 23,988,500 shares of MTI stock (1,867,423 MAI warrants). The combined convertible notes are issued with OID of 10% ($0.66 million); carries an interest rate of 15% and has a maturity date of one year. The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion is determined according to the formula:  Conversion Amount/Conversion Price of $0.6877, subject to certain adjustments. However, upon conversion, ownership by TDR Capital (together with their affiliates) is limited to a 9.9% ownership cap in shares of MTI’s (MAI’s) common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants. As of September 30, 2021, only $550,000 was received from TDR Capital for this convertible debt issuance. Refer to Commitments and Contingencies, Note 17 and Subsequent Events, Note 19.

Digital Power Lending, LLC

On July 22, 2021, the Company received debt financing through MTI entering into an unsecured $2.42 million convertible note agreement with Digital Power Lending, LLC. The convertible note is issued with OID of 10% or $0.242 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 9,595,300 shares of MTI common stock (746,961 MAI warrants). The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion of the conversion amount shall be determined according to the

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

formula:  Conversion Amount/Conversion Price, subject to certain adjustments. However, upon conversion, Digital Power Lending, LLC (together with their affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On August 19, 2021, the Company received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with Digital Power Lending, LLC. The convertible note is issued with OID of 10% or $0.1 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 4,361,500 shares of MTI common stock (339,528 MAI warrants). The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion of the conversion amount shall be determined according to the formula:  Conversion Amount/Conversion Price, subject to certain adjustments. However, upon conversion, Digital Power Lending, LLC. (together with their affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

Convertible Debt to Equity Conversion (Exchange Agreements)

On May 7, 2021, and amended on May 20, 2021, MTI executed an exchange agreement with its existing convertible debt investors who hold $10,762,500 in MTI convertible debt. Upon consummation of the then proposed merger with Net Element, we and the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share. The right to additional purchases of preferred stock expires 12 months from the merger close date between Net Element and MAI. MTI originally issued 42,759,290 (3,717,898 MAI warrants).in detached warrants to purchase shares of MTI common stock as part of the convertible debt agreements with investors. Refer to Note 18, Subsequent Events for Amendment No. 6 and Joinder to the Exchange Agreement.

On July 22, 2021, the Exchange Agreement was amended to include the $2,420,000 debt financing and associated warrants with Digital Power Lending, LLC. The agreement represents Amendment No. 2 and Joinder to the Exchange Agreement that was signed on May 7, 2021 and amended on May 20, 2021. Upon consummation of the then proposed merger with Net Element, we and the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share.

On July 26, 2021, the Exchange Agreement was amended to include the $1,100,000 debt financing and associated warrants with TDR Capital. The agreement represents Amendment No. 3 and Joinder to the Exchange Agreement that was signed on May 7, 2021 and amended on May 20, 2021. Upon consummation of the then proposed merger with Net Element, we and the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share.

On August 19, 2021, the Exchange Agreement was amended to include the $1,100,000 debt financing and associated warrants with Digital Power Lending, LLC. The agreement represents Amendment No. 4 and Joinder to the Exchange Agreement that was signed on May 7, 2021 and amended on May 20, 2021. Upon consummation of the then proposed merger with Net Element, we and the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share.

Convertible Debt to Equity Conversion (Exchange Agreements), continued

On September 3, 2021, the Exchange Agreement was amended to include the $6,600,000 debt financing and associated warrants with TDR Capital. The agreement represents Amendment No. 5 and Joinder to the Exchange Agreement that was signed on May 7, 2021 and amended on May 20, 2021. Upon consummation of the then proposed merger with Net Element, we and the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Drawbridge Relationship

During July 2020, Drawbridge-DBI and MTI entered into a settlement agreement (the “Agreement”) to restructure the aggregate obligations owed to Drawbridge-DBI and the other DBI-affiliated entities. In connection with the Agreement, (a) the Sale-Leaseback obligation in the amount of $49,500,000 was replaced by a new note with a face value of $23,831,554, (b) the other indebtedness and advances from DBI-affiliated entities with a net book value of $9,935,086 were extinguished, and (c) MTI issued 71,516,534 MAI – 5,567,319)  Series B Preferred Shares to Drawbridge-DBI.

The amounts owed to Drawbridge-DBI is $33,296,648 and $25,092,994 as of September 30, 2021, and September 30, 2020 respectively, and are in default (See Note 18 – Subsequent Events). The amounts owed to other DBI-affiliated entities is $982,500 and $1,082,500, as of September 30, 2021, and September 30, 2020, respectively. The 2020 Drawbridge loan is currently recognized within the current portion of debt on the consolidated balance sheet.

SBA Loans

On April 14, 2020, MTI entered a promissory note (the “Note”) evidencing an unsecured loan (the “Loan”) in the amount of $885,426 made under the Paycheck Protection Program (the “PPP”). The Note matures on April 14, 2022 and bears interest at a rate of 1% per annum. Pursuant to the terms of the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) and the PPP, the Company applied to the Lender for forgiveness for the amount due on the Loan. The amount eligible for forgiveness is based on the amount of Loan proceeds used (during the eight-week period after the Lender makes the first disbursement of Loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), interest on mortgage obligations, rent and utilities, subject to certain limitations and reductions in accordance with the CARES Act and the PPP. During November 2020, the SBA approved the loan forgiveness amount of $875,426 in principal and $5,155 in interest on November 20, 2020. The loan forgiveness is accounted for as a gain on debt extinguishment of $890,581 in the Consolidated Statement of Operations.

In September 2020, MTI entered a promissory note (the "Note") in the amount of $10,000 by the SBA under the EIDL program. Monthly installment payments on the Note will begin twelve months from the date of the Note, with the balance of any accrued principal and interest at 3.75% annually, payable thirty years from the date of the Note. An application was submitted to the Lender for loan forgiveness, which was approved for the full amount on February 18, 2021.

Convertible Notes

As of September 30, 2021, MTI issued unsecured convertible notes totaling $10,762,500, of which $6,418,500 were issued between January 2021 and September 2021. The new issuances bear interest at 15% and mature in one year and included with warrants to acquire shares of common stock based on a specified formula. Interest is accrued in arrears until the last business day of each calendar year quarter. The default rate on the note increases to 20% when quarterly interest payments are not timely made by MTI.

Convertible Notes

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    

Convertible

    

Interest

    

Default 

    

Maturity 

    

Warrants 

    

Exercise 

    

Exercise 

Date of Issuance

 Note ($)

 Rate

Interest Rate

Date

(#)

Date

Price ($)

8/26/2020

$

1,000,000

15

%  

20

%  

8/26/2021

226,397

8/26/2025

$

8.84

8/26/2020

 

200,000

 

15

%  

20

%  

8/26/2021

 

45,279

 

8/26/2025

$

8.84

8/26/2020

 

200,000

 

15

%  

20

%  

8/26/2021

 

45,279

 

8/26/2025

$

8.84

8/26/2020

 

100,000

 

15

%  

20

%  

8/26/2021

 

22,640

 

8/26/2025

$

8.84

9/25/2020

 

105,000

 

15

%  

20

%  

9/25/2021

 

29,715

 

9/25/2025

$

8.84

9/25/2020

 

157,500

 

15

%  

20

%  

9/25/2021

 

44,572

 

9/25/2025

$

8.84

9/25/2020

 

105,000

 

15

%  

20

%  

9/25/2021

 

29,715

 

9/25/2025

$

8.84

10/12/2020

 

660,000

 

15

%  

20

%  

10/12/2021

 

203,757

 

10/12/2025

$

8.84

10/12/2020

 

33,000

 

15

%  

20

%  

10/12/2021

 

10,188

 

10/12/2025

$

8.84

10/12/2020

 

27,500

 

15

%  

20

%  

10/12/2021

 

8,490

 

10/12/2025

$

8.84

11/9/2020

 

660,000

 

15

%  

20

%  

11/9/2021

 

203,757

 

11/9/2025

$

8.84

11/9/2020

 

33,000

 

15

%  

20

%  

11/9/2021

 

10,188

 

11/9/2025

$

8.84

11/9/2020

 

27,500

 

15

%  

20

%  

11/9/2021

 

8,490

 

11/9/2025

$

8.84

12/7/2020

 

660,000

 

15

%  

20

%  

12/7/2021

 

203,756

 

12/7/2025

$

8.84

12/7/2020

 

33,000

 

15

%  

20

%  

12/7/2021

 

10,188

 

12/7/2025

$

8.84

12/7/2020

 

27,500

 

15

%  

20

%  

12/7/2021

 

8,490

 

12/7/2025

$

8.84

12/15/2020

 

157,500

 

15

%  

20

%  

12/15/2021

 

44,572

 

12/15/2025

$

8.84

12/15/2020

 

157,500

 

15

%  

20

%  

12/15/2021

 

44,572

 

12/15/2025

$

8.84

1/7/2021

 

660,000

 

15

%  

 

1/7/2022

 

203,757

 

1/7/2026

$

8.84

1/7/2021

 

33,000

 

15

%  

 

1/7/2022

 

10,188

 

1/7/2026

$

8.84

1/7/2021

 

27,500

 

15

%  

 

1/7/2022

 

8,490

 

1/7/2026

$

8.84

1/7/2021

 

 

 

 

 

2,038*

 

1/7/2026

$

8.84

1/7/2021

 

192,500

 

15

%  

 

1/7/2022

 

59,429

 

1/7/2026

$

8.84

1/7/2021

 

82,500

 

15

%  

 

1/7/2022

 

25,470

 

1/7/2026

$

8.84

1/7/2021

 

192,500

 

15

%  

 

1/7/2022

 

59,429

 

1/7/2026

$

8.84

1/7/2021

 

110,000

 

15

%  

 

1/7/2022

 

33,960

 

1/7/2026

$

8.84

3/10/2021

 

660,000

 

15

%  

 

3/10/2022

 

203,757

 

3/10/2026

$

8.84

3/10/2021

 

33,000

 

15

%  

 

3/10/2022

 

10,188

 

3/10/2026

$

8.84

3/10/2021

 

27,500

 

15

%  

 

3/10/2022

 

8,490

 

3/10/2026

$

8.84

5/7/2021

 

 

 

 

 

82,326**

 

5/7/2026

$

8.84

5/7/2021

 

 

 

 

 

33,316**

 

5/7/2026

$

8.84

5/7/2021

 

 

 

 

 

10,504**

 

5/7/2026

$

8.84

5/7/2021

 

 

 

 

 

19,167**

 

5/7/2026

$

8.84

5/16/2021

 

4,400,000

 

15

%  

20

%  

5/16/2022

 

1,358,112

 

5/16/2026

$

8.84

7/22/2021

 

2,420,000

 

15

%  

20

%  

7/22/22

 

746,961

 

7/22/2026

$

8.84

7/26/2021

 

1,100,000

 

15

%  

20

%  

7/26/22

 

339,528

 

7/26/2026

$

8.84

8/19/2021

 

1,100,000

 

15

%  

20

%  

8/19/22

 

339,528

 

8/19/2026

$

8.84

9/3/2021

 

550,000

 

15

%  

20

%  

9/3/22

 

169,764

 

9/3/2026

$

8.84

Total

$

15,932,500

 

 

 

 

4,924,447

 

 

*

As part of placement agent, Cambria received five-year warrants to purchase 6% of the MTI common shares issuable under convertible notes sold in the Regulation D offering to investors introduced by the firm.

**

On May 7, 2021, additional warrants of 1,866,665 were added to the Exchange Agreement for no additional consideration to acquire additional common shares of common stock to four convertible debt holders given changes in the exchange share calculation, which will be consistent with the exchange share calculation of other convertible debt holders. The Exchange Agreement supersedes the original agreements that were issued by MTI and allows the

F-20

Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

convertible debt holder to exchange their debt for the newly created Series C Preferred Stock, par value of $0.001. The new series of preferred stock will be created upon the merger effectiveness date between Net Element and MAI.

Convertible Notes

Because the market price for MTI common stock on the date of the notes exceeded the notes’ conversion price of $0.6877 per share, a beneficial conversion feature in the amount of $10,613,630 was recorded as a discount on the notes. The discount is being amortized as additional interest over the life of the notes. At September 30, 2021, the balance of the unamortized discount is $8,060,555.

Company management evaluated the conversion features embedded in the convertible notes for classification and accounting under the provisions of ASC 815-40 and determined the conversion features met treatment as equity.

NOTE 6 – FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

Non-financial assets, such as property, equipment and leasehold improvements is required to be measured at fair value only when acquired or when an impairment loss is recognized. See Note 12 - Property, Equipment and Leasehold Improvements, Netfor further information on impairment of fixed assets.

Financial instruments for which carrying value approximates fair value

Certain financial instruments that are not carried at fair value on the consolidated balance sheets are carried at amounts that approximate fair value, due to their short-term nature and credit risk. These instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. We believe that the carrying value of term debt approximates fair value due to the variable rates associated with these obligations. Accounts payable are short-term in nature and generally terms are due upon receipt or within 30 to 90 days.

NOTE 7 – DEFICIENCY IN STOCKHOLDERS’ EQUITY

The accompanying financial statements include a retrospective recapitalization to reflect the composition of stockholder’s equity, as if they had existed for the periods presented.

Preferred Stock

On November 5, 2021, we filed an Amended and Restated Articles of Incorporation which included the rights and privileges of Preferred Stock Series A and Series B.  Under the terms of our Articles of Incorporation, the Board of Directors may determine the rights, preferences and terms of our authorized but unissued shares of preferred stock.

Dividends

The holders of Preferred Stock are entitled to non-cumulative dividends if declared by the Board of Directors. The holders of the Preferred Stock Series A and Series B shall participate on a pro rata basis (on an “as converted” basis to common stock) in any cash dividend paid on common stock. No dividends have been declared or paid during the years ended September 30, 2021 and 2020.

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Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liquidation

Holders of Preferred Stock are entitled to receive a liquidation preference prior to any distribution to holders of Common Stock. Upon occurrence of a liquidation transaction, the Preferred Stock would be redeemed by the issuer for the applicable original issue price. However, if the holders of Preferred Stock would receive a greater amount of consideration had the Preferred Stock been converted immediately prior to such transaction, the Preferred Stock shall be deemed to have been converted for the purposes of the redemption amount.

Conversion

Preferred Stock Series A is convertible at any time at the option of the holder into Common Stock at a conversion rate of one for one hundred basis with common shares of at any time after the date of issuance of such shares into such number of fully paid and non-accessible shares of Common Stock. Preferred Stock Series B is convertible at any time at the option of the holder into Common Stock at a conversion rate of one for one basis with common shares at any time after the date of issuance of such shares into such number of fully paid and non-accessible shares of Common Stock.

Additionally, all outstanding shares of the Preferred Stock shall automatically convert into shares of the underlying Common Stock upon the Company’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act, the public offering price of which results in aggregate cash proceeds to the Company of not less than $50 million, net of underwriting discounts and commissions (a “Qualified IPO”).

Voting Rights

Holders of Preferred Stock are entitled to the same voting rights as the holders of common stock and to notice of shareholders’ meetings. The holders of Common Stock and Preferred Stock shall vote together as a single class (on an as-converted basis) on all matters. Each holder of Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Preferred Stock could be converted.

Common Stock

We have 500,000,000 shares of common stock authorized with $0.001 par value per share. There were 7,048,386 and 5,086,225 shares of common stock issued and outstanding at September 30, 2021 and 2020, respectively.

The holders of Common Stock are entitled to one vote for each share of Common Stock held at all meetings of shareholders. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the common shareholders are entitled to receive the remaining assets following distribution of liquidation preferences, if any, to the holders of our preferred stock. The holders of common stock are not entitled to receive dividends unless declared by our Board of Directors. To date, no dividends were declared or paid to the holders of common stock.

F-22

Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrants

The following table summarizes warrant activity for the years ended September 30, 2021 and 2020:

    

    

Weighted Average 

MAI shares

Exercise Price

Warrants outstanding at September 30, 2019

 

97,308

$

8.84

Warrants exercised

 

$

Warrants granted

 

420,242

$

8.84

Warrants expired

 

$

Warrants outstanding at September 30, 2020

 

540,905

$

8.84

Weighted Average

MAI shares

    

Exercise Price

Warrants outstanding at September 30, 2020

540,905

$

8.84

Warrants exercised

$

Warrants granted

4,480,855

$

8.84

Warrants expired

(97,308)

$

8.84

Warrants outstanding at September 30, 2021

4,924,447

$

8.84

2020-2021 Warrants

The warrants are exercisable for a five-year period commencing upon issuance . The estimated fair value of the MAI warrants issued and outstanding is $8,166,441 using the Black-Scholes option valuation model. The assumptions used that represent management’s best estimates of the fair value of the Company’s warrants issued and outstanding were as follows:

    

September 30, 2021

 

Expected term (in years)

 

5.0

Volatility

 

63.9

%

Dividend yield

 

0.00

%

Risk-free interest rate

 

0.34%-0.82

%

Common stock price

 

$

5.43

The allocation of the fair value of these warrants was included as a debt discount on the consolidated balance sheet and amortized to interest expense over the scheduled maturity dates of the various promissory notes.

NOTE 8 – LOSS PER SHARE

Earnings per common share (“EPS”) is computed by dividing net income allocated to common shareholders by the weighted-average common shares outstanding, excluding unvested common shares subject to repurchase or cancellation. Diluted EPS is computed by dividing income allocated to common shareholders plus dividends on dilutive convertible preferred stock and preferred stock that can be tendered to exercise warrants, by the weighted-average common shares outstanding plus amounts representing the dilutive effect of outstanding warrants and the dilution resulting from the conversion of convertible preferred stock, if applicable.

For 2021 and 2020, the Series A Preferred Stock were excluded from the diluted share count because the result would have been antidilutive under the “if-converted method.”

The warrants to purchases common shares of stock also were excluded from the computation because the result would have been antidilutive.

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Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – MTI SHARE- BASED COMPENSATION

MTI has a share incentive plan as part of its annual discretionary share-based compensation programs. The plan includes consultants and employees, including directors and officers. For employees, they are notified of company share incentives during the onboarding process. The employee’s offer letter briefly describes the plan. Subject to the approval of MTI’s Board of Directors or its Compensation Committee and following the adoption of an equity incentive plan, employees are issued a specified number of shares of the MTI Common Shares. Employees are vested in 100% of the MTI shares after 12 months of continuous service. Additional MTI shares may be issued to employees over the next two years at anniversary date. Any disruption or separation of service results in the forfeiture of common shares. The total expense recognized for share awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period.

Consulting agreements or MTI shares for services are determined by the number of MTI shares granted within the individual contracts, as well as the services provided by the consultant. The MTI shares specified within the individual agreements are negotiated and approved by our Chief Executive Officer. The consultant earns the MTI shares over the service period. The MTI shares are accounted for as professional fees within G&A expenses. Employee share issuances are part of Salaries expense. The expense recognized for share awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period.

For the fiscal year ended 

September 30, 

Composition of Stock-Based Compensation Expense

    

2021

    

2020

Employee MTI share issuance

$

2,505,091

$

1,037,102

MTI shares for services

 

2,460,529

 

2,929,179

MTI Share-Based compensation expense

$

4,965,620

$

3,966,281

NOTE 10 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

    

September 30, 2021

    

September 30, 2020

Accrued Expenses and Other Liabilities

 

  

 

  

Accrued expense - other

$

2,051,696

$

16,021,442

Accrued payroll

 

4,586,057

 

3,771,874

Accrued interest

 

12,489,012

 

2,358,273

Total

$

19,126,765

$

22,151,589

Accrued expenses – other at September 30, 2020 includes obligations arising from the $13.6 million AirSign advertising contract and the $1.4 million RedRock Outdoor Advertising, Inc. contract. The Company entered into these agreements to promote its electric vehicle capabilities with various national sporting events and within the New York market. However, the marketing campaigns never materialized. During 2021, the Company received a release of liability from both AirSign, Inc. and RedRock Outdoor Advertising, Inc. Both liabilities, along with the associated deferred advertising, were derecognized during January 2021.

Accrued payroll represents salaries and benefits that are owed to employees. More importantly, the payroll tax liabilities are reported within this account. Delinquent IRS and state tax liabilities on September 30, 2021, and September 30, 2020, are $3,904,720 and $3,987,596, respectively. These tax liabilities have priority liens over MTI assets due to nonpayment of tax debt. The lien protects the government’s interest in all MTI property, including real estate, personal property and financial assets. Refer to Note 17, Contingencies and Claims.

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Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued interest relates to finance charges on debt financing and represents interest on loans, and convertible notes payable throughout 2021. Refer to Note 5, Debt.

NOTE 11 - LIABILITY TO ISSUE STOCK

Liability represents stock payable that is accrued for and issuable at a future date for Preferred Management Partners and Cambria Investment Banking Services. Refer to Note 17.

NOTE 12 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment, and leasehold improvements, net consists of the following:

    

September 30, 

    

September 30, 

2021

2020

Building

$

804,654

$

807,154

Furniture and Equipment

 

111,102

 

114,879

Vehicles

 

45,887

 

45,887

Computer Hardware and Software

 

139,742

 

129,967

Machinery and Equipment

 

2,597,654

 

2,615,311

Leasehold Improvements

 

66,379

 

76,675

Subtotal

 

3,765,418

 

3,789,873

Less: Accumulated Depreciation

 

(2,583,941)

 

(2,247,877)

Property, Equipment and Leasehold Improvements, Net

$

1,181,477

$

1,541,996

Depreciation expense related to property, equipment and leasehold improvements for the years ended September 30, 2021, and 2020 was $354,125 and $702,068, respectively.

NOTE 13 – OTHER ASSETS

Other assets consist of the following:

    

September 30, 2021

    

September 30, 2020

Other Assets

 

  

 

  

Coda Materials

$

76,587

$

207,000

Advance Payments on long-lived assets

 

 

51,806

Notes Receivable

 

90,552

 

79,939

Show Room Cars

 

2,739,995

 

210,483

Security Deposits

 

186,640

 

212,782

Deposit on Property (See Note 15)

 

1,240,000

 

Total Other Assets

$

4,333,774

$

762,010

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Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – OPERATING EXPENSES

General and Administrative Expenses consists of the following:

Year ended September 30,

2021

2020

Professional fees

    

$

6,991,246

    

$

5,260,142

Salaries

 

6,091,520

 

2,437,934

Depreciation and amortization

 

720,805

 

725,796

Lease

 

1,776,198

 

905,231

Settlements and penalties

 

1,532,378

 

219,655

Employee benefits

 

368,563

 

216,349

Utilities and office expense

 

345,766

 

213,361

Advertising and promotions

 

413,771

 

156,241

Taxes and licenses

 

73,527

 

67,607

Repairs and maintenance

 

244,868

 

55,050

Other

 

835,299

 

169,775

Total

$

19,393,941

$

10,427,141

Within professional fees is MTI shares for services, which is the issuance of MTI shares for services rendered to consultants and professional service firms. The expense is recorded at fair value of MTI shares issued (see Note 13, Other Assets). For the fiscal year ended September 30, 2021 and 2020, the Company recorded $2,460,529 and $2,929,179, respectively, for shares for services.

Research and development consist of the following:

For the fiscal year ended

September 30, 

    

2021

    

2020

Research & Development

Professional fees

$

3,009,027

$

1,667,077

Total

$

3,009,027

$

1,667,077

Research and development costs are expensed as incurred. Research and development expenses primarily consist of Mullen Five EV show car development and are primarily comprised of personnel-related costs for employees and consultants.

In December 2020, the Company entered into an agreement with Thurner, Inc. to design and develop two show electric vehicles. The planned finalization is expected to occur in 2021. The total cost for Phase 1 is $483,254.

In December 2020, MTI entered into a Statement of Work with Phiaro, Inc. for its show car development for approximately $1.6 million. The show car project program started in December 2020 and is anticipated to be finished November 2021. The program is for the initial show car development of the Mullen Five, which is a mid-size electric SUV. The program start began in January 2021. The initial show cars in development consist of two mid-size electric SUVs.

NOTE 15 – LEASES

MTI has entered into various operating lease agreements for certain of its offices, manufacturing and warehouse facilities, and corporate jet. We have implemented the provisions of ASC 842, on October 1, 2019. Operating leases are included in right-of-use assets, and current and noncurrent portion of lease liabilities, as appropriate. These right-of-use assets also

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Table of Contents

MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

includes any lease payments made and initial direct costs incurred at lease commencement and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We have lease agreements which require payments for both lease and non-lease components and has elected to account for these as a single lease component. Certain leases provide for annual increases to lease payment based on an index or rate. We calculate the present value of future lease payments based on the index or at the lease commencement date for new leases.

The table below presents information regarding our lease assets and liabilities.

    

September 30, 2021

    

September 30, 2020

 

Assets:

 

  

 

  

Operating lease right-of-use assets

$

2,350,927

$

1,729,112

Liabilities:

 

  

 

  

Operating lease liabilities, current

 

(599,898)

 

(336,765)

Operating lease liabilities, non-current

 

(1,857,894)

 

(1,482,569)

Total lease liabilities

$

(2,457,792)

$

(1,819,334)

Weighted average remaining lease terms:

 

  

 

  

Operating leases

 

3.34 years

 

4.51 years

Weighted average discount rate:

 

  

 

  

Operating leases

 

28

%  

 

28

%

Cash paid for amounts included in the measurement of lease liabilities for the fiscal year ended September 30, 2021, and 2020

$

1,057,438

$

1,096,054

Operating lease costs:

For the fiscal year ended September 30,

    

2021

    

2020

Fixed lease cost

$

1,185,576

$

430,886

Variable lease cost

 

448,983

 

454,422

Short-term lease cost

 

401,526

 

101,916

Sublease income

 

(84,473)

 

(81,993)

Total operating lease costs

$

1,951,612

$

905,231

Operating Lease Commitments

Our leases primarily consist of land, land and building, or equipment leases. Our lease obligations are based upon contractual minimum rates. Most leases provide that we pay taxes, maintenance, insurance and operating expenses applicable to the premises. The initial term for most real property leases is typically 1 to 3 years, with renewal options of 1 to 5 years, and may include rent escalation clauses. For financing obligations, a portion of the periodic lease payments is recognized as interest expense and the remainder reduces the obligations. For operating leases, rent is recognized on a straight-line basis over the lease term, including scheduled rent increases and rent holidays.

On April 27, 2021, MTI entered into a 4-month lease agreement to lease a 127,400 square-foot manufacturing plant on 100 acres located at One Greentech Drive, Robinsonville (Tunica County), MS from May 1, 2021 through July 31, 2021 for $50,000 per month. MTI also has an option to purchase the property for $12.0 million. The lease agreement will terminate on the earlier of the (a) closing of the purchase of the property or (b) MTI’s termination of the lease. On March 12, 2021, MTI paid $240,000 into escrow for the asset purchase. Consummation of the purchase is contingent upon completion of satisfactory inspection, review of environmental report, etc. Furniture, fixtures, equipment and other assets are included as part of the purchase. On July 23, 2021, the parties entered into a first amendment to the agreement, whereby the lease is extended for an additional six months. On July 26, 2021, MTI paid $1,000,000 (“extension payment”) pursuant to the first amendment to the lease agreement (payments will remain at $50,000 per month through January 31, 2022). The source of the funds to make the extension payment came from proceeds received from the issuance of a convertible note

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with TDR Capital Pty Limited. The extension payment deposited into escrow will be credited to the purchase price upon closing. As of 11/12/2021, the property was purchased from Saleen Motors International, LLC for $12,000,000. The lease was cancelled on the purchase date of the aforesaid property. Refer to Note 19, Subsequent Events.

The following table reflects maturities of operating lease liabilities at September 30, 2021:

Years ending

    

    

September 30,

2022

$

1,213,728

2023

 

1,157,693

2024

 

824,287

2025

 

436,155

2026

 

222,787

Thereafter

 

Total lease payments

$

3,854,650

Less: Imputed interest

 

(1,396,858)

Present value of lease liabilities

$

2,457,792

NOTE 16 – INCOME TAXES

On December 2, 2019, we entered into a tax sharing agreement with Mullen Technologies Inc. Although our results are included in the Mullen Technologies consolidated tax return for U.S. federal income tax purposes, our tax provision is calculated primarily as though MAI was a separate taxpayer. However, under certain circumstances, transactions between us and Mullen Technology are assessed using consolidated tax return rules. Tax sharing agreement governs the payment of tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of tax returns, and provide for certain other matters relating to taxes

For the years ended September 30, 2021 and 2020, we had income tax NOL carryforwards of approximately $193 million for Federal and $192 million for California, which will expire as follows:

NOL Carryforward

    

  

    

2021

Federal

 

  

2034-2037

$

29,838,716

Indefinite

$

162,818,819

Total Federal

$

192,657,535

California

 

  

2034-2040

$

191,722,566

Total California

$

191,722,566

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    

2021 - $

  

2021 - %

Income tax benefit at statutory rate

$

(9,247,200)

 

21.00

%

State income taxes

 

800

 

0.00

%

Permanent Differences

 

158,166

 

(0.36)

%

Valuation Allowance

 

9,091,163

 

(20.65)

%

Other

 

(2,129)

 

0.00

%

Total (benefit) provision for income taxes

$

800

 

0.00

%

We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities.

Significant components of the Company’s net deferred tax assets as of September 30, 2021, are as follows:

    

2021

    

2020

Deferred tax assets:

 

  

 

  

Net Operating loss carryforwards

 

38,676,405

 

31,413,378

Charitable Contributions

 

894

 

1,176

Accrued Expenses

 

315,555

 

104,164

Impairment Other

 

 

83,845

Other Assets

 

364,419

 

261,842

163(j) Limitation

 

14,491,332

 

4,178,291

Total gross deferred tax assets

 

53,848,604

 

36,042,696

Less valuation allowance

 

(53,416,875)

 

(35,747,087)

Total net deferred tax assets

 

431,729

 

295,609

Deferred tax liabilities:

 

  

 

  

Intangibles

 

(146,639)

 

(157,641)

Fixed Assets

 

(284,922)

 

(137,632)

Other

 

(168)

 

(336)

Total deferred tax liabilities

 

(431,729)

 

(295,609)

Net deferred tax assets

$

0

$

For the years ended September 30, 2021 and 2020, we recorded a full valuation allowance against the deferred tax assets because we do not believe that the deferred tax assets recorded in 2021 and 2020 are more likely than not to be realizable.

We follow the guidance for accounting for uncertainty in income taxes in accordance with FASB ASC 740, which clarifies uncertainty in income taxes recognized in an enterprise’s financial statements. The standard also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken, or expected to be taken, in an income tax return. Only tax positions that meet the more likely than not recognition threshold may be recognized. In addition, the standard provides guidance on derecognition, classification, interest and

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

penalties, accounting in interim periods, and disclosure. As of September 30, 2021, the Company has recorded $15.2M related to unrecognized tax benefits. Tax years for 2014 through 2021 are subject to examination by the tax authorities.

Tax Reform. The Tax Cuts and Jobs Act of 2017 (the “TJCA”) was enacted on December 22, 2017, and among other changes, reduced the federal statutory tax rate from 35.0% to 21.0%. In accordance with U.S. GAAP for income taxes, as well as SEC Staff Accounting Bulletin No. 1187 (“SAB”), the Company made a reasonable estimate of the impacts of the TJCA and recorded this estimate in Company results for the year ended September 30, 2021. SAB 118 allows for a measurement period of up to one year, from the date of enactment, to complete the accounting for the impact of TJCA. As of September 20, 2021, our analysis of under SAB 118 was completed and resulted in no material adjustments to the provisional amounts recorded as of September 30, 2021.

NOTE 17 – CONTINGENCIES AND CLAIMS

ASC 450 governs the disclosure and recognition of loss contingencies, including potential losses from litigation, regulatory, tax and other matters. The accounting standard defines a “loss contingency” as “an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur.”  ASC 450 requires accrual for a loss contingency when it is “probable that one or more future events will occur confirming the fact of loss” and “the amount of the loss can be reasonably estimated.”

From time to time, we are subject to asserted and actual claims and lawsuits arising in the ordinary course of business. Company management reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our consolidated financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, management evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood is probable, but the amount cannot be reasonably estimated.

Preferred Management Partners, Inc. – Consulting Agreement

On September 23, 2021, MAI entered into a consulting arrangement with Preferred Management Partners, Inc. The Company hereby engages Preferred Management, Inc. to resume negotiations between MAI and Qiantu Motor Cars to enable the Company to procure the intellectual property ownership rights related to the K-50 automobile. As compensation for entering into this agreement and providing services to MAI, the consultant will receive 750,000 unrestricted publicly traded shares of the Company’s common stock registered on Form S-8 registration statement. If the consultant is successful, the Company will pay the consultant an additional 750,000 unrestricted shares of common stock registered on Form S-8 registration statement. As of this date, the Form S-8 registration statement has not been filed; however, the transaction is properly accounted for within the prepaid account and the liability for to issue future shares on the balance sheet.

Debt Financing

On September 3, 2021, the Company received debt financing through MTI entering into an unsecured $6.6 million convertible note agreement with TDR Capital. The initial sale and purchase was comprised of a $550,000 convertible note and detached warrants to acquire up to 2,180,750 shares in MTI stock (169,764 MAI warrants). The second sale and purchase was comprised of a $6,050,000 convertible note and detached warrants to acquire up to 23,988,500 shares in MTI stock (1,867,423 MAI warrants). The series of funding began October 5, 2021 and ended on 11/5/2021, the aggregate

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

funds received was $5.44 million, net of OID of 10% or $0.61 million. Refer to Note 5, Debt and Note 19, Subsequent Events.

Equity Financing

On May 7, 2021, MTI executed a $20,000,000 equity purchase agreement with the Acuitas Group Holdings, who committed to purchase shares of the MAI Series C Preferred Stock at a price of $8.84 per share. Upon NASDAQ uplifting and trading volume of stock, this equity will commence funding. On November 4, 2021, Acuitas Group Holdings wired $20,000,000 to MTI before the merger effective date with Net Element that occurred on November 5, 2021. As part of the transaction, Acuitas Group Holdings received 5,915,639 warrants with an adjusted exercise price of $8.83 and matures in five years.

Cambria – Investment Banking Services Agreement

On July 16, 2021 and September 8, 2021, MTI agreed to a proposal with Cambria a placement agent services for investment offerings up to $3,000,000. As a result of the agreement, MTI is obligated to pay a financing fee of 6.0% of aggregate gross proceeds and warrants equal to 6.0% of the offering. To date, Cambria has raised $750,000 in equity financing. The equity purchases of Series C Preferred Stock have detached warrants with strike price of $8.84. The warrants have a five-year maturity. Since the Series C Preferred Stock has not been issued to the investor due to pending merger between MAI and Net Element, the transaction is being accounted for within the prepaid account and the liability for to issue shares on the balance sheet.

Table below represents the post-merger shares for equity capitalization. As of September 30, 2021, there was no issuances of Series C preferred Stock and associated warrants.

Date

    

Series C Preferred Stock

    

Warrants

    

Additional Warrants

    

Maturity Date

    

Exercise Price

7/23/2021

$

75,000

1,983

7/23/2026

$

8.84

7/23/2021

50,000

1,322

7/23/2026

$

8.84

7/23/2021

 

100,000

 

2,644

 

 

7/23/2026

$

8.84

7/23/2021

 

75,000

 

1,983

 

 

7/23/2026

$

8.84

7/23/2021

 

 

1,528

*

3,056

*

7/23/2026

$

8.84

9/8/2021

 

175,000

 

4,626

 

 

9/8/2026

$

8.84

9/8/2021

 

175,000

 

4,626

 

 

9/8/2026

$

8.84

9/8/2021

 

100,000

 

2,644

 

 

9/8/2026

$

8.84

Total

$

750,000

 

21,356

 

3,056

 

 

Represents placement agent fees to Cambria.

Drawbridge Acknowledgement, Waiver and Consent

On July 16, 2021, MTI and Drawbridge entered into an agreement whereby Drawbridge acknowledged, waived, and consented to the contribution and spin-off of Mullen’s EV assets into a new entity. As indicated in Note 1 to the financial statements, the spin-off occurred occur immediately prior to the merger with Net Element. As part of the agreement, Drawbridge was paid $10,000,000 that was applied towards the outstanding principal balance and includes a waiver of default. The principal reduction to the indebtedness to Drawbridge occurred on November 15, 2021.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

International Business Machines (“IBM”)

We previously recorded a $4.5 million liability associated with a lawsuit with IBM, in which IBM contended that we had not fulfilled our obligations pursuant to a contract entered into during 2017. On April 28, 2020, the Supreme Court of the State of New York granted summary judgment in favor of IBM’s claim for breach of contract. The Court, however, found that a trial (inquest) was required to determine the damages to which IBM is entitled. We proposed an offer in settlement to resolve the matter, with the parties proceeding under the Joint Development and Technology License Agreement and all rights restored to us under the Trademark License Agreement. On December 1, 2021, the Supreme Court of the State of New York entered a judgment of $5.6 million to IBM. On December 2, 2021, we filed a Notice of Appeal. As a result, we recorded an additional charge, increasing the liability to the adjudicated amount.

Federal and State Tax Liabilities

We have recorded a $3.8 million liability at September 30, 2021 associated with past due amounts owed to the Internal Revenue Service (“IRS”) and the Employment Development Department of California (“EDD”) for failing to remit payroll taxes associated with MTI and the Company’s employees.

The IRS has filed a lien on substantially all of our assets. On April 28, 2021, MTI entered into an installment agreement with the EDD to pay $10,000 per month related to unpaid state payroll tax liabilities of $388,352 plus accrued interest. Monthly payments of $10,000 are being made and will continue until paid in full.

Raymond James and Associates (“RJA”) – Investment Banking Services Agreement

On May 5, 2020, MTI entered into an agreement with Raymond James & Associates for public offering and placement agent services. The agreement called for payment of a cash retainer of $50,000, which remains unpaid. Upon the closing of any public offering, regardless of whether RJA procured the agreement regarding the offering, we are obligated to pay a financing fee of equal to the greater of a) 6.0% of aggregate gross proceeds and b) $3,000,000.

Linghang Boao Group, LTD

In November 2019, we entered into a three-year Strategic Cooperation Agreement (“SCA”) with Linghang Boao Group LTD to co-develop a Solid- State Battery Management system with a 480 - 720-mile Driving Range. The Company’s total financial commitment under the SCA is $2,196,000. On December 3, 2019, we paid the first installment of $390,000. The remaining installments are payable upon the earlier of certain dates or the achievement of defined milestones.

The contractual target dates and milestones have been severely disrupted due to the occurrence COVID-19. As a result, our management believes the COVID-19 pandemic represents a Force Majeure event (that is, the pandemic has impacted our and Linghang Boao Group LTD’s ability to meet their respective contractual obligations due to restriction in movement, stoppage of production, increase in costs due to scarcity of raw materials components, labor shortages, shortage of funds, disruption in the supply chains, U.S. governmental closures of ports/borders and travel restrictions). Based on the foregoing, we believe there is no breach of contract due to our failure of performance. Unfortunately, we have sustained a loss of $390,000 at September 30, 2020 due to contract nonperformance and force majeure. There are no accrued liabilities recorded for any remaining milestone payments at September 30, 2021.

Our management has notified Linghang Boao Group of the decision to invoke the force majeure provision of the Strategic Cooperation Agreement due to the inability of the parties to perform caused by the global Pandemic.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ASC GEM Equity Line Financing

On January 4, 2021, MTI entered into a $350,000,000 equity line financing agreement with GEM Global Yield LLC (“Purchaser”) and GEM Yield Bahamas Limited (“GEM”). MAI plans to issue and sell common shares to GEM up to the number of common shares having an aggregate value of $350,000,000. The Purchaser will buy MAI shares based on the operational needs and/or drawdowns of the Company. If the aggregate limit has been reached, the Purchaser will increase the aggregate limit in an amount up to $150,000,000. The commitment fee, equal to 2% of the Aggregate Limit, will be charged for each draw-down. The fee may be paid in cash or freely tradeable common shares of the Company. The commitment begins when we effect the public listing of MAI common stock for trading on a U.S. national securities exchange. The agreement matures in 36 months after the public listing of MAI common shares.

Pursuant to the GEM Agreement, the commitment began on the “Public Listing Date”, defined as the date that we effected (i) a “Reverse Merger Transaction” (defined in the GEM Agreement as a reverse merger of a similar transaction between MAI and a special purpose acquisition company whose securities are publicly traded) or (ii) the direct listing of the Company’s common stock on a public market. Further to the GEM Agreement, we are obligated to issue warrants providing GEM the right to purchase up to 6.6% of our common shares outstanding on the Public Listing Date. As the Company is not effecting a Reverse Merger Transaction (that is, Net Element is not a special purpose acquisition company) nor is the Company effecting a direct listing of its common shares, the Company does not believe it is obligated under the GEM Agreement to pay fees nor issue warrants to GEM. In addition, the Company has agreed with a lender of its convertible promissory notes that the Company would not initiate utilization of the GEM Agreement. [HELP ME UNDERSTAND THIS – THE REVERSE MERGER INTO NET ELEMENT DID OCCUR. SO, IS THIS AGREEMENT STILL VALID?  NEED TO DISCLOSE THE PROPER RIGHTS AND OBLIGATIONS]

Litigation

On May 28, 2021, a Net Element shareholder filed a complaint against Net Element and Mullen Acquisition, Inc. and certain named individuals regarding the proposed merger transaction. The complaint alleges, among other things, a potential dilution of the value of Net Elements stock and a failure to act in with a fiduciary duty to its stakeholders.

On September 3, 2021, a Net Element shareholder filed a lawsuit against Net Element, Mullen Technologies, Inc. and Mullen Acquisition, Inc. and certain individuals regarding the proposed merger agreement. The lawsuit alleges material omissions regarding the merger transaction and seeks to prevent the consummation of the merger agreement, as well as certain other equitable relief.

Based upon information presently known to management, the Company believes that the potential liability from the May 2021 complaint and September 2021 lawsuit, if any, will not have a material adverse effect on its financial condition, cash flows or results of operations. Therefore, no liability has been reflected on the financial statements.

Odyssey Group Settlement

On August 13, 2021, MTI and Odyssey Group reached a settlement concerning disputes and differences that arose from collections on invoices and liens pending pursuant to Odyssey’s Client Account and the Odyssey Group Consulting Agreement. Odyssey alleged that the MTI owed $503,637 at March 31, 2021. The parties agreed that Odyssey would receive $50,000 and 500,000 shares of MTI common stock (pre-merger). Additionally, Odyssey will receive an equivalent of $10,000 in cash or common stock from Mullen. The obligation to pay Odyssey may be terminated by either party upon 30-days’ notice by either party. A release of liability for the amounts owed on the Consulting arrangement was signed and executed on the settlement date. The Company has issued Odyssey the 500,000 common shares worth $1.25 million and paid $50,000 in cash and common stock. The $10,000 in cash or common stock provision has not been terminated by either party.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18 – RELATED PARTY TRANSACTIONS

At September 30, 2021 and September 30, 2020, respectively, the Drawbridge Investments, LLC relationship comprised various loans and advances, common shares, and preferred shares.

The Drawbridge loans are currently in default. The Common and Preferred Shares presented are shares in MTI that have been issued by MTI.

Drawbridge Related Transactions

(Cumulative)

September 30, 2021

September 30, 2020

Description

    

Loan Principal

    

# of Shares

    

FV of Shares

    

Loan Principal

    

# of Shares

    

FV of Shares

Various Notes

$

23,831,554

 

$

$

23,831,554

 

$

Common Shares

 

 

1,378,274

 

14,730,560

 

 

1,378,274

 

14,730,560

Preferred Shares - Series A

 

 

2,335

 

2,496,000

 

 

2,335

 

2,496,000

Preferred Shares - Series B

 

 

5,567,319

 

59,501,756

 

 

5,567,319

 

59,501,756

Total Related Party Transactions

$

23,831,554

 

6,947,929

$

76,728,316

$

23,831,554

 

6,947,929

$

76,728,316

*Shares are MTI common and preferred shares.

The default interest rate on the Drawbridge loans is 28% per annum, and accrued interest is $9,465,094 at September 30, 2021.

Chief Executive Officer Loans to MTI

From time to time, the Company’s CEO provides loans to the Company. The outstanding balances for these loans at September 30, 2021, and September 30, 2020, are $479,914 and $236,565, respectively. Subsequent to September 30, 2021, the Company repaid their outstanding loan balance.

William Miltner

William Miltner is a litigation attorney who provides legal services to Mullen Technologies and its subsidiaries. Mr. Miltner also is an elected Director for MAI, beginning his term in August 2021. For the fiscal year ending September 30, 2021, Mr. Miltner received $901,398 for services rendered to us. Net billings were $890,484. Mr. Miltner has been providing legal services to us since 2020.

Equity Warrants (EXCHANGE AGREEMENT and EQUITY WARRANTS)

During 2020 and 2021, as part of the planned merger with Net Element, we entered into an Exchange Agreement and subsequent amendments with certain holders of convertible debt as an incentive to convert their convertible debt into shares of our series C preferred stock. In connection with this agreement, the Company issued warrants to these investors, which represents a share-based equity incentive (“Series Preferred C Investors”). Series C Preferred Investors also purchased Series Preferred C Stock with detached warrants. The warrants have a fixed and determinable price of $8.84 per common share. The fair value of the MAI warrants is $13.7 million as of September 30, 2021.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – SUBSEQUENT EVENTS

Company management has evaluated subsequent events through December [XX], 2021, which is the date these financial statements were available to be issued. Except as discussed below, management has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the carve-out financial statements:

Business Combination and Recapitalization

On November 5, 2021, the Company consummated the merger with Net Element. At the effective time of the Merger, the common and preferred equity interests held by our then investors were cancelled, and the investors received their respective shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock in Net Element, Inc. (which was renamed Mullen Automotive, Inc.)

Prior to the Merger, Net Element, Inc. transferred its assets and liabilities to RBL Capital Group LLC (“RBL”) in full satisfaction of the outstanding loan balance owed to RBL by Net Element and its subsidiary or affiliated entities pursuant to a Divestiture Agreement, dated July 20, 2021, which was filed with the Registration Statement. Pursuant to ASC 805, for financial accounting and reporting purposes, Mullen Automotive, Inc. was deemed the accounting acquirer and Net Element was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse merger transaction.

Debt and Equity Financing

Exchange Agreement (Convertible Debt to Equity Conversion)

On October 25, 2021, MTI amended the exchange agreement to include the $1,100,000 debt financing and detached warrants with JADR Consulting Group PTY Limited. The agreement represents Amendment No. 6 and Joinder to the Exchange Agreement that was originally signed on May 7, 2021 and amended on May 20, 2021. Upon consummation of the proposed merger with Net Element, the investors agreed to exchange the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share. The right to additional purchases of preferred stock expires 12 months from the merger close date between Net Element and MAI.

Assignment and Assumption of Rights

On October 25, 2021, JADR Consulting Group PTY Limited and TDR Capital entered into agreement of Assignment and Assumption of Rights. On September 3, 2021, the Assignor (“TDR Capital”) agreed to purchase $6,600,000 in convertible debt and warrants to acquire 2,037,164 shares of MAI common stock. The Assignor has agreed with the Assignee (“JADR Consulting Group PTY Limited”) to assign al rights, title and interest in the aggregate original amount of $3,300,000 and warrants to acquire 1,201,521 shares of MTI common stock for the aggregate purchase price of $3,000,000. The funding would occur between October 27, 2021 and November 4, 2021.

On October 27, 2021, Amendment No. 6 and Joinder to the Exchange Agreement was modified to reflect the changes of the Assignment and Assumption of Rights document.

Convertible Debt Issuances and Warrants

On November 4, 2021, we received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with JADR Consulting Group PTY Limited. The convertible note is issued at OID of 10% ($0.1 million); carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 417,375 shares of MAI common stock. The warrant exercise price is $8.84 per common share

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and expires five years from the date of issuance. The number of shares issuable upon conversion of the conversion amount is determined according to the formula:  Conversion Amount/Conversion Price, subject to certain adjustments. However, upon conversion, JADR Consulting Group PTY Limited (together with its affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding, after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On November 4, 2021, the Company received debt financing through MTI entering into an unsecured $110K convertible note agreement with Michael Friedlander. The convertible note is issued with OID of 10% or $10K; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 30,872 shares of MAI common stock. The warrant exercise price is $8.84 per common share and expires five years from the date of issuance. The number of conversions shares issuable upon conversion of the conversion amount shall be determined according to the formula:  Conversion Amount/Conversion Price , subject to certain adjustments. However, upon conversion, Michael Friedlander (together with his affiliates) is limited to a 9.9% ownership cap in shares of MTI’s common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

    

    

Default

    

    

    

    

    

Date of

Convertible

Interest

Interest

Maturity

Warrants

Additional

Exercise

Exercise

Issuance

Note ($)

Rate

Rate

Date

(#)

Warrants

Date

Price ($)

10/27/2021

$

550,000

*

15

%  

20

%  

10/27/2022

 

208,687

 

27,246

 

10/27/2026

$

8.84

10/27/2021

 

 

 

 

 

 

116,770

 

10/27/2026

$

8.84

10/27/2021

 

1,100,000

 

15

%  

20

%  

10/27/2022

 

417,375

 

 

10/27/2026

$

8.84

11/4/2021

 

2,750,000

*

15

%  

20

%  

11/4/2022

 

848,818

 

 

11/4/2021

$

8.84

11/4/2021

 

110,000

 

15

%  

20

%  

11/4/2022

 

30,872

 

 

11/4/2026

$

8.84

Total

$

4,510,000

 

 

 

 

1,478,752

 

144,016

 

 

*Assumption and assignment of $3,300,000 in convertible debt and warrants, which included 144,016 in additional warrants.

$30M common stock purchase

On September 1, 2021, MAI (through MTI) and Esousa Holdings, LLC entered into a Securities Purchase Agreement, whereby the Esousa Holdings, LLC committed to purchase up to an aggregate of $30,000,000 common shares over a twelve-month period. The number of shares purchased is based on a set of conditions. The number of common shares is calculated by multiplying 125% by $2,500,000 and then dividing by the closing sale price for the trading day immediately after the last closing trade price for MAI securities reported on the principal securities exchange or trading market is listed or trading. The initial closing date is based on the close of the reverse merger transaction with Net Element, which occurred on November 5, 2021. The Company must file a SEC registration statement covering the sale of the Registrable securities by MAI and be declared effective before the purchases of common stock commences. Lastly, the agreement contains a provisions that the purchase of common stock can vary based on an adjustment of upward or downward based on closing price calculation that must be calculated each month.

$15M Note Receivable Transaction

Securities Purchase Agreement

On October 8, 2021, MAI (through MTI) and CEOcast, Inc. entered into an agreement, whereby CEOCast, Inc. irrevocably committed to purchase, and MAI irrevocably committed to sell $15 million in warrants to acquire shares of common stock. The aggregate purchase price will be paid to MTI at closing by means of a full recourse promissory note. MAI will issue warrants that are registered in the name of CEOcast, Inc.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Promissory Note

On October 8, 2021, CEOcast, Inc. committed to pay to MAI (through MTI) in the principal amount of $15 million. The note receivable bears no interest, and the payment of principal will be made in 6 equal monthly installments beginning on the first business day of the calendar month after warrants.

Pre-Funded Common Stock Warrants (Penny Warrants)

On October 8, 2021, CEOcast, Inc. is entitled to receive warrants (this “Warrant”) issued by the Company in connection with the note receivable transaction contemplated within the Securities Purchase Agreement. The warrant structure is pre-funded, meaning that it allows MTI to receive the exercise price of a not pre-funded warrant, except for the nominal exercise price, at the time of warrant issuance rather than the time of exercise. The aggregate exercise price of the warrant is $0.001 per warrant share. The number of common shares is calculated by multiplying 125% by $2,500,000 and then dividing by the closing sale price for the trading day immediately after the sale price for the trading day immediately after the last closing trade price for MAI securities reported on the principal securities exchange or trading market is listed or trading. The initial closing date is based on the close of the reverse merger transaction with Net Element, which occurred on November 5, 2021. We are obligated to file a registration statement with the SEC covering the sale of the Registrable securities by MAI, which would be declared effective before commencement of the purchases of common stock.

Equity Swap Agreement

On October 8, 2021, the agreement was entered into between CEOcast, Inc. and MAI (through MTI) for the purposes of adjusting the number of warrant shares initially issued to CEOcast, Inc. The readjustment of shares will coincide with the schedule outlined within the Equity Swap Agreement. The schedule is to perform the warrant share calculation on the first business day of each month for the next six months beginning after the effective date of the reverse merger and the registration of common shares.

Drawbridge Acknowledgement, Waiver and Consent

On July 16, 2021, the Company and Drawbridge entered into an agreement whereby Drawbridge acknowledged, waived, and consented to the contribution and spin-off of Mullen’s EV assets into a new entity. As indicated in Note 1 to the financial statements, the spin-off occurred immediately prior to the consummation of the merger with Net Element. As part of the agreement, Drawbridge was paid $10,000,000, to be applied towards the outstanding principal balance and includes a waiver of default. The principal pay down to Drawbridge occurred on November 15, 2021.

Release of Liability, Debt Paydowns and Payoffs

On December 27, 2021, the Par Funding/CBSG debt of $78,904 has been satisfied and is longer a viable debt and should be removed from the books as a liability. The determination was made by Daniel Stermer, authorized agent for the United States Trustee.

On November 29, 2021, MAI (through MTI) repaid the $140,000 loan from the NY Group, which had matured on January 24, 2021.

On November 29, 2021, MAI (through MTI) repaid the $25,000 loan from MABM Holdings loan, which matured on January 13, 2021.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 11, 2021, the Company executed a release of liability for the EXIM relationship. MAI (through MTI) paid $1,750,000 to EXIM USA to dismiss or release any and all claims, causes of action, lawsuits or other demands upon MTI. The loan matured on October 31, 2019, and the then current balance on the loan was $700,000 plus interest.

On November 9, 2021, the Company executed a release of liability for the Elegant Funding relationship. The lending relationship covered two transactions:

1. $458,000 loan dated May 23, 2018, which had matured on November 23, 2018. The current principal balance was $438,000, and the payoff amount was $604,770.
2. $185,000 dated September 29, 2018, which had matured on March 29, 2019. The current principal balance is $185,000, and the payoff amount is $222,426.

On November 9, 2021, MAI (through MTI) repaid a loan from John Gordon, which had matured on May 7, 2019. In consideration for the payoff, MAI (through MTI) received the title to one (1) Qiantu Dragonfly K50 EV car.

Tunica, MS Production Facility – Purchase

On November 12, 2021, Mullen completed the $12,000,000 purchase of the Tunica County, MS property (“Advanced Manufacturing and Engineering Center” or “AMEC”). The property is approximately 127,400sf EV manufacturing facility and a small shed for storage. The property is located at 1 Greentech Drive, in the City of Robinsonville, MS. AMEC will be used to class 1 and class 2 EV cargo vans and the Mullen FIVE Crossover. The facility currently occupies 124,000 square feet of manufacturing space. The total available land on the property is over 100 acres. On the expanded site, Mullen plans to build a body shop, fully automated paint shop and a general assembly shop.

Show Car Development

On November 17, 2021, MAI debuted the Mullen FIVE Crossover at the LA Auto Show and was awarded Top SUV Zero Emission Vehicle. Mullen had two variants of the FIVE model on display while also showcasing powertrain, battery and charging technology. The cost of the two cars was approximately $4.1 million.

Employment Agreements

On November 5, 2021, MAI assumed liabilities, including employment agreements, from MTI as part of the reverse merger transaction with Net Element.

On November 15, 2021, MTI entered into an employment agreement with Shawn Hughes as the President of OEM Franchising of MAI. According to the employment agreement, he will receive an annual salary of $240,000 and 100,000 shares per year.

On October 25, 2021, MTI entered into an employment agreement with Kerri Sadler as the Chief Financial Officer of MAI. According to the employment agreement, she will receive an annual salary of $350,000 and 300,000 shares per year.

On September 14, 2021, MTI entered into an employment agreement with Jillian Green as the Vice President of Business and Legal Affairs of MAI. According to the employment agreement, she will receive an annual salary of $300,000 and 30,000 shares per year.

On July 1, 2021, MTI entered into an employment agreement with Jerry Alban as the Chief Operating Officer of MAI. According to the employment agreement, he will receive an annual salary of $350,000 and 300,000 shares per year.

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MULLEN AUTOMOTIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consulting Agreements

On October 26, 2021, MAI entered into a consulting agreement with Mary Winters, Corporate Secretary and Director, to compensate for Corporate Secretary Services and director responsibilities for the period of October 1, 2021, for one fiscal year ending September 30, 2022, in the amount of $60,000 annually or $5,000 per month.

On January 1, 2021, MAI entered into a consulting agreement with Connection Management to perform services in the following areas: creation and implementation of a marketing plan to the independent auto dealer community, consult in the areas of auto finance, and aftermarket product development, target marketing promotions within the auto reseller community. The agreement was signed by the Company and Shawn Hughes, who is the principal for Connection Management. The consulting contract was terminated on November 15, 2021, when Mr. Hughes became an employee of MAI.

Director Fees

Our board of directors adopted a non-employee director compensation policy, which we expect will became effective in August 2021. Under the non-employee director compensation policy, our non-employee directors are expected to be eligible to receive compensation for service on our board of directors and committees of our board of directors as follows:

Each non-employee director is entitled to receive $25,000 annually as a cash retainer for their board service, with additional annual cash retainers of (i) $2,000 for each member of our compensation committee or nominating and governance committee; (ii) $5,000 for the chairman of our compensation committee or nominating and governance committee; (iii) $8,000 for each member of our audit committee; and (iv) $45,000 for the chairman of our audit committee. All cash retainers are paid quarterly in arrears.
Additionally, each non-employee director shall receive an annual stock option award under the 2021 Plan to purchase such number of shares of our Class A common stock that will equal $75,000 divided by the closing trading price of our Class A common stock on the date of each such grant, which will vest one year from the date of grant. Upon the occurrence of certain corporate events, including a change of control of the Company, all such stock option awards will immediately vest. The initial annual stock option award will be awarded to each of our non-employee directors in connection with the S-8 registration statement which will be filed in December 2021.

Our non-employee directors are entitled to reimbursement of ordinary, necessary and reasonable out-of-pocket travel expenses incurred in connection with attending in-person meetings of our board of directors or committees thereof. In the event our non-employee directors are required to attend greater than four in-person meetings or 12 telephonic meetings during any fiscal year, such non-employee directors shall be entitled to additional compensation in the amount of $500 for each additional telephonic meeting beyond the 12 telephonic meeting thresholds, and $1,000 for each additional in-person meeting beyond the four in-person meeting threshold.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Mullen Automotive Inc.

December 29, 2021

By:

/s/ David Michery

David Michery

Chief Executive Officer, President and Chairman of the Board

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each of Mullen Automotive Inc., a Delaware corporation (the “Company”), and the undersigned Directors and Officers of Mullen Automotive Inc. hereby constitute and appoint David Michery and Kerri Sadler as the Company’s or such Director’s or Officer’s true and lawful attorneys-in-fact and agents, for the Company or such Director or Officer and in the Company’s or such Director’s or Officer’s name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this report, and to file each such amendment to this report, with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Company or such Director or Officer might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ David Michery

Chief Executive Officer, President and

December 29, 2021

David Michery

Chairman of the Board

(Principal Executive Officer)

/s/ Kerri Sadler

Chief Financial Officer

December 29, 2021

Kerri Sadler

(Principal Financial and Accounting Officer)

/s/ Jerry Alban

Chief Operating Officer and Director

December 29, 2021

Jerry Alban

/s/ Mary Winter

Secretary and Director

December 29, 2021

Mary Winter

/s/ Kent Puckett

Director

December 29, 2021

Kent Puckett

/s/ Mark Betor

Director

December 29, 2021

Mark Betor

/s/ William Miltner

Director

December 29, 2021

William Miltner

/s/ Jonathan New

Director

December 29, 2021

Jonathan New

72

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73

Exhibit 2.1(c)

AGREEMENT OF MERGER

Merging

MULLEN ACQUISITION, INC.

with and into

MULLEN AUTOMOTIVE INC.

This Agreement of Merger is entered into by and between MULLEN AUTOMOTIVE INC., a California corporation (the "Surviving Corporation"), MULLEN ACQUISITION, INC., a California corporation (the "Merging Corporation"), and NET ELEMENT, INC., a Delaware corporation ("Parent").

1.

Surviving Corporation is a California corporation organized on May 14, 2021, corporation number C4158411.

2.

Surviving Corporation’s issued and outstanding shares total (i) 67,860,246 shares of common stock ("Surviving Corporation Common Stock"), (ii) 1,500,250 shares of Series A preferred stock ("Surviving Corporation Series A Preferred Stock"), (iii) 71,516,534 shares of Series B preferred stock ("Surviving Corporation Series B Preferred Stock"), and no shares of Series C preferred stock (and ("Surviving Corporation Series C Preferred Stock" and collectively all such shares are referred to herein as "Surviving Corporation Securities").

3.

Merging Corporation is a California corporation, organized on August 3, 2020, corporation number C4622774.

4.

Merging Corporation has one (1) share of common stock ("Merging Corporation Common Stock") issued and outstanding.

5.

Parent is a Delaware corporation organized on October 2, 2012.

6.

At the Effective Time (as defined below), Merging Corporation shall be merged with and into Surviving Corporation (the "Merger") and Surviving Corporation shall become a wholly-owned subsidiary of Parent.

7.

At the Effective Time, as a result of the Merger and without any action on the part of Surviving Corporation, Merging Corporation or Parent, each share of Merging Corporation Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of Surviving Corporation Common Stock and no consideration shall be paid therefor.

8.

At the Effective Time, as a result of the Merger and without any action on the part of Surviving Corporation, Merging Corporation or Parent, each share of Surviving Corporation Common Stock, each share of Surviving Corporation Series A Preferred


Stock, each share of Surviving Corporation Series B Preferred Stock, and each share of Surviving Corporation Series C Preferred Stock issued and outstanding immediately prior to the Effective Time shall be cancelled and converted into the right to a number of shares of Parent Common Stock, Parent Series A Preferred Stock, Parent Series B Preferred Stock, and Parent Series C Preferred Stock, determined in accordance with that certain Second Amended and Restated Agreement and Plan of Merger, dated as of July 20, 2021, by and among Surviving Corporation, Merging Corporation, Parent, and Mullen Technologies, Inc., a California corporation, as the same may be further amended, restated, or modified from time to time. All Surviving Corporation Securities, when so cancelled and converted, will be retired and cease to exist and each holder thereof shall cease to have any rights with respect thereto.

9.

At the Effective Time, the articles of incorporation (the "Articles") of Surviving Corporation shall be shall be restated to read as set forth in Exhibit A hereto.

The Articles as so amended shall be the Articles of Surviving Corporation until thereafter amended as provided by applicable law.

10.

The bylaws of Surviving Corporation, as in effect immediately prior to the Effective Time, shall continue to be the bylaws of Surviving Corporation (other than changing the name therein to "Ottava Automotive, Inc.") until thereafter changed or amended as provided by the Articles or the bylaws of Surviving Corporation or by applicable law.

11.

At the Effective Time, as a result of the Merger and without any action on the part of Surviving Corporation, Merging Corporation or Parent, all shares of Merging Corporation Common Stock will be cancelled and retired without any consideration whatsoever therefor.

12.

At the Effective Time, the separate existence of Merging Corporation shall cease and all of the property, rights, privileges, immunities, powers, franchises, licenses and authority of each of Surviving Corporation and Merging Corporation shall vest in the Surviving Corporation, and all debts, restrictions, duties and other liabilities of each of Surviving Corporation and Merging Corporation shall become the debts, restrictions, duties and other liabilities of the Surviving Corporation.

13.

Merging Corporation shall from time to time, as and when requested by Surviving Corporation, execute and deliver all such documents and instruments and take all such action necessary or desirable to evidence or carry out the Merger.

14.

The effect of the Merger is as prescribed by law.

15.

The Merger shall be effective as of 12:01am Pacific Time on November 5, 2021 (the "Effective Time").

[Signature page follows.]


IN WITNESS WHEREOF the parties have executed this Agreement of Merger as of the _3rd_ day of November, 2021.

SURVIVING CORPORATION

Mullen Automotive Inc.

By:

/s/ David Michery

David Michery, Chief Executive Officer

By:

/s/ Mary Winter

Mary Winter, Secretary

MERGING CORPORATION

Mullen Acquisition, Inc.

By:

/s/ Oleg Firer

Oleg Firer, Chief Executive Officer

By:

/s/ Oleg Firer

Oleg Firer, Secretary

PARENT

Net Element, Inc.

By:

/s/ Oleg Firer

Oleg Firer, Chief Executive Officer

By:

/s/ Steven Wolberg

Steven Wolberg, Secretary


EXHIBIT A

RESTATED ARTICLES OF INCORPORATION

OF

MULLEN AUTOMOTIVE, INC.

ONEThe name of the corporation is OTTAVA AUTOMOTIVE, INC.

TWOThis corporation is authorized to issue one class of shares of capital stock, designated "Common Stock" of which this corporation is authorized to issue a total of one hundred (100) shares.

THREEThe purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

FOURThe liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. If the California General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this corporation shall be eliminated or limited to the fullest extent permitted by the California General Corporation Law, as so amended. Any repeal or modification of this provision shall not adversely affect any right or protection of a director of this corporation existing at the time of such repeal or modification.

FIVEThis corporation is authorized to indemnify the directors and officers of this corporation to the fullest extent permissible under California law. Any repeal or modification of this provision shall not adversely affect any right or protection of a director of this corporation existing at the time of such repeal or modification.


Certificate of Approval

of

Agreement of Merger

David Michery and Mary Winter hereby certify that:

1.

They are the chief executive officer and secretary, respectively, of Mullen Automotive Inc. ("Mullen Automotive"). Mullen Automotive is a California corporation, number C4158411.

2.

The board of directors of Mullen Automotive duly approved the principal terms of the Agreement of Merger in the form submitted herewith.

3.

Mullen Automotive has four classes of authorized shares of which three classes were entitled to vote on the merger as of the record date of September 7, 2021 (the "Record Date"). The number of shares of Common Stock issued and outstanding and entitled to vote on the merger totaled 67,860,246 shares. The number of shares of Series A Preferred Stock issued and outstanding and entitled to vote on the merger totaled 1,500,250 shares. The number of shares of Series B Preferred Stock issued and outstanding and entitled to vote on the merger totaled 71,516,534 shares. Mullen Automotive had no shares of Series C Preferred Stock issued and outstanding as of the Record Date and therefore, no shares of Series C Preferred Stock were entitled to vote on the merger.

4.

Shareholders duly approved the principal terms of the Agreement of Merger by the affirmative vote of (i) 55% of the outstanding shares of Common Stock, (ii) 100% of the outstanding shares of Series A Preferred Stock, and (iii) 100% of the outstanding shares of Series B Preferred Stock the corporation, which equaled or exceeded the vote required. No shares of Series C Preferred Stock were issued and outstanding as of the Record Date.

[Signature page follows.]


We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate of Approval of Mullen Automotive Inc. are true and correct of our own knowledge.

Dated this _3rd_ day of November, 2021.

/s/ David Michery

David Michery

Chief Executive Officer

/s/ Mary Winter

Mary Winter

Secretary


Certificate of Approval

of

Agreement of Merger

Oleg Firer and Steven Wolberg hereby certify that:

1.

He is the chief executive officer and secretary of Mullen Acquisition, Inc. ("Merger Sub"). The Company is a California corporation, number C4622774.

2.

The board of directors of the corporation duly approved the principal terms of the Agreement of Merger in the form submitted herewith.

3.

Merger Sub has only one class of shares issued and outstanding and entitled to vote on the merger. The number of such shares totaled one (1) share of common stock.

4.

The sole shareholder duly approved the principal terms of the Agreement of Merger by the affirmative vote of 100% of the outstanding shares of the corporation, which equaled or exceeded the vote required.

I further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of my own knowledge.

Dated this 3rd day of November, 2021.

/s/ Oleg Firer

Oleg Firer

Chief Executive Officer

/s/ Oleg Firer

Oleg Firer

Secretary


Exhibit 4.1

Execution Version

WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), FROM REPUTABLE COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

MULLEN TECHNOLOGIES, INC.

WARRANT TO PURCHASE COMMON STOCK

Warrant No.: 0017

Date of Issuance: January 7, 2021 (“Issuance Date”)

Mullen Technologies, Inc., a California corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Acuitas Capital, LLC, a Delaware limited liability company, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), 2,617,420 (subject to adjustment as provided herein), fully paid and non-assessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16. This Warrant is one of the Warrants to purchase Common Stock (the “SPA Warrants”) issued to Holder pursuant to that certain Securities Purchase Agreement, dated as of October 12, 2020, by and between the Company and the Holder (the “Securities Purchase Agreement”).


1.

EXERCISE OF WARRANT.

(a)Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (in respect of such specific exercise, the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate and issuance of a new Warrant certificate evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (the “Required Delivery Date”), the Company shall (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder and upon surrender hereof by the Holder at the principal office of the Company, the Company shall as soon as

2


practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

(b)Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.6877, subject to adjustment as provided herein.

(c)Company’s Failure to Timely Deliver Securities.  If the Company fails to issue and deliver (or cause to be delivered) to the Holder by the Required Delivery Date a certificate representing the Warrant Shares that is free from all restrictive and other legends or credit the balance account of Holder or Holder’s nominee with DTC for such number of Warrant Shares so delivered to the Company, then, in addition to all other remedies available to Holder, at the sole discretion of Holder, the Company shall:

(i)pay in cash to Holder on each Trading Day after the Required Delivery Date that the issuance or credit of such Warrant Shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to Holder or Holder’s nominee multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required Delivery Date; or

(ii)if on or after the Required Delivery Date, Holder (or any other Person in respect, or on behalf, of Holder) purchases (in an open market transaction or otherwise) Common Stock (“Replacement Shares”) to deliver in satisfaction of a sale by Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that Holder so anticipated receiving from the Company without any restrictive legend, then, within five (5) Trading Days after Holder’s request and in Holder’s sole discretion, either (A) pay cash to Holder in an amount equal to Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Replacement Shares (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit Holder’s balance account shall terminate and such shares shall be cancelled, or (B) promptly honor its obligation to so deliver to Holder a certificate or certificates or credit Holder’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (1) such number of shares of Common Stock that the Company was required to deliver to Holder by the Required Delivery Date multiplied by (2) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date Holder purchased Replacement Shares and ending on the date of such delivery and payment under this clause (ii).

3


To the extent permitted by law, the Company’s obligations to issue and deliver the Common Stock upon exercise of the Warrant in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of the Common Stock.  Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver the Common Stock issuable upon exercise of this Warrant as required pursuant to the terms hereof.

(d)Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below) at any time commencing sixty (60) days after the Issuance Date, the Holder may in its sole discretion (and without limiting the Holder’s rights and remedies contained herein or in any of the other Transaction Documents (as defined in the Securities Purchase Agreement)), exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

Net Number = (A x B) / C

For purposes of the foregoing formulas:

A=

The total number of shares with respect to which this Warrant is then being exercised.

B=

The Black Scholes Value (as defined in Section 16 herein).

C=

The Closing Bid Price of the Common Stock as of two (2) Trading Days prior to the time of such exercise (as such Closing Bid Price is defined in Section 16 herein), but in any event not less than $0.01(as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in Section 2(a) herein).

D=

The Exercise Price, as adjusted hereunder.

(e)Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof (including, without limitation, the Net Number), the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed, provided that following such issuance to Holder such dispute shall be resolved in accordance with Section 13.

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(f)Limitations on Exercises and Exchanges. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 9.9% of the number of shares of Common Stock outstanding after giving effect to the issuance of Common Stock issuable upon exercise of the Warrants calculated in accordance with Section 13(d) of the Exchange Act (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise or exchange this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability or exchangeability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into shares of Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Securities Purchase Agreement.

(g)Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued shares of Common Stock a number of shares of Common Stock equal to 200% of the maximum number of Warrant Shares issuable to satisfy the Company's obligations to issue shares of Common Stock hereunder, and the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock equal to 200% of the maximum number of Warrant Shares issuable to satisfy the Company’s obligation to issue shares of Common Stock hereunder.

(h)Activity Restrictions. For so long as Holder holds this Warrant or any Warrant Shares, Holder will not:  (i) engage or participate in any actions, plans or proposals which relate to or would result in (a) acquiring additional securities of the Company, alone or together with any other Person, which would result in beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.9% of the total outstanding shares of Common Stock or other voting securities of the Company, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Company, (c) a sale or transfer of a material

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amount of assets of the Company, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company’s business or corporate structure, including but not limited to, if the Company is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by Section 13 of the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any Person, (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant  to Section 12(g)(4) of the Act, or (j) any action, intention, plan or arrangement similar to any of those enumerated above, or (ii) request the Company or its directors, officers, employees, agents or representatives to amend or waive any provision of this Section 1(h); provided, however, that notwithstanding anything to the contrary contain in clauses (i) and (ii) above, Holder may vote any shares of Common Stock owned or controlled by it, solicit any proxies, or seek to advise or influence any Person with respect to any voting securities of the Company.  Holder may only exercise this Warrant for a cash exercise price if the trading price at the time of exercise is greater than the then applicable Exercise Price.

2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.

(a)Reverse Merger with Net Element. The Company shall not close or effect the Merger unless prior to effecting the Merger Net Element (as defined in the Securities Purchase Agreement) assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents related to this Warrant in accordance with the provisions of this Section 4(a) pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements confirming the obligations of Net Element as set forth in this Warrant and an obligation to deliver to the Holder in exchange for this Warrant a security of Net Element evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to the Merger, and with an exercise price which applies the Exercise Price hereunder to such shares of capital stock (but taking into account the relative value of the Common Stock pursuant to the Merger and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of the Merger).  Notwithstanding the foregoing, immediately after the effectiveness of the Merger, the shares of Net Element’s common stock issuable upon the exercise of this Warrant shall be the same percentage of shares of Net Element’s common stock on a fully diluted and fully converted basis (but excluding shares of Net Element’s common stock outstanding, or shares of common stock reissued pursuant to the Merger based on ownership of common stock outstanding, immediately prior to the Merger) (the “Post Merger Company Shares”) as the percentage of which the Warrant Shares are of the outstanding Common

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Stock on a fully diluted and fully converted basis immediately prior to the Merger (including conversion of the Drawbridge Note, the Convertible Note and this Warrant immediately prior to the Merger); provided, that it is intended that the Post-Merger Company Shares shall immediately after the Merger constitute approximately 85% of the shares of Net Element’s common stock on a fully diluted and fully converted basis.  In connection with the foregoing, there shall be a corresponding adjustment to the Exercise Price.

(b)Stock Dividends and Splits. Without limiting any provision of Section 4, if the Company, at any time on or after the date of the Securities Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

(c)Adjustment Upon Issuance of Common Stock.  If, during the Restricted Period (as defined in the Securities Purchase Agreement), the Company effects an Subsequent Financing (as defined in the Securities Purchase Agreement), or in accordance with this Section 2 is deemed to have effected an Subsequent Financing, any Common Stock (including the issuance or sale of Common Stock owned or held by or for the account of the Company) issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Exercise Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced (and in no event increased) to the price per share as determined in accordance with the following formula:

EP2 = EP1 x (A + B) / (A + C)

For purposes of the foregoing formula:

A=

The total number of Warrant Shares with respect to which this Warrant may be exercised.

B=

The total number of shares of Common Stock that would be issued or issuable under the Dilutive Issuance if issued at a per share equal to EP1.

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C=

The total number of shares of Common Stock actually issued or issuable under the Dilutive Issuance.

EP1=

The Exercise Price in effect immediately prior to a Dilutive Issuance.

EP2=

The Exercise Price immediately after such Dilutive Issuance; provided, however, that such price shall in no event be less than $0.01 per share of Common Stock  (as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in Section 2(a) herein, the “Floor Price”);

provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received the Floor Price for each such share so issued or deemed to be issued.  For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and consideration per share under this Section 2(b)), the following shall be applicable:

(i)Issuance of Options. If, during the Restricted Period, the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to (A) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option minus (B) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(ii)Issuance of Convertible Securities. If, during the Restricted Period, the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the

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purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to (A) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security minus (B) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issue or sale.

(iii)Change in Option Price or Rate of Conversion. If, during the Restricted Period, the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock increases or decreases at any time, the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.

(iv)Calculation of Consideration Received. If, during the Restricted Period, any Option or Convertible Security is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, (A) such Option or Convertible Security (as applicable) will be deemed to have been issued for consideration equal to the Black Scholes Value – Consideration thereof and (B) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (1) the aggregate consideration received by the Company, minus (2) the Black Scholes Value – Consideration of each such Option or Convertible Security (as applicable).  If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such

9


consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

(v)Record Date. If, during the Restricted Period, the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

(d)Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a), (b) or (c) of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).  In addition, and notwithstanding anything to the contrary contained herein, upon a Cashless Exercise as set forth in Section 1(d) hereof, the number of Warrant Shares for which this Warrant is exercisable immediately following such Cashless Exercise shall be equal to (i) the number of Warrant Shares for which this Warrant was exercisable immediately prior to such Cashless Exercise less (ii) the number of Warrant Shares as to which such Cashless Exercise was exercised (such number of Warrant Shares in this clause (ii) in respect of such Cashless Exercise being equal to “A” in such Cashless Exercise formula in respect of such Cashless Exercise) and the number of such Warrant Shares issuable hereunder shall automatically be adjusted, as necessary, to enable to the Company to comply with its obligations to issue the Net Number of shares of Common Stock under Section 1(d)(i) hereof upon any Cashless Exercise thereunder.

(e)Calculations. All calculations under this Section 2 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the

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account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f)Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(f) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

3.RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of Common Stock covered by Section 2(a)) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, provision shall be made so that upon exercise of this Warrant, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

4.

PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a)Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon

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complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

(b)Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents related to this Warrant in accordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements confirming the obligations of the Successor Entity as set forth in this paragraph (b) and (c) and elsewhere in this Warrant and an obligation to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction).  Notwithstanding the foregoing, at the election of the Holder upon exercise of this Warrant following a Fundamental Transaction, the Successor Entity shall deliver to the Holder, in lieu of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of common stock (or its equivalent) of the Successor Entity (including its Parent Entity), or other securities, cash, assets or other property, which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction; provided, however, that such amount of reserved shares of Common Stock shall be limited by the Maximum Percentage of Common Stock as set forth in Section 1(f).

(c)Black Scholes Value – FT. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (i) the public disclosure of any Fundamental Transaction, (ii) the consummation of any Fundamental Transaction and (iii) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction, the Company or the Successor Entity, at the election of the Holder, shall purchase this Warrant from the Holder on the date of the

12


consummation of such Fundamental Transaction by paying to the Holder cash in an amount equal to the Black Scholes Value – FT.

(d)Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any such subsequent warrants issued hereunder) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).

5.NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding; provided, however, that such amount of reserved Common Stock shall be limited by the Maximum Percentage of Common Stock as set forth in  Section 1(f).

6.WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.

7.REISSUANCE OF WARRANTS.

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(a)Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.  If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act.

(b)Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

(c)Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional share of Common Stock shall be given.

(d)Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

8.NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all

14


actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities, indebtedness, or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information (to the extent it constitutes, or contains, material, non-public information regarding the Company shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction.  It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

9.AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. The Holder shall be entitled, at its option, to the benefit of any amendment of any other similar warrant issued under the Securities Purchase Agreement. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

10.SEVERABILITY.  If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

11.GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accor­dance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the

15


jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

12.CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented to in writing by the Holder.

13.DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the arithmetic calculation of the Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder or the Company (as the case may be) learned of the circumstances giving rise to such dispute.  If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed arithmetic calculation of the Warrant Shares, the disputed determination of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Holder, with the consent of the Company (which may not be unreasonably withheld, conditioned or delayed), or (b) if acceptable to the Holder, the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error. The fees and expenses of such investment bank or accountant shall be borne by the parties in the same proportion as the respective amounts by which the investment bank’s or accountant’s determination differs from such party’s calculation.

16


14.REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

15.TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

16.

CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

(a)Bid Price” means, for any security as of the particular time of determination, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

17


(b)Black Scholes Value” means the Black Scholes value of an option for one share of Common Stock at the date of the applicable Cashless Exercise, as such Black Scholes value is determined, calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Exercise Price, as adjusted, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate, (iii) a strike price equal to the Exercise Price in effect at the time of the applicable Cashless Exercise, (iv) an expected volatility equal to 135%, and (v) a deemed remaining term of the Warrant of five (5) years (regardless of the actual remaining term of the Warrant).

(c)Black Scholes Value – Consideration” means the value of the applicable Option or Convertible Security (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option or Convertible Security (as the case may be) as of the date of issuance of such Option or Convertible Security (as the case may be) and (iii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option or Convertible Security (as the case may be).

(d)Black Scholes Value – FT” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (A) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the earliest to occur of (1) the public disclosure of the applicable Fundamental Transaction, (2) the consummation of the applicable Fundamental Transaction and (3) the date on which the Holder first became aware of the applicable Fundamental Transaction and ending on the Trading Day of the Holder’s request pursuant to Section 4(c) and (B) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (A) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (B) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable Fundamental Transaction and (iv) an expected volatility equal to the greater of 135% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

(e)Bloomberg” means Bloomberg, L.P.

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(f)Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

(g)Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and the last closing trade price, respectively, for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the average of the bid prices, or the ask prices, respectively, of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(h)Common Stock” means the common stock, no par value, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

(i)Convertible Securities” means any capital stock or other security of the Company that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock)..

(j)Drawbridge Note” means that secured convertible promissory note and security agreement dated July 23, 2020 in the principal amount of $23,831,553.98 issued by the Company to DBI Lease Buyback Servicing LLC.

(k)Eligible Market” means the New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market.

(l)Expiration Date” means the date that is January 7, 2026 or, if such date falls on a day other than a Business Day or on which trading does not take place on the principal securities exchange or trading market where the Common Stock is listed (a “Holiday”), the next date that is not a Holiday.

(m)Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving entity) any other Person unless the shareholders of the Company immediately prior to such consolidation or merger continue to hold more than 50% of the outstanding shares of Voting Stock after such consolidation or merger, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets to any other Person, in connection with which the Company is dissolved, or (3) allow any other

19


Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company; provide however that a Fundamental Transaction shall not include the Merger.

(n)Merger” means the reverse merger between Net Element, the Company and Mullen Acquisition, Inc., a wholly-owned subsidiary of Net Element, or any similar transaction between the Company and Net Element or a Subsidiary of Net Element.

(o)Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

(p)Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(q)Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(r)Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(s)Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is

20


otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

(t)Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

(u)VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the three highest closing bid prices and the three lowest closing ask prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

[signature page follows]

21


IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

MULLEN TECHNOLOGIES, INC.

By:

Name:

Title:


EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

MULLEN TECHNOLOGIES, INC.

The undersigned holder hereby exercises the right to purchase _________________ shares of the Common Stock (“Warrant Shares”) of Mullen Technologies, Inc., a California corporation (the “Company”), evidenced by Warrant to Purchase Common Stock No. _______ (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

____________

a “Cash Exercise” with respect to _________________ Warrant Shares; and/or

____________

a “Cashless Exercise” with respect to _______________ Warrant Shares.

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares, the Holder represents and warrants that ____________ Common Stock are to be delivered pursuant to such Cashless Exercise, as further specified in Annex A to this Exercise Notice.

2.Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

3.Delivery of Warrant Shares and Net Number of Common Stock.  The Company shall deliver to Holder, or its designee or agent as specified below, __________ Common Stock in respect of the exercise contemplated hereby.  Delivery shall be made to Holder, or for its benefit, to the following address:

_______________________

_______________________

_______________________

_______________________

Date: _______________ __, _______

______________________________

Name of Registered Holder


By:

Name:

Title:

Account Number:

  (if electronic book entry transfer)

Transaction Code Number:

  (if electronic book entry transfer)


ANNEX A TO EXERCISE NOTICE

CASHLESS EXERCISE EXCHANGE CALCULATION

TO BE FILLED IN BY THE REGISTERED HOLDER TO EXCHANGE THE

WARRANT TO PURCHASE COMMON STOCK IN A CASHLESS EXERCISE

PURSUANT TO SECTION 1(d) OF THE WARRANT

Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

[    ]  Net Number = (A x B)/C = ________________ shares of Common Stock

OR

[    ]  Net Number = (C - D) x A / C

For purposes of the foregoing formula:

A= the total number of shares with respect to which the Warrant is then being exercised = _________________.

B= Black Scholes Value (as defined in Section 16 of the Warrant) = ______________.

C= the Closing Bid Price of the Common Stock as of two (2) Trading Days prior to the time of such exercise (as such Closing Bid Price is defined in Section 16 of the Warrant) = ______________.

D= the Exercise Price, as adjusted hereunder = ___________.

Date: _______________ __, ______

Name of Registered Holder

By:

Name:

Title:


EXHIBIT B

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 20__, from the Company and acknowledged and agreed to by _______________.

MULLEN TECHNOLOGIES, INC.

By:

Name:

Title:


Exhibit 10.21

MULLEN TECHNOLOGIES, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made as of this 25th day of October 2021, by and between Kerri Sadler (“Employee”) and Mullen Technologies, Inc., a California corporation (the “Company”).

PREAMBLE

The Company desires to employ Employee as the Chief Financial Officer of the Company and to compensate Employee, therefore. Employee desires to be employed by the Company and to commit to serve the Company on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties, the parties agree as follows:

1.Definitions.

“Benefits” shall mean all the fringe benefits approved by the Board from time to time and established by the Company for the benefit of Employees generally, including, but not limited to, regular holidays, vacations, absences resulting from illness or accident, health insurance, disability and medical plans (including dental and prescription drug), group life insurance, and pension, profit-sharing and stock bonus plans or their equivalent.

“Board” shall mean the Board of Directors of the Company, together with an executive committee thereof (if any), as the same shall be constituted from time to time.

“Cause” shall mean (i) gross negligence in the performance of the material responsibilities of the Employee’s position, (ii) willful misconduct in the performance and discharge of the Employee’s material duties or that is otherwise materially injurious to the Company’s business, (iii) conviction of or a plea of no contest to a felony or Employee’s incapacity due to alcoholism or substance abuse, or (iv) a material and intentional breach by Employee of her principal obligations under this Agreement not remedied within fifteen (15) business days after receipt of written notice from the Company.

“Change of Control” shall mean the occurrence of one or more of the following four events:

·

A Reorganization; or

·

A sale of all or substantially all of the assets of the Company.

“Chairman” shall mean the individual designated by the Board from time to time as its chairman.

“Chief Executive Officer” shall mean the individual having responsibility

1


to the Board for direction and management of all operational affairs of the Company and who reports and is accountable only to the Board.

“Company” shall mean Mullen Technologies, Inc., a California corporation and any of its subsidiaries.

“Competitive Business Activity” shall mean the development, production, marketing and sale of vehicles.

“Director” shall mean the individual designated by the Board from time to time as a director of the Company.

“Disability” shall mean a written determination by an independent physician mutually agreeable to the Company and Employee (or, in the event of Employee’s total physical or mental disability, Employee’s legal representative) that Employee is physically or mentally unable to perform her duties of Chief Financial Officer under this Agreement and that such disability can reasonably be expected to continue for a period of six (6) consecutive months or for shorter periods aggregating one hundred and eighty (180) days in any twelve-(12)-month period.

“Exchange Act” shall mean the Securities Exchange Act of 1934.

“Employee” shall mean Kerri Sadler and, if the context requires, her heirs, personal representatives, and permitted successors and assigns.

“Performance Year” shall mean each twelve-month period of employment under this Agreement commencing upon the date of this Agreement.

“Person” shall mean any natural person, incorporated entity, limited or general partnership, limited liability company, business trust, association, agency (governmental or private), division, political sovereign, or subdivision or instrumentality, including those groups identified as “persons” in §§ 13(d)(3) and 14(d)(2) of the Exchange Act.

“President” shall mean the individual having responsibility to the Chief Executive Officer and Board for the day-to-day direction and management of the operational affairs of the Company and who reports and is accountable only to the Chief Executive Officer and Board.

“Chief Financial Officer” shall mean the individual having responsibility to the President, Chief Executive Officer and the Board for such financial and operational affairs of the Company as directed by the President, Chief Executive Officer and/or the Board, and who reports and is accountable only to the President, Chief Executive Officer and the Board.

“Reorganization” shall mean any transaction, or any series of transactions consummated in a 12-month period, pursuant to which any Person acquires (by merger, acquisition, or otherwise) all or substantially all of the assets of the Company or the then

2


outstanding equity securities of the Company and the Company is not the surviving entity, the Company being deemed surviving if and only if the majority of the Board of Directors of the ultimate parent of the surviving entity were directors of the Company prior to its organization.

“Territory” shall mean any state of the United States and any equivalent section or area of any country in which the Company has revenue-producing customers or activities.

2.Position and Responsibilities.

2.01Position. Employee shall serve as the Chief Financial Officer.  In this capacity, Employee shall, subject to the bylaws of the Company, and to the direction of the President, Chief Executive Officer and the Board, serve the Company by performing such duties and carrying out such responsibilities as are normally related to the position in accordance with the standards of the industry in which the Company carries on its business.

2.02Reporting.  Employee, in her capacity as Chief Financial Officer, will report directly to the President, Chief Executive Officer and the Board.

2.03Time and Efforts Covenant.  Employee will, to the best of her ability, devote such time and efforts as are necessary to the performance of her duties for the Company and its subsidiaries.

2.04Employee’s Commitment.  During Employee’s employment with the Company, Employee will not undertake or engage in any other employment, occupation or business enterprise inconsistent with her obligations under this Agreement.  Subject to the foregoing, Employee agrees not to acquire, assume, or participate in, directly or indirectly, any position, investment, or interest in the Territory adverse or antagonistic to the Company, its business or prospects, financial or otherwise, or take any action towards any of the foregoing. The provisions of this Section shall not prevent Employee from owning shares of any entity engaging in Competitive Business Activity, so long as such shares (i) do not constitute more than 5% of the outstanding equity of such competitor, and (ii) are regularly traded on a national securities exchange or quoted for trading by the NASDAQ Stock Market.

2.05Relocation.  Employee’s place of employment will not be located outside the United States.

2.06Confidential Information.  Employee recognizes and acknowledges that the Company’s trade secrets and proprietary information and know-how, as they may exist from time to time and to the extent, they are unique to and internally developed by the Company (“Confidential Information”), are valuable assets of the Company’s business, access to and knowledge of which are essential to the performance of Employee’s duties hereunder.  Employee will not, during or after the term of her employment by the Company, in whole or in part, disclose such secrets, information or know-how to any Person for any reason or purpose whatsoever, nor shall Employee make

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use of any such property for her own purposes or for the benefit of any Person (except the Company) under any circumstances during or after the term of her employment, provided, however, that after the term of her employment these restrictions shall not apply to such secrets, information and know-how which are then in the public domain (provided that Employee was not responsible, directly or indirectly, for such secrets, information or processes entering the public domain without the Company’s consent).  Employee shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure of any thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, the Employee shall provide the Company with prompt notice of such requirement, prior to making any disclosure, so that the Company may seek an appropriate protective order.  Employee agrees to hold as the Company’s property all memoranda, books, papers, letters, customer and supplier lists, processes, computer software, records, financial information, policy and procedure manuals, training and recruiting procedures and other data, and all copies thereof and therefrom, in any way relating to the Company’s business and affairs, whether made by her or otherwise coming into her possession, and on termination of her employment, or on demand of the Company at any time, to deliver the same to the Company.

Employee shall use her best efforts to prevent the removal of any Confidential Information from the premises of the Company, except as required in her normal course of employment by the Company.  Employee shall use her best efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by her hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby.

2.07Records, Files.  All records, files, drawings, documents, equipment and the like relating to the business of the Company which are prepared or used by Employee during the term of her employment under this Agreement shall be and shall remain the sole property of the Company.

2.08Equitable Relief. Employee acknowledges that her services to the Company are of a unique character which gives them a special value to the Company.  Employee further recognizes that material and intentional violations by Employee of any one or more of the provisions of this Section 2 may give rise to losses or damages for which the Company cannot be reasonably or adequately compensated in an action at law and that such material and intentional violations may result in irreparable and continuing harm to the Company.  Employee agrees that, in addition to any other remedy which the Company may have at law and equity, including the right to withhold any payment of compensation under Section 3 of this Agreement, the Company shall be entitled to injunctive relief to restrain any material and intentional violation, actual or threatened, by Employee of the provisions of Section 2 of this Agreement.

2.09Work Products.

(a)Employee agrees promptly to disclose and deliver to the Company any and all, and hereby assigns, transfers, and sets over to the Company,

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Employee’s entire and exclusive right, title, and interest, including rights in the nature of patent rights, trademark rights, copyrights, trade secrets, or design rights, in and to any and all, improvements, inventions, developments, discoveries, works of authorship, innovations, systems, techniques, ideas, processes, programs, listings, and other things that may be of assistance to the Company, whether patentable or unpatentable, relating to or arising out of any development, service, or product of, or pertaining in any manner to the business of, the Company whether conceived, developed, or learned by Employee, alone or with others, during or after normal business hours, while employed by the Company (collectively, “Work Products”).  These include only items that would be construed as part of the Company’s business plan.  Any other unrelated activities that do not relate to the business plan of the Company will be the property of any third party and/or the Employee, whichever is applicable.  Any developments for any third party shall be made solely on the Employee’s personal time and not during business hours.  The foregoing assignment includes, without limitation, all such rights in the United States of America and throughout the world, and in and to any letters patent, applications for letters patent, any division, reissue, extension, continuation, or continuation in part thereof, or any copyright or trademark registrations that may be granted and issued for such Work Products.  Employee hereby authorizes and requests the Commissioner of Patents and Trademarks or other appropriate government official to issue any such Letters Patent or registrations to the Company, its successors, and assigns.

(b)The parties intend that the Company have the sole and exclusive right, title, and interest in such Work Products. Employee acknowledges and agrees that all Work Products will be and remain the exclusive property of the Company and that Employee will, upon the request of the Company, and without further compensation, do all lawful things requested by the Company to ensure the Company’s ownership of the Work Products, including, without limitation, the execution of all documents requested by the Company to assign and transfer to the Company and its assigns all of Employee’s right, title, and interest in the Work Products, if any, and to enable the Company to file and obtain patents, copyrights, and other proprietary rights in the United States and foreign countries relating to the Work Products.  Employee hereby appoints the Company as Employee’s attorney-in-fact to execute all documents relating to such registrations, applications, and assignments.  The provisions of this Section 2.09 will survive the expiration or termination of this Agreement for any reason.

3.Compensation.

3.01 One-Time-Sign-On Bonus Compensation.  The Company shall pay to Employee a one-time sign on bonus in the in the form of a salvage title vehicle (2016 AUDI SQ5 PREMIUM PLUS SPORT UTILITY 4D; VIN # WA1CCAFP4GA016909) valued at $1.00. Employee is responsible for the seats, airbags and other required safety equipment, taxes, title, registration fees, and warranty.  Such bonus shall be earned immediately upon signing the employment agreement in recognition for leading the Company through its first successful annual audit and subsequent reviews that led to its NASDAQ listing, dated October 25th, 2021, while developing and reorganizing the accounting, finance, and operational departments. Additionally, Employee receives a one-

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time bonus of 100,000 Mullen Technologies common shares for outstanding and specialized services provided as a Consultant from June 2020 to October 2021.

3.02 Annual Compensation.  The Company shall pay to Employee for the services to be rendered hereunder an annual base salary of $350,000.00 and 300,000 restricted shares of common stock of the Company, post-merger, per year (the “Annual Compensation”).  The Annual Compensation will increase by 3.5% per year to reflect an annual merit increase to hedge against inflation. Employee’s salary shall be payable in periodic installments in accordance with the Company’s usual practice for similarly situated Employees of the Company.

3.03Incentive Compensation.  In addition to her Annual Compensation, Employee shall be entitled to receive annual incentive compensation in such further amounts, if any, as determined by the Board from time to time (the “Incentive Compensation”).  The Board may designate additional Incentive Compensation as it desires and said additions shall be attached as an addendum to this Agreement.  Any Incentive Compensation which is not deductible in the opinion of the Company’s counsel under § 162(m) of the Internal Revenue Code of 1986 as amended, shall be deferred and paid, without interest, in the first year or years when and to the extent such payment may be deducted, Employee’s right to such payment being absolute so long as Employee remains employed by the Company, subject only to the provisions of Section 2.09.

3.04Participating in Benefits.  Employee shall be entitled to all Benefits for as long as such Benefits may remain in effect and/or any substitute or additional Benefits made available in the future to similarly situated Employees of the Company, subject to and on a basis consistent with the terms, conditions and overall administration of such Benefits adopted by the Company.  Benefits paid to Employee shall not be deemed to be in lieu of other compensation to Employee hereunder as described in this Section 3.

3.05Specific Benefits.

During Employee’s employment with the Company:

(a)Employee shall be entitled to two (2) weeks of paid vacation time per year, to be taken at times mutually acceptable to the Company and Employee.

(b)Employee shall be entitled to sick leave benefits during her employment in accordance with the customary policies of the Company, which is accrued as four (4) hours per pay period, but in no event less than three (3) days per year.

(c)Employee shall be entitled to twelve (12) weeks of unpaid, job-protected leave per year in compliance with the Family and Medical Leave Act. This leave will be available for the following reasons: (i) for the birth and care of a newborn child of the Employee, (ii) for the placement with the Employee of a child for adoption or foster care; (iii) to care for an immediate family member (i.e., spouse, child, or parent) with a serious health condition, or (iv) to take medical leave when the employee is unable to work

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because of a serious health condition. The Employee will become eligible for this leave after she has worked for the Company for at least 12 months.

(d)In addition to the vacation provided pursuant to Section 3.05(a) hereof, Employee shall be entitled to not less than ten (10) paid holidays (other than weekends) per year, generally on such days on which the New York Stock Exchange is closed to trading.

(e)Employee shall be entitled to premium health and wellness benefits fully paid by the Company, including medical insurance, dental, vision, and employee assistance.

(f)Employee shall be entitled to receive a company mobile phone to be distributed by the Company, a car allowance in the amount of $1,000 per month, and all reasonable dues and subscriptions the Employee uses in coordination with her responsibilities.

(g)Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by her in performing services hereunder and preapproved in writing by the Board or the Chief Executive Officer.

(h)Employee shall be eligible to participate during her employment in Benefits not inconsistent or duplicative of those set forth in this Section 3.04 as the Company shall establish or maintain for its Employees generally.

4.Term/Termination.

4.01Limited Duration Employment.  The Employee’s employment with the Company is for two (2) years. The Company will retain the option to renew the employment for up to sixty (60) months.

4.02Termination by the Company for Reasons Other Than Cause.  If the Company terminates the employment of Employee and such termination is not for Cause (a “Termination by the Company for Reasons Other Than Cause”), then, the Company shall pay to Employee (i) an amount equal to Employee’s Annual Compensation at the time of such termination (the “Salary Termination Payment”).  The Salary Termination Payment shall be paid to Employee no later than 90 days after the date of such termination.  To the extent that Employee is not fully vested in Benefits from any pension or any other retirement plan or program (whether tax qualified or not) maintained by the Company, the Company shall obtain and pay the premium upon an annuity policy to provide Employee with Benefits as though he had been fully vested on the date that her employment terminated.

4.03Constructive Discharge.  If the Company (a) subjects Employee to a diminution in her title(s), responsibilities, or in her then-current Annual Compensation, (b) fails to comply with the provisions of Section 3, (c) locates Employee’s place of

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employment outside the United States, or (d) engages in any material and intentional breach of the Company’s principal obligations under this Agreement which is not remedied within fifteen (15) business days after receipt of written notice from the Employee (a “Constructive Discharge”), Employee may at her option terminate her employment, and such termination shall be considered to be a Termination by the Company for Reasons Other Than Cause.

4.04Termination by the Company for Cause.  The Company shall have the right to terminate the employment of Employee for Cause (a “Termination by the Company for Cause”).  Effective as of the date of Termination by the Company for Cause, this Agreement, except for Sections 2.06 through 2.9, shall terminate, and no further payments of the Compensation described in Section 3 (except for such remaining payments of Annual Compensation under Section 3.02 relating to periods during which Employee was employed by the Company, Benefits which are required by applicable law to be continued, and reimbursement of expenses incurred prior to such termination under Section 3.05) shall be made.

4.05Termination on Account of Employee’s Death.  In the event of Employee’s death during her employment at the Company, the Company shall pay to Employee’s beneficiary or beneficiaries (or to her estate if she fails to make such a designation) an amount equal to her Annual Compensation earned through the dated of Employee’s death.  Employee may designate one or more beneficiaries for the purposes of this Section 4.05 by making a written designation and delivering such designation to the Board of Directors.  If Employee makes more than one such written designation, the designation last received before Employee’s death shall control.

4.06Disability.  If Employee shall sustain a Disability, the Company shall continue to pay to Employee while such Disability continues the full amount of her then-current Annual Compensation for the three-month period next succeeding the date upon which such Disability shall have been so certified, as well as a prorated amount of any Incentive Compensation which would have been paid to Employee at the end of the year.  Thereafter, if Employee’s Disability shall continue, the employment of Employee under this Agreement shall terminate and all obligations of Employee shall cease and Employee shall be entitled to receive the Benefits, if any, as may be provided by any insurance to which he may have become entitled pursuant to Section 3.04 as well as the acceleration of the exercise date of any incentive stock options granted prior to Employee’s Disability.

5.Stock Options.  Employee will be eligible to participate in any Company stock option plan and will participate at the level of other similarly situated Employees in such plan or any future stock incentive plans established by the Company.

6.Indemnification.  The Company shall indemnify Employee and hold Employee harmless from and against any claim, loss or cause of action arising from or out of Employee’s performance as an officer, director or employee of the Company or in any other capacity, including any fiduciary capacity, in which the Employee serves at the

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request of the Company to the maximum extent permitted by applicable law.  The Company shall advance to Employee the reasonable costs and expenses of investigating and/or defending any such claim, subject to receiving a written undertaking from Employee to repay any such amounts advanced to Employee in the event and to the extent of any subsequent determination by an agency of competent jurisdiction that Employee was not entitled to indemnification hereunder.  In the event that Employee is or becomes a party to any action or proceeding in respect of which indemnification may be sought hereunder, Employee shall promptly notify the Company thereof.  Following such notice, the Company shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof with counsel satisfactory to Employee in its reasonable judgment.  After notice from the Company to Employee of the Company's election to assume the defense of such Employee, the Company will not be liable to Employee hereunder for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof other than reasonable costs of investigation.  Employee shall not settle any action or claim against Employee without the prior written consent of the Company except at such Employee's sole cost and expense.

7.Miscellaneous.

7.01Assignment.  This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of each of the parties hereto and shall also bind and inure to the benefit of any successor or successors of the Company in a Reorganization, merger or consolidation and any assignee of all or substantially all of the Company’s business and properties, but, except as to any such successor of the Company, neither this Agreement nor any rights or benefits hereunder may be assigned by the Company or Employee.

7.02Governing Law.  This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of California.

7.03Interpretation.  In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

7.04Notice.  All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, effective when delivered, or if delivered by express delivery service, effective when delivered, or if mailed by registered or certified mail (return receipt requested), effective three business days after mailing to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Company to:

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Mullen Technologies, Inc.

1405 Pioneer Street

Brea, CA 92821

with a copy to:

Brunson Chandler & Jones, PLLC

Walker Center

175 S. Main Street, 14th Floor

Salt Lake City, UT 84111

If to Employee to:

Kerri Sadler

c/o Mullen Technologies, Inc.

1405 Pioneer Avenue

Brea, California 92821

with a copy to:

Address on file

7.05Amendment and Waiver.  This Agreement may not be amended, supplemented or waived except by a writing signed by the party against which such amendment or waiver is to be enforced.  The waiver by any party of a breach of any provision of this Agreement shall not operate to, or be construed as a waiver of, any other breach of that provision or as a waiver of any breach of another provision.

7.06Binding Effect.  Subject to the provisions of Sections 4 & 7 hereof, this Agreement shall be binding on the successors and assigns of the parties hereto.  All obligations of Employee with respect to any shares covered by this Agreement shall, as the context requires, bind Employee’s spouse and the divorce or death of such spouse shall not vitiate the binding nature of such obligation.

7.07Survival of Rights and Obligations.  All rights and obligations of Employee or the Company arising during the term of this Agreement shall continue to have full force and effect after the termination of this Agreement unless otherwise provided herein.

7.08Section Headings.  The section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

7.09Entire Agreement.  This Agreement contains the entire understanding, and cancels and supersedes all prior agreements, including any agreement in principle or oral statement, letter of intent, statement of understanding or guidelines of the parties hereto with respect to the subject matter hereof.

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In witness whereof, on the date first written above, the undersigned do hereby agree to the terms contained herein.

COMPANY:

Mullen Technologies, Inc.

By:

/s/ David Michery

Name: DAVID MICHERY

Title: CEO

EMPLOYEE:

/s/Kerri D. Sadler

KERRI SADLER

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Exhibit 10.22

MULLEN AUTOMOTIVE, INC.

EMPLOYMENT AGREEMENT

Chief Operating Officer

This Employment Agreement (“Agreement”) is made as of this 15 day of April 2021, by and between Jerry Alban (“Employee”) and Mullen Automotive, Inc., a Delaware corporation (the “Company”).

PREAMBLE

The Company desires to employ Employee as Chief Operating Officer and to compensate Employee therefore. Employee desires to be employed by the Company and to commit to serve the Company on the terms herein provided.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements of the parties, the parties agree as follows:

1.

Definitions.

“Benefits” shall mean all the fringe benefits approved by the Board from time to time and established by the Company for the benefit of Employees generally, including, but not limited to, regular holidays, vacations, absences resulting from illness or accident, health insurance, disability and medical plans (including dental and prescription drug), group life insurance, and pension, profit-sharing and stock bonus plans or their equivalent.

“Board” shall mean the Board of Directors of the Company, together with an executive committee thereof (if any), as the same shall be constituted from time to time.

“Cause” shall mean (i) gross negligence in the performance of the material responsibilities of the Employee’s position, (ii) willful misconduct in the performance and discharge of the Employee’s material duties or that is otherwise materially injurious to the Company’s business, (iii) conviction of or a plea of no contest to a felony or Employee’s incapacity due to alcoholism or substance abuse, or (iv) a material breach by Employee of his principal obligations under this Agreement not remedied within fifteen (15) days after receipt of written notice from the Company.

“Change of Control” shall mean the occurrence of one or more of the following two events:

(1)

A Reorganization; or

(2)

A sale of all or substantially all of the assets of the Company.

“Chairman” shall mean the individual designated by the Board from time to time as its chairman.

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“Chief Operating Officer” or “COO” shall mean the individual having responsibility to design and implement business strategies, plans and procedures pursuant to the explicit direction of the company’s CEO.

“Company” shall mean Mullen Automotive, Inc., a Delaware corporation and any of its subsidiaries.

“Competitive Business Activity” shall mean the development, sale and marketing of electric or other vehicles.

“Director” shall mean the individual designated by the Board from time to time as a director of the Company.

“Disability” shall mean a written determination by an independent physician mutually agreeable to the Company and Employee (or, in the event of Employee’s total physical or mental disability, Employee’s legal representative) that Employee is physically or mentally unable to perform his duties of Chief Operating Officer under this Agreement and that such disability can reasonably be expected to continue for a period of six (6) consecutive months or for shorter periods aggregating one hundred and eighty (180) days in any twelve-(12)-month period.

“Effective Date” shall mean April 15, 2021

“Exchange Act” shall mean the Securities Exchange Act of 1934.

“Employee” shall mean Jerry Alban and, if the context requires, his heirs, personal representatives, and permitted successors and assigns.

“Performance Year” shall mean each twelve-month period of employment under this Agreement commencing upon the date of this Agreement.

“Person” shall mean any natural person, incorporated entity, limited or general partnership, limited liability company, business trust, association, agency (governmental or private), division, political sovereign, or subdivision or instrumentality, including those groups identified as “persons” in §§ 13(d)(3) and 14(d)(2) of the Exchange Act.

“Reorganization” shall mean any transaction, or any series of transactions consummated in a 12-month period, pursuant to which any Person acquires (by merger, acquisition, or otherwise) all or substantially all of the assets of the Company or the then outstanding equity securities of the Company and the Company is not the surviving entity, the Company being deemed surviving if and only if the majority of the Board of Directors of the ultimate parent of the surviving entity were directors of the Company prior to its organization.

“Territory” shall mean any state of the United States and any equivalent section or area of any country in which the Company has revenue-producing customers or activities.

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2.

Position and Responsibilities.

2.01Position.  Employee shall serve as Chief Operating Officer of the Company.  In this capacity, Employee shall, subject to the bylaws of the Company, and to the direction of the CEO and the Board, serve the Company by performing such duties and carrying out such responsibilities as are normally related to the position of COO in accordance with the standards of the industry in which the Company carries on its business.

2.02Reporting.  Employee, in his capacity as COO, will report directly to the CEO and the Board.

2.03Time and Efforts Covenant.  Employee will  devote his full time and efforts to the performance of his duties for the Company and its subsidiaries.

2.04Employee’s Commitment.  During Employee’s employment with the Company, Employee will not undertake or engage in any other employment, occupation or business enterprise inconsistent with his obligations under this Agreement.  Subject to the foregoing, Employee agrees not to acquire, assume, or participate in, directly or indirectly, any position, investment, or interest in the Territory adverse or antagonistic to the Company, its business or prospects, financial or otherwise, or take any action towards any of the foregoing. The provisions of this Section shall not prevent Employee from owning shares of any entity engaging in Competitive Business Activity, so long as such shares (i) do not constitute more than 5% of the outstanding equity of such competitor, and (ii) are regularly traded on a national securities exchange or quoted for trading by the NASDAQ Stock Market.

2.05Relocation.  Employee’s place of employment will not be located outside the United States.

2.06Post Employment Noncompensation and Nonsolicitation Covenant. For a period of one (1) year subsequent to Employee's voluntary withdrawal from employment with the Company ( except for such withdrawal pursuant to a Change in Control or due to Constructive Discharge), or a Termination by the Company for Cause, Employee will not, without the express prior written approval of the Board, (i) engage in Competitive Business Activity in the Territory either on Employee's own behalf or that of any other business organization, (ii) directly or indirectly, in one or a series of transactions, recruit, solicit or otherwise induce or influence any proprietor, partner, stockholder, lender, director, officer, employee, sales agent, joint venturer, investor, lessor, supplier, customer, agent, representative or any other person which has a business relationship with the Company or had a business relationship with the Company within the twenty­four (24) month period preceding the date of the incident in question, to discontinue, reduce, or modify such employment, agency or business relationship with the Company, or (iii) employ or seek to employ or cause any business organization engaged in Competitive Business Activity to employ or seek to employ any person or agent who is then ( or was at any time within six months prior to the date the Employee or such business employs or seeks to employ such person) employed or retained by the Company or its affiliates.

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Notwithstanding the foregoing, nothing herein shall prevent the Employee from providing a letter of recommendation to another Company employee or consultant with respect to a future employment opportunity.

2.07Confidential Information. Employee recognizes and acknowledges that the Company’s trade secrets and proprietary information and know-how, as they may exist from time to time and to the extent, they are unique to and internally developed by the Company (“Confidential Information”), are valuable assets of the Company’s business, access to and knowledge of which are essential to the performance of Employee’s duties hereunder.  Employee will not, during or after the term of his employment by the Company, in whole or in part, disclose such secrets, information or know-how to any Person for any reason or purpose whatsoever, nor shall Employee make use of any such property for his own purposes or for the benefit of any Person (except the Company) under any circumstances during or after the term of her employment, provided, however, that after the term of his employment these restrictions shall not apply to such secrets, information and know-how which are then in the public domain (provided that Employee was not responsible, directly or indirectly, for such secrets, information or processes entering the public domain without the Company’s consent).  Employee shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure of any thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, the Employee shall provide the Company with prompt notice of such requirement, prior to making any disclosure, so that the Company may seek an appropriate protective order.  Employee agrees to hold as the Company’s property all memoranda, books, papers, letters, customer and supplier lists, processes, computer software, records, financial information, policy and procedure manuals, training and recruiting procedures and other data, and all copies thereof and therefrom, in any way relating to the Company’s business and affairs, whether made by him or otherwise coming into her possession, and on termination of her employment, or on demand of the Company at any time, to deliver the same to the Company.

Employee shall use his best efforts to prevent the removal of any Confidential Information from the premises of the Company, except as required in his normal course of employment by the Company.  Employee shall use his best efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by him hereunder to observe the terms and conditions set forth herein as though each such person or entity was bound hereby.

2.08Records, Files.  All records, files, drawings, documents, equipment and the like relating to the business of the Company which are prepared or used by Employee during the term of his employment under this Agreement shall be and shall remain the sole property of the Company.

2.09Equitable Relief. Employee acknowledges that his services to the Company are of a unique character which gives them a special value to the Company.  Employee further recognizes that material and intentional violations by Employee of any one or more of the provisions of this Section 2 may give rise to losses or damages for which

4


the Company cannot be reasonably or adequately compensated in an action at law and that such material and intentional violations may result in irreparable and continuing harm to the Company.  Employee agrees that, in addition to any other remedy which the Company may have at law and equity, including the right to withhold any payment of compensation under Section 3 of this Agreement, the Company shall be entitled to injunctive relief to restrain any material and intentional violation, actual or threatened, by Employee of the provisions of Section 2 of this Agreement.

2.10

Work Products.

(a)Employee agrees promptly to disclose and deliver to the Company any and all, and hereby assigns, transfers, and sets over to the Company, Employee’s entire and exclusive right, title, and interest, including rights in the nature of patent rights, trademark rights, copyrights, trade secrets, or design rights, in and to any and all, improvements, inventions, developments, discoveries, works of authorship, innovations, systems, techniques, ideas, processes, programs, listings, and other things that may be of assistance to the Company, whether patentable or unpatentable, relating to or arising out of any development, service, or product of, or pertaining in any manner to the business of, the Company whether conceived, developed, or learned by Employee, alone or with others, during or after normal business hours, while employed by the Company (collectively, “Work Products”).  These include only items that would be construed as part of the Company’s business plan.  Any other unrelated activities that do not relate to the business plan of the Company will be the property of any third party and/or the Employee, whichever is applicable.  Any developments for any third party shall be made solely on the Employee’s personal time and not during business hours.  The foregoing assignment includes, without limitation, all such rights in the United States of America and throughout the world, and in and to any letters patent, applications for letters patent, any division, reissue, extension, continuation, or continuation in part thereof, or any copyright or trademark registrations that may be granted and issued for such Work Products.  Employee hereby authorizes and requests the Commissioner of Patents and Trademarks or other appropriate government official to issue any such Letters Patent or registrations to the Company, its successors, and assigns.

(b)The parties intend that the Company have the sole and exclusive right, title, and interest in such Work Products. Employee acknowledges and agrees that all Work Products will be and remain the exclusive property of the Company and that Employee will, upon the request of the Company, and without further compensation, do all lawful things requested by the Company to ensure the Company’s ownership of the Work Products, including, without limitation, the execution of all documents requested by the Company to assign and transfer to the Company and its assigns all of Employee’s right, title, and interest in the Work Products, if any, and to enable the Company to file and obtain patents, copyrights, and other proprietary rights in the United States and foreign countries relating to the Work Products.  Employee hereby appoints the Company as Employee’s attorney-in-fact to execute all documents relating to such registrations, applications, and assignments.  The provisions of this Section 2.10 will survive the expiration or termination of this Agreement for any reason.

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3.

Compensation.

3.01 Annual Compensation.  The Company shall pay to Employee for the services to be rendered hereunder a base salary of $350,000.00 and 300,000 restricted shares of common stock of the Company, post-merger, per year (the “Annual Compensation”).  There shall be an annual review for merit by the Board or officers of the Company and an increase as deemed appropriate to reflect the value of services by Employee. At no time during his employment with the Company shall Employee's annual base salary fall below his Annual Compensation. In addition, if the Board or CEO increases Employee's Annual Compensation at any time during his employment with the Company or after an annual review, such increased Annual Compensation shall become a floor below which Employee's compensation shall not fall at any future time during his employment with the Company and shall become his Annual Compensation. In addition, Employee shall receive, as a onetime bonus payable as soon as reasonably practicable after execution of this agreement, 100,000 restricted shares of common stock of the Company.

Employee's salary shall be payable in periodic installments in accordance with the Company's usual practice for similarly situated Employees of the Company.

3.02Incentive Compensation.  In addition to his Annual Compensation, Employee shall be entitled to receive incentive compensation in such amounts as are determined by the Board from time to time (the "Incentive Compensation"). The Board may in its discretion designate additional Incentive Compensation, and said additions shall be attached as an addendum to this Agreement. Any Incentive Compensation which is not deductible in the opinion of the Company's counsel under§ 162(m) of the Internal Revenue Code of 1986 as amended, shall be deferred and paid, without interest, in the first year or years when and to the extent such payment may be deducted, Employee's right to such payment being absolute so long as Employee remains employed by the Company.

3.03Participating in Benefits. Employee shall be entitled to all Benefits for as long as such Benefits may remain in effect and/or any substitute or additional Benefits made available in the future to similarly situated Employees of the Company, subject to and on a basis consistent with the terms, conditions and overall administration of such Benefits adopted by the Company. Benefits paid to Employee shall not be deemed to be in lieu of other compensation to Employee hereunder as described in this Section 3.

3.04Specific Benefits.

During Employee’s employment with the Company:

(a)Employee shall be entitled to three weeks of paid vacation time per year, to be taken at times mutually acceptable to the Company and Employee.

(b)The Company shall provide fully paid health and dental insurance for Employee and Employee's spouse and children with limits and extent of coverage such

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that the insurance would be considered platinum-level.

(c)Employee shall be entitled to sick leave benefits during his employment in accordance with the customary policies of the Company for its Employee officers, but in no event less than one (1) month per year.

(d)In addition to the vacation provided pursuant to Section 3.04(a) hereof, Employee shall be entitled to not less than ten (10) paid holidays (other than weekends) per year, generally on such days on which the New York Stock Exchange is closed to trading.

(e)Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performing services hereunder up to $35,000 per year.

(f)Employee shall be eligible to participate during his employment in Benefits not inconsistent or duplicative of those set forth in this Section 3.04 as the Company shall establish or maintain for its Employees generally.

(g)The Company shall have the option to maintain and be the owner and beneficiary of a term life insurance policy payable on Employee's death with a minimum policy limit of one million dollars ($1,000,000), and Employee agrees to submit to any physical examination, and otherwise to cooperate in any other procedures required to obtain such policy. Employee represents he has no reason to believe the Company cannot obtain such life insurance policy on an "unrated" basis.

(h)The Company shall have the option to maintain and be the owner and beneficiary of a disability insurance policy payable on Employee's disability, with a minimum policy limit of one million dollars ($1,000,000), and Employee agrees to submit to any physical examination, and otherwise to cooperate in any other procedures required to obtain such policy. Employee represents he has no reason to believe the Company cannot obtain such disability insurance policy on an "unrated" basis.

4.Term/Termination.

4.01Limited Duration Employment. The Employee’s employment with the Company is for one (1) year from the Effective Date (“Initial Term”).  Thereafter, Employee shall be an Employee at Will.

4.02Termination by the Company for Reasons Other Than Cause.  If the Company terminates the employment of Employee during the Initial Term and such termination is not for Cause (a "Termination by the Company for Reasons Other Than Cause"), then, the Company shall pay to Employee the lesser of (i) an amount equal to Employee's Annual Compensation at the time of such termination multiplied by a number of years equal to five (5) (the "Salary Termination Payment"), and (ii) an amount equal to one percent (1 %) of the Company's market capitalization at such time (the "Equity

7


Termination Payment"). The Salary Termination Payment shall be paid to Employee no later than 90 days after the date of such termination. To the extent that Employee is not fully vested in Benefits from any pension or any other retirement plan or program (whether tax qualified or not) maintained by the Company, the Company shall obtain and pay the premium upon an annuity policy to provide Employee with Benefits as though he had been fully vested on the date that his employment terminated. This Section 4.02 shall not apply if Employee is terminated for Cause.

4.03Constructive Discharge.  If during the Initial Term the Company (a) subjects Employee to a diminution in his title(s), responsibilities, or in his then-current Annual Compensation, (b) fails to comply with the provisions of Section 3, (c) locates Employee's place of employment outside the United States, or (d) engages in any material and intentional breach of the Company's principal obligations under this Agreement which is not remedied within fifteen ( 15) business days after receipt of written notice from the Employee (a "Constructive Discharge"), Employee may at his option terminate his employment, and such termination shall be considered to be a Termination by the Company for Reasons Other Than Cause.

4.04Termination by the Company for Cause.  The Company shall have the right at any time from the Effective Date to terminate the employment of Employee for Cause (a "Termination by the Company for Cause"). Effective as of the date of Termination by the Company for Cause, this Agreement, except for Sections 2.06 through 2.10, shall terminate, and no further payments of the Compensation described in Section 3 (except for such payments of Annual Compensation under Section 3.01 relating to periods during which Employee was employed by the Company, Benefits which are required by applicable law- to be continued, and reimbursement of expenses incurred prior to such termination under Section 3.04) shall be made.

4.05Change of Control.  If during the Initial Term of Employee's employment at the Company there is a Change of Control or Company's shareholders receive a proxy request or tender offer for a transaction which could result in a Change of Control, Employee may at his option terminate his employment, and such termination shall be considered to be a Termination by the Company for Reasons Other Than Cause.

4.06Termination on Account of Employee’s Death.  In the event of Employee's death during the Initial Term of his employment at the Company, the Company shall pay to Employee's beneficiary or beneficiaries (or to his estate if he fails to make such a designation) an amount equal to the Salary Termination Payment. Employee may designate one or more beneficiaries for the purposes of this Section 4.06 by making a written designation and delivering such designation to the Board of Directors. If Employee makes more than one such written designation, the designation last received before Employee's death shall control.

4.06Disability.  If Employee shall sustain a Disability, the Company shall continue to pay to Employee while such Disability continues the full amount of his then-current Annual Compensation for the one-year period next succeeding the date upon

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which such Disability shall have been so certified, as well as a prorated amount of any Incentive Compensation which would have been paid to Employee at the end of the year. Thereafter, if Employee's Disability shall continue, the employment of Employee under this Agreement shall terminate and all obligations of Employee shall cease and Employee shall be entitled to receive the Benefits, if any, as may be provided by any insurance to which he may have become entitled pursuant to Section 3.04 as well as the acceleration of the exercise date of any incentive stock options granted prior to Employee's Disability.

5.Stock Options.  Employee will be eligible to participate in any Company stock option plan and will participate at the level of other similarly situated Employees in such plan or any future stock incentive plans established by the Company.

6.Indemnification.  The Company shall indemnify Employee and hold Employee harmless from and against any shareholder or third-party claims or cause of action arising from or out of Employee’s performance as an officer, director or employee of the Company or in any other capacity, including any fiduciary capacity, in which the Employee serves at the request of the Company to the maximum extent permitted by applicable law.  The Company shall advance to Employee the reasonable costs and expenses of investigating and/or defending any such claim, subject to receiving a written undertaking from Employee to repay any such amounts advanced to Employee in the event and to the extent of any subsequent determination by an agency of competent jurisdiction that Employee was not entitled to indemnification hereunder.  In the event that Employee is or becomes a party to any action or proceeding in respect of which indemnification may be sought hereunder, Employee shall promptly notify the Company thereof.  Following such notice, the Company shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof with counsel satisfactory to Employee in its reasonable judgment.  After notice from the Company to Employee of the Company's election to assume the defense of such Employee, the Company will not be liable to Employee hereunder for any legal or other expenses subsequently incurred by Employee in connection with the defense thereof other than reasonable costs of investigation.  Employee shall not settle any action or claim against Employee without the prior written consent of the Company except at such Employee's sole cost and expense.

7.

Miscellaneous.

7.01Assignment.  This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of each of the parties hereto and shall also bind and inure to the benefit of any successor or successors of the Company in a Reorganization, merger or consolidation and any assignee of all or substantially all of the Company’s business and properties, but, except as to any such successor of the Company, neither this Agreement nor any rights or benefits hereunder may be assigned by the Company or Employee.

7.02Governing Law.  This Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of California.

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7.03Interpretation.  In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

7.04Notice.  Any notice herein required or permitted to be given shall be in writing and may be sent by hand delivery or registered or certified mail, return receipt requested, and shall be deemed to have been given: if by hand delivery, on the date of delivery or if mailed, on the date indicated as the date of delivery or, if refused, on the date of attempted delivery, on the return receipt. For purposes hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 7.05) shall be as follows:

To the Company:

To Employee:

Mullen Automotive, Inc.

Jerry Alban

1405 Pioneer Street

Brea, CA 92821

Attention: Jerry Alban

jalban@mullenusa.com

(949) 306-0850

7.05Amendment and Waiver.  This Agreement may not be amended, supplemented or waived except by a writing signed by the party against which such amendment or waiver is to be enforced.  The waiver by any party of a breach of any provision of this Agreement shall not operate to, or be construed as a waiver of, any other breach of that provision or as a waiver of any breach of another provision.

7.06Binding Effect.  Subject to the provisions of Sections 4 & 7 hereof, this Agreement shall be binding on the successors and assigns of the parties hereto.  All obligations of Employee with respect to any shares covered by this Agreement shall, as the context requires, bind Employee’s spouse and the divorce or death of such spouse shall not vitiate the binding nature of such obligation.

7.07Survival of Rights and Obligations.  All rights and obligations of Employee or the Company arising during the term of this Agreement shall continue to have full force and effect after the termination of this Agreement unless otherwise provided herein.

7.08Section Headings.  The section headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

7.09Entire Agreement.  This Agreement contains the entire understanding, and cancels, replaces, and supersedes any and all prior agreements between Employee and Mullen Technologies, Inc., Mullen Automotive, Inc. and any of the

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Company’s subsidiaries and/or affiliates, including any oral agreement in principle or oral statement, letter of intent, statement of understanding or guidelines of the parties hereto with respect to the subject matter hereof.

In witness whereof, on the date first written above, the undersigned do hereby agree to the terms contained herein.

COMPANY:

Mullen Automotive, Inc.

By:

/s/ David Michery

Name:

David Michery

Title:

CEO

EMPLOYEE:

/s/ Jerry Alban

Jerry Alban

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Exhibit 10.23

VOTING AND SUPPORT AGREEMENT

This VOTING AND SUPPORT AGREEMENT (this “Agreement”), dated as of October 26, 2021, is entered into by and among the persons identified on the signature pages attached hereto (each a “Stockholder” and collectively, the “Stockholders”), Mullen Technologies, Inc., a California corporation (“Mullen Technologies”) and Mullen Automotive Inc., a California corporation and a wholly-owned subsidiary of Mullen Technologies (“Mullen Automotive”)

WHEREAS, Net Element, Inc., a Delaware corporation, (“Parent” or “Net Element”), Mullen Acquisition, Inc., a California corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), Mullen Technologies and Mullen Automotive entered into a Second Amended and Restated Agreement and Plan of Merger dated as of July 20, 2021 (the “Merger Agreement”) whereby Parent, Mullen Automotive and Merger Sub will enter into a business combination transaction pursuant to which Merger Sub will merge with and into Mullen Automotive, with the result that Mullen Automotive will be the surviving corporation, will become a wholly-owned subsidiary of Parent and change its name to “Ottava Automotive, Inc.”, and each share of Mullen Automotive common stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock issued and outstanding immediately prior to the Merger Effective Time (as defined in the Merger Agreement), other than dissenting shares, will be canceled and will be converted automatically into the right to receive a number of shares of Net Element common stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as the case may be, determined in accordance with the Merger Agreement, and Net Element will change its name to “Mullen Automotive, Inc.”, a Delaware corporation (the “Merger”);

WHEREAS, pursuant to the Merger Agreement, at Merger Effective Time (as defined in the Merger Agreement), all current officers and directors of Parent will resign officers and directors selected by Mullen Automotive will be appointed;

WHEREAS, Mullen Technologies and Mullen Automotive have entered into a Separation Agreement and a Master Distribution Agreement, each dated as of May 12, 2021, whereby Mullen Technologies has agreed to assign and transfer to Mullen Automotive all of its electric vehicle business related assets, business and operations and Mullen Automotive has agreed to assume certain debt and liabilities of Mullen Technologies, such assignment and transfer to take place immediately prior to the Merger; and immediately prior to the Merger, Mullen Technologies will then spin off, via a share dividend (the “Spin-Off”), all of the capital stock of Mullen Automotive to the shareholders of Mullen Technologies so that after the Spin-Off and immediately prior to the Merger Effective Time (as such term is defined in the Merger Agreement), the capital structure of Mullen Automotive will mirror the capital structure of Mullen Technologies;

WHEREAS, the Stockholders currently hold shares of Mullen Technologies and, as a result of the Spin-Off and Merger the Stockholders, will become stockholders of Parent; and

WHEREAS, in connection with the approval to list Parent’s common stock on the Nasdaq Capital Market (“Nasdaq”), Nasdaq has required that Parent hold a meeting of stockholders within six months of the closing of the Merger to procure the approval of an amendment to Parent’s certificate of incorporation to reflect a three-year sunset provision pertaining to the voting rights associated with the Series A Preferred Stock (the “Series A Sunset Amendment”).


NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:

1.Certain Definitions. For the purposes of this Agreement, capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in this Section 1.

Additional Owned Shares” means all shares of Parent capital stock and any other equity securities of Parent which are beneficially owned by a Stockholder or any of its Affiliates as of and subsequent to the closing of the Merger and are acquired after the date hereof and prior to the termination of this Agreement.

Affiliate” has the meaning set forth in the Merger Agreement; provided, however, that Parent shall be deemed not to be an Affiliate of any Stockholder.

beneficial ownership” (and related terms such as “beneficially owned” or “beneficial owner”) has the meaning set forth in Rule 13d-3 under the Exchange Act.

Covered Shares” means the Owned Shares and Additional Owned Shares.

Exchange Act” means the Exchange Act of 1934, as amended.

Disclosed Owned Shares” has the meaning assigned thereto in Section 5(a) hereof.

Governmental Entity” has the meaning set forth in the Merger Agreement.

Owned Shares” means all shares of Parent capital stock beneficially owned by a Stockholder or any of its Affiliates as of the date hereof, each as set forth on such Stockholder’s signature page hereto.

Parent Stockholders Meeting” has the meaning assigned thereto in Section 2(a) hereof.

person” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization or other entity or group (as defined in Section 13(d) of the Exchange Act).

Term” has the meaning assigned thereto in Section 6 hereof.

Transfer” means, with respect to a security, the transfer, pledge, hypothecation, encumbrance, assignment or other disposition (whether by sale, merger, consolidation, liquidation, dissolution, dividend, distribution or otherwise) of such security or the beneficial ownership thereof, the offer to make such a transfer or other disposition, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, “Transfer” shall have a correlative meaning.

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2.Stockholder Vote.

(a)Voting Agreement. During the Term, at any meeting of the stockholders of Parent related to voting on the Series A Sunset Amendment, however called, or at any adjournment thereof, or in any other circumstance in which the vote, consent or other approval of the stockholders of Parent is sought (each, a “Parent Stockholders Meeting”), each Stockholder shall, and shall cause any other holder of record to, (i) appear at each such meeting or otherwise cause all Covered Shares to be counted as present thereat for purposes of calculating a quorum and (ii) vote (or cause to be voted), or execute and deliver a written consent (or cause a written consent to be executed and delivered) covering, all Covered Shares:

(i)in favor of adopting the Series A Sunset Amendment, including the execution and delivery by Parent of the Series A Sunset Amendment and the filing of the Series A Sunset Amendment with the Secretary of State of the State of Delaware and of other actions contemplated by the Series A Sunset Amendment and this Agreement,

(ii)in favor of any proposal to adjourn or postpone a Parent Stockholders Meeting relating to the Series A Sunset Amendment to a later date if there are not sufficient votes to adopt the Series A Sunset Amendment or if there are not sufficient shares of Parent capital stock present in person or by proxy at such meeting to constitute a quorum, and

(iii)against any proposal, action or agreement that would impede, frustrate, prevent or nullify any provision of this Agreement or the Series A Sunset Amendment.

3.No Adverse Act.

(a)The Stockholders each agree to hold the Covered Shares subject to, and to vote the Covered Shares in accordance with, the provisions of this Agreement.

(b)Until (A) termination of this Agreement, (B) a public sale of Covered Shares through a national securities exchange or an over-the-counter market (a “Public Sale”), or (C) a private sale of Shares pursuant to which a proposed transferee agrees to be bound by the terms of this Agreement, the Stockholder covenants and agrees that the Stockholder will not directly or indirectly, except with respect to any agreement with David Michery, (i) deposit any of the Covered Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Covered Shares or grant any proxy or power of attorney with respect thereto which is inconsistent with this Agreement, (iii) enter into any contract, option or other agreement, arrangement or understanding with respect to the Transfer of, directly or indirectly, any of the Covered Shares or any securities convertible into or exercisable for Covered Shares, any other capital stock of Parent or any interest in any of the foregoing with any Person, (iv) enter into any swap, contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer (including by merger or operation of law) or other disposition of any Covered Shares, or (v) take any action that would make any of the Stockholder’s representations or warranties contained in this Agreement untrue or incorrect in any material respect or have the effect of preventing or disabling the Stockholder from performing the Stockholder’s obligations

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under this Agreement. If the Stockholder sells Covered Shares in a Public Sale, then the terms of the this Agreement will no longer apply only with respect to those Covered Shares that were sold in such Public Sale, and any remaining Covered Shares held by Stockholder subsequent to the Public Sale will continue to be subject to this Agreement.

4.Additional Agreements.

(a)Certain Events. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of Parent affecting the Covered Shares or the acquisition of Additional Owned Shares or other securities or rights of Parent by any Stockholder or any of its Affiliates, (i) the type and number of Covered Shares shall be adjusted appropriately and (ii) this Agreement and the obligations hereunder shall automatically attach to any additional Covered Shares or other securities or rights of Parent issued to or acquired by such Stockholder or any of its Affiliates.

(b)Communications. Each Stockholder hereby (i) consents to and authorizes the publication and disclosure by Parent of such Stockholder’s identity and holding of Covered Shares, and the nature of such Stockholder’s commitments, arrangements and understandings under this Agreement, and any other information that Parent reasonably determines to be necessary or desirable in any press release or any other disclosure document in connection with the Series A Sunset Amendment and (ii) agrees as promptly as practicable to notify Parent of any required corrections with respect to any written information supplied by such Stockholder specifically for use in any such disclosure document.

(c)Additional Owned Shares. Each Stockholder hereby agrees to notify Mullen Automotive and Parent promptly in writing of the number and description of any Additional Owned Shares.

5.Representations and Warranties of Stockholder. Each Stockholder hereby represents and warrants as follows:

(a)Title. Such Stockholder is the sole record and/or beneficial owner of the shares of capital stock of Mullen Technologies set forth opposite such Stockholder’s name on their signature page hereto. (the “Disclosed Owned Shares”). The Disclosed Owned Shares constitute all of the capital stock and any other equity securities of Mullen Technologies owned of record or beneficially by such Stockholder and its Affiliates on the date hereof (other than to the extent such Affiliate has entered into a separate voting agreement in substantially the form of this Agreement) and, except for shares to be issued to Stockholder in connection with the Spin-Off and Merger, neither such Stockholder nor any of its Affiliates is the beneficial owner of, or has any right to acquire (whether currently, upon lapse of time, following the satisfaction of any conditions, upon the occurrence of any event or any combination of the foregoing) any shares of capital stock of Mullen Technologies, Mullen Automotive or Parent or any other equity securities of Mullen Technologies, Mullen Automotive or Parent or any securities convertible into or exchangeable or exercisable for shares of Mullen Technologies, Mullen Automotive or Parent or such other equity securities, in each case other than the Disclosed Owned Shares (including those of any Affiliates who have entered into a separate voting agreement in substantially the form of this Agreement). Such Stockholder has sole voting power, sole power of disposition and sole power to issue

4


instructions with respect to the matters set forth in Section 3 hereof and all other matters set forth in this Agreement, in each case with respect to all of the Owned Shares with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. Except as permitted by this Agreement, the Owned Shares and the certificates representing such shares, if any, are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, free and clear of any and all liens, pledges, claims, options, proxies, voting trusts or agreements, security interests, understandings or arrangements or any other encumbrances whatsoever on title, transfer or exercise of any rights of a Stockholder in respect of the Owned Shares (other than as created by this Agreement).

(b)Organization and Qualification. If such Stockholder is not a natural person, such Stockholder is a legal organization duly organized and validly existing in good standing under the laws of the jurisdiction of its organization indicated on its signature page hereto.

(c)Authority. Such Stockholder has all necessary power and authority and legal capacity to execute, deliver and perform all of such Stockholder’s obligations under this Agreement, and consummate the transactions contemplated hereby, and no other proceedings or actions on the part of such Stockholder are necessary to authorize the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

(d)Due Execution and Delivery. This Agreement has been duly and validly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery hereof by Parent, constitutes a legal, valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms. If such Stockholder is married, and any of the Covered Shares constitute community property or spousal approval is otherwise necessary for this Agreement to be legal, binding and enforceable, this Agreement has been duly authorized, executed and delivered by, and constitutes the legal, valid and binding obligation of, such Stockholder’s spouse, enforceable against such Stockholder’s spouse in accordance with its terms.

(e)No Filings: No Conflict or Default. No filing with, and no permit, authorization, consent or approval of, any Governmental Entity or any other person is necessary for the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby and the compliance by such Stockholder with the provisions hereof. None of the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof will (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, permit, contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind, including any voting agreement, proxy arrangement related to any meeting of the stockholders of Parent related to voting on the Series A Sunset Amendment (but, for the avoidance of any doubt, not an annual or special meeting the stockholders of Parent unrelated to voting on the Series A Sunset Amendment), pledge agreement, stockholders agreement or voting trust, to which such Stockholder is a party or by which such Stockholder or any of such Stockholder’s properties or

5


assets may be bound, (ii) violate any judgment, order, writ, injunction, decree or award of any court, administrative agency or other Governmental Entity that is applicable to such Stockholder or any of such Stockholder’s properties or assets, (iii) constitute a violation by such Stockholder of any law or regulation of any jurisdiction, or (iv), if such Stockholder is not a natural person, contravene or conflict with such Stockholder’s certificate of incorporation, bylaws, trust agreement or other organizational documents, in each case, except for any conflict, breach, default or violation described above which would not adversely affect the ability of such Stockholder to perform its obligations hereunder or consummate the transactions contemplated hereby.

(f)No Litigation. There is no suit, claim, action, investigation or proceeding pending or, to the knowledge of such Stockholder, threatened against such Stockholder at law or in equity before or by any Governmental Entity that could reasonably be expected to impair the ability of such Stockholder to perform its obligations hereunder or consummate the transactions contemplated hereby.

6.Termination. The term (the “Term”) of this Agreement, with respect to any Stockholder, shall commence as of the Closing Date of the Merger and shall terminate upon the earliest of (i) the mutual agreement of Parent and such Stockholder, and (ii) the close of the Parent Stockholders Meeting at which the Series A Sunset Amendment is approved by the stockholder of parent pursuant to the terms of Parent’s currently effective certificate of incorporation; provided that (A) nothing herein shall relieve any party hereto from liability for any breach of this Agreement and (B) this Section 6 and Section 8 shall survive any termination of this Agreement.

7.No Limitation. Nothing in this Agreement shall be construed to prohibit any Stockholder who is an officer or member of the Board of Directors of Parent from taking any action solely in his or her capacity as an officer or member of the Board of Directors of Parent.

8.Miscellaneous.

(a)Entire Agreement. This Agreement (together with any schedules or exhibits) and the Proxies constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof.

(b)Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated hereby. At the other party’s reasonable request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated hereby. Without limiting the foregoing, each Stockholder shall execute and deliver to Parent and any of its designees any additional proxies, including with respect to Additional Owned Shares, reasonably requested by Parent in furtherance of this Agreement.

(c)No Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of Stockholders or Parent.

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(d)Binding Successors. Without limiting any other rights Parent may have hereunder in respect of any Transfer of the Covered Shares, each Stockholder agrees that this Agreement and the obligations hereunder and thereunder shall attach to the Covered Shares beneficially owned by such Stockholder and its Affiliates and, solely with respect to shares that are privately transferred, shall be binding upon any person to which legal or beneficial ownership of such Covered Shares shall pass, whether by operation of law or otherwise, including, without limitation, such Stockholder’s heirs, guardians, administrators, representatives or successors.

(e)Amendments. This Agreement may not be amended, changed, supplemented or otherwise modified except by an instrument in writing signed by each Stockholder, and if prior to the closing of the Merger, on behalf of Mullen Automotive and Mullen Technologies, and if subsequent to the closing of the Merger on behalf of Parent.

(f)Notice. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly received) (i) upon receipt, if delivered personally or by first class mail, postage pre-paid, (ii) on the date of transmission, if sent by facsimile transmission (with confirmation of receipt), or (iii) on the business day after dispatch, if sent by nationally recognized, documented overnight delivery service, as follows:

If to Stockholder:

At the address and email set forth on such Stockholder’s signature page hereto.

If to Mullen Technologies or Mullen Automotive (or Parent after the Merger):

Mullen Technologies, Inc.

1405 Pioneer Street

Brea, California 92821

Attention: David Michery, CEO

Email: david@mullenusa.com

or to such other address or facsimile number as the person to whom notice is given may have previously furnished to the other parties hereto in writing in the manner set forth above.

(g)Severability. This Agreement shall be deemed severable; the invalidity, illegality or unenforceability of any term or provision of this Agreement shall not affect the validity, legality or enforceability of the balance of this Agreement or of any other term hereof, which shall remain in full force and effect. If any of the provisions hereof are determined to be invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible.

(h)Remedies. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any such right, power or remedy by any party hereto shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

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(i)No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with such party’s obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of such party’s right to exercise any such or other right, power or remedy or to demand such compliance.

(j)No Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

(k)Governing Law; Jurisdiction; Waiver of Jury Trial.

(i)All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware.

(ii)All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any Delaware Chancery Court. The parties hereto hereby (a) submit to the exclusive jurisdiction of the Delaware Chancery Court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement may not be enforced in or by any of the above-named courts. Each of the parties agrees to waive any bond, surety or other security that might be required of any other party with respect to any such action, suit or proceeding, including any appeal thereof.

(iii)Each of the parties agrees that service of any process, summons, notice or document in accordance with Section 8(f) shall be effective service of process for any action, suit or proceeding brought against it by the other party, provided that nothing contained herein shall affect the right of any party to serve legal process in any other manner permitted by applicable law.

(iv)EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION, DIRECTLY OR INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS

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AGREEMENT, TO THE FULLEST EXTENT PERMITTED BY LAW. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(k).

(l)Specific Performance. The parties hereto agree that Mullen Automotive or Parent would be irreparably damaged in the event that any of the provisions of this Agreement were not performed by any Stockholders in accordance with their specific terms or were otherwise breached by any Stockholder, and that Mullen Automotive or Parent would not have an adequate remedy at law for money damages in such event. It is accordingly agreed that Mullen Technologies, Mullen Automotive or Parent shall be entitled, without posting any bond or other undertaking, to specific performance and injunctive and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which Mullen Automotive or Parent is entitled at law or in equity.

(m)Interpretation. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. The words “include,” “includes” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. No provision of this Agreement shall be interpreted for or against any party hereto because that party or its legal representatives drafted the provision. The words “hereof,” “hereto,” “hereby,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not any particular section in which such words appear.

(n)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement.

(o)Expenses. Except as otherwise provided herein, each party hereto shall pay such party’s own expenses incurred in connection with this Agreement.

(p)No Ownership Interest. Nothing contained in this Agreement shall be deemed, upon execution, to vest in Mullen Automotive or Parent any direct or indirect ownership or incidence of ownership of or with respect to any Covered Shares. All rights, ownership and economic benefits of and relating to the Covered Shares shall remain vested in and belong to the applicable Stockholder, and Mullen Automotive or Parent shall have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of

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Mullen Automotive or Parent or exercise any power or authority to direct any Stockholder in the voting of any of the Covered Shares, except as otherwise provided herein.

[Signature page follows.]

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IN WITNESS WHEREOF, Mullen Technologies, Mullen Automotive and each Stockholder named below have caused this Agreement to be duly executed as of the day and year first above written.

MULLEN TECHNOLOGIES, INC.

By:

Name:

Title:

MULLEN AUTOMOTIVE INC.

By:

Name:

Title:

(signatures continued on next page)

[Signature Page to Voting and Support Agreement]


STOCKHOLDER:

Print Name: _____________________________

Signature: ______________________________


Title (if applicable):_______________________

Address for Notices:

_______________________________________

_______________________________________

Email: _________________________________

Common Stock:________________________________

Series A Preferred Stock:________________________

Series B Preferred Stock:________________________

Series C Preferred Stock:________________________

Options:_____________________________________

____________________________________________

Warrants: ____________________________________

____________________________________________

Convertible Notes: ____________________________

___________________________________________

Other Securities: _____________________________

___________________________________________

[Signature Page to Voting and Support Agreement]


Exhibit 10.24

AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY

AND JOINT ESCROW INSTRUCTIONS

This Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions (“Agreement”) is made and entered into as of March 9, 2021 (“Effective Date”), by and between Saleen Motors International, LLC, a Delaware limited liability company (“Seller”), and Mullen Technologies, Inc., a California corporation (“Buyer”).

Recitals

A.Seller is the owner of a fee simple interest in that certain real property located in the City of Robinsonville, County of Tunica, State of Mississippi, commonly known as 1 Greentech Drive, Robinsonville, MS 38664, designated as APN 3104-20000-0000202 and more particularly described on Exhibit A attached hereto and incorporated by this reference herein, together with all of Seller’s right, title and interest in and to all buildings and improvements, fixtures, all rights appurtenant, including, without limitation, any easements, rights-of-way, privileges, permits, licenses, entitlements, mineral rights, water rights, air rights, development rights and privileges and other tangible and intangible property, rights and privileges appurtenant or related thereto (collectively, the “Property”).
B.Among other improvements, the Property has been improved with an approximately 127,400 square foot EV car manufacturing facility and a small shed for storage (the “Buildings”).
C.On the terms and conditions contained herein, Seller desires to sell the Property to Buyer, and Buyer desires to purchase the Property from Seller.

Agreement

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

1.Purchase and Sale. On the terms and conditions contained in this Agreement, Seller shall sell the Property to Buyer, and Buyer shall purchase the Property from Seller.
2.Opening of Escrow. Within one (1) business day following the Effective Date, Buyer and Seller shall open an escrow (the “Escrow”) for the purchase and sale of the Property with First American Title Insurance Company (“Escrow Holder”) by depositing a fully executed copy of this Agreement with Escrow Holder. The terms and conditions set forth in this Agreement shall constitute both an agreement between Seller and Buyer and escrow instructions for Escrow Holder. If Escrow Holder requires separate or additional escrow instructions (“Additional Instructions”), Seller and Buyer shall execute and deliver them to Escrow Holder promptly after any such request from Escrow Holder, provided that such Additional Instructions are not inconsistent with this Agreement. If there is any conflict or inconsistency between this Agreement and the Additional Instructions, this Agreement shall prevail.

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3.Purchase Price. Subject to the adjustments and prorations hereinafter provided, the purchase price for the Property (the “Purchase Price”) shall be Twelve Million and 00/100 Dollars ($12,000,000.00). The Purchase Price shall be payable by Buyer as follows:

3.1Deposit. Not later than three (3) business days after the opening of Escrow, Buyer shall deposit into the Escrow for disbursement in accordance with the terms and provisions set forth herein, cash or a certified or bank cashier’s check or wire-transferred funds in the amount of Two Hundred Forty Thousand and 00/100 Dollars ($240,000.00) (the “Deposit”). Escrow Holder shall place the Deposit into an FDIC-insured interest bearing account. Any cost of establishing or maintaining such account shall be Buyer’s responsibility. All interest accrued on the Deposit shall become part of the Deposit. Buyer shall be responsible for paying any income taxes applicable to interest earned on the Deposit unless Seller retains the Deposit, or any part thereof, pursuant to the terms of this Agreement. At the Close of Escrow, the Deposit shall be credited toward payment of the Purchase Price.

3.2Balance of Purchase Price. Prior to the Closing Date (defined below), Buyer shall deliver or cause to be delivered to Escrow Holder a certified or bank cashier’s check or wire-transferred funds in the amount of the balance of the Purchase Price, calculated by deducting from the Purchase Price the sum of (a) the Deposit, and (b) the amount, if any, by which credits to Buyer exceed debits to Buyer by reason of the prorations set forth in Section 10 of this Agreement.

3.3Independent Contract Consideration. Seller and Buyer agree that the amount of One Hundred Dollars ($100.00) (the “Independent Contract Consideration”) of the Initial Deposit has been bargained for as consideration for Seller’s execution and delivery of this Agreement and for Buyer’s right of review, inspection and termination, and is independent of any other consideration or payment provided for in this Agreement.

4.Feasibility Inspection Period. Buyer shall have a period following the Effective Date until April 21, 2021 (the “Feasibility Inspection Period”), to perform the following investigations (the “Feasibility Inspection”):

4.1Due Diligence; Physical Investigation. Buyer shall have the right, at Buyer’s expense, to physically inspect and perform tests and studies on the Property, including a Phase I Environmental Assessment, and if deemed necessary a Phase II Environmental Site Assessment, review and verify all information provided by Seller, and, if Buyer so desires, obtain (at Buyer’s sole cost and expense) and review such tests, inspections and reports of the Property, and to evaluate such other matters related to the Property, as Buyer shall deem necessary in order to determine, in Buyer’s sole and absolute discretion, whether the Property is suitable for Buyer’s intended use. Seller has provided and shall provide Buyer and its agents with access to the Property so that such inspections can be carried out and shall reasonably cooperate with Buyer in connection with its due diligence investigation of the Property.

4.2Property Documents. Seller shall make available to Buyer no later than the Effective Date copies of the documents and materials in Seller’s possession or control relating to the Property (the “Property Documents”), and as identified on Exhibit B attached hereto and made a part hereof, each of which is being furnished or made available to Buyer for

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information purposes only and without any representation or warranty by Seller with respect thereto, express or implied, other than that Seller is providing complete copies of the Property Documents. Seller shall make available to Buyer any other documents relating to the Property during the course of Buyer’s due diligence investigation promptly following Buyer’s request, and shall make available to Buyer all additional documents relating to the Property received by Seller following the Effective Date within two (2) business days of Seller’s receipt thereof, including, without limitation, any inquiries from governmental agencies or notices of pending or threatened condemnation or other proceedings.

4.3Buyer’s Right to Terminate. Notwithstanding anything herein to the contrary, Buyer shall have the right, by delivering written notice to Seller (“Termination Notice”) at any time before 5:00 p.m. California time on the last day of the Feasibility Inspection Period (or the next business day, if such date falls on a non-business day), to terminate this Agreement for any reason or for no reason whatsoever. If Buyer does not deliver a Termination Notice to Seller of its election not to proceed with the acquisition of the Property before 5:00 p.m. on the last day of the Feasibility Inspection Period, then Buyer shall be deemed to have elected to proceed with the acquisition of the Property. If however Buyer terminates this Agreement, Escrow Holder shall release and return the Deposit to Buyer with no further action required by Buyer or Seller (less the Independent Contract Consideration, which shall be delivered to Seller), and neither Buyer nor Seller shall have any further obligations to one another under this Agreement, except that (i) Buyer and Seller shall split the expenses of canceling Escrow equally, and (ii) and Buyer and Seller shall continue to be obligated under the provisions of this Agreement that expressly survive the termination of this Agreement.

4.4Utilities. No later than March 5, 2021 (or such other earliest date which the utility companies can turn on the respective services), Seller shall ensure that all power, water, sewer, waste disposal and other utility services have been reinstated and are turned on at the Property and/or serving the Buildings to accommodate all of Buyer’s due diligence requirements. From and after such date until the Closing or earlier termination of this Agreement, all utilities to the Property shall remain on, in good working order and condition, available for Buyer’s use and timely paid for directly to the provider, by Seller. From and after the Closing, any such utilities shall be transferred into Buyer’s name and Buyer shall be responsible for all costs and expenses incurred from and after the Closing.

4.5Service Contracts. As a part of the Property Documents, Seller shall provide Buyer with true, correct and complete copies of all service, maintenance, repair, management, supply and other contracts to which Seller is a party, including, without limitation, all maintenance and repair contracts (collectively, “Service Contracts”), if any, which would be binding on Buyer subsequent to the Closing. Except as provided to Buyer, neither Seller nor any agent of Seller has executed or shall execute any service, maintenance, repair, management, supply or other contracts (including, without limitation, any Service Contracts) which would be binding on Buyer subsequent to the Closing. At Buyer’s request prior the end of the Feasibility Inspection Period, Seller shall terminate all (or a portion as designated by Buyer) of the Service Contracts effective as of the Close of Escrow, at Seller’s cost provided that, as noted above, Seller shall facilitate the transfer of all utilities into Buyer’s name.

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5.Title. Within ten (10) days following the opening of Escrow, First American Title Insurance Company (“Title Company”) shall deliver a current preliminary title report covering the Property, together with copies of the documents reflected as exceptions to title (collectively, the “Preliminary Report”). Buyer shall have a period of fifteen (15) days following receipt of the Preliminary Report (the “Title Review Period”) within which to deliver to Seller a written notice (“Buyer Objection Notice”) of any objection that Buyer has to the title exceptions reflected in the Preliminary Report. Buyer’s failure to deliver to Seller a Buyer Objection Notice before 5:00 p.m. California time on the last day of the Title Review Period (or the next business day, if such date falls on a non-business day) shall be deemed to constitute Buyer’s election not to object to any such title exceptions. Upon receipt of a Buyer Objection Notice, Seller shall have the right, but not the obligation, to deliver written notice to Buyer (“Seller Response Notice”) of Seller’s election to remove the objectionable item(s). If Seller does not deliver a Seller Response Notice within five (5) days of its receipt of a Buyer Objection Notice, Seller shall be deemed to have elected not to remove the objectionable item(s), and Buyer shall have a period of ten (10) days thereafter to elect to terminate this Agreement. Seller shall not voluntarily cause any new exceptions to title to be created following the Effective Date (a “New Exception”). If, after the Effective Date, a New Exception is created for any reason other than the actions of Buyer, Buyer shall have a period of ten (10) days following Buyer’s receipt of an amendment or supplement to the Preliminary Report identifying such New Exception (along with a copy of the New Exception) to deliver a Buyer Objection Notice, and Seller shall have the right, but not the obligation, within five (5) days following receipt of the Buyer Objection Notice, to deliver a Seller Response Notice. If Seller does not deliver a Seller Response Notice before the end of such five (5) day period, Seller shall be deemed to have elected not to remove the New Exception, and Buyer shall have a period of ten (10) days thereafter to elect to terminate this Agreement. If necessary, the closing of Escrow shall be extended for such period of time as is necessary to allow for the time periods set forth above and to allow Seller to complete removal of a New Exception. If Seller delivers a timely Seller Response Notice and thereafter fails to remove the objectionable item(s) within the allotted time period, or if Buyer has delivered a Buyer Objection Notice identifying a New Exception following the expiration of the Title Review Period and Seller has not delivered a timely Seller Response Notice, then Buyer shall have the right to terminate this Agreement within ten (10) business days following such failure to remove or election not to provide a Seller Response Notice, Escrow Holder shall release and return the Deposit to Buyer with no further action required by Buyer or Seller (less the Independent Contract Consideration, which shall be delivered to Seller), and neither Buyer nor Seller shall have any further obligations to one another under this Agreement, except that Buyer and Seller shall continue to be obligated under the provisions of this Agreement that expressly survive the termination of this Agreement. Exceptions to title set forth in the Preliminary Report or any amendments or supplements thereto to which Buyer has not objected (or for which Buyer has waived its objection following Seller’s election or deemed election not to remove such exception) shall be referred to as the “Permitted Exceptions.” Notwithstanding anything to the contrary contained herein, Seller shall discharge and remove, at Seller’s sole cost and expense, any and all deeds of trust, mechanics’ liens, judgments, tax liens or any other liens affecting the Property or that secure an obligation to pay money (other than installments of real estate taxes not yet delinquent as of the Closing or liens created by or through Buyer) (collectively, the “Liens”), and in no event shall such Liens be Permitted Exceptions. All Liens shall

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automatically be deemed disapproved, without the requirement that Buyer deliver a Buyer Objection Notice as to any such Liens.

6.Close of Escrow. The close of the Escrow (“Close of Escrow” or “Closing”) shall occur on the date (the “Closing Date”) which is one (1) business day after the expiration of the Feasibility Inspection Period, or at such other time mutually agreed upon by the parties. At the Close of Escrow, Seller shall convey title to the Property to Buyer by means of a special warranty deed in the form of Exhibit C attached hereto (the “Deed”) and shall cause Title Company to issue to Buyer an owner’s policy of title insurance (the “Title Policy”) in the amount of the Purchase Price insuring Buyer that, as of the Closing Date, Buyer is vested with fee simple title to the Property subject only to real property taxes and assessments not yet due and payable and the Permitted Exceptions. Seller shall execute and deliver to Title Company such documents and other items as Title Company may reasonably require as a condition to the issuance of the Title Policy. The Title Policy shall be written as a standard ALTA Owner’s Policy unless Buyer elects to have the Title Policy issued as an ALTA Extended Coverage Owner’s Policy (“Extended Policy”), provided that Buyer shall be responsible for providing to Title Company prior to the Closing Date all items required by Title Company from buyers as a condition to issuing the Title Policy as an Extended Policy, and in no event shall Buyer’s election to have the Title Policy written as an Extended Policy delay the Closing.

7.Conditions Precedent to Close.

7.1Conditions Precedent to Buyer’s Obligation to Close. Buyer's obligation to consummate the transaction contemplated hereunder is subject to the following conditions:

7.1.1Title Company shall have issued or irrevocably committed to issue to Buyer the Title Policy, subject only to the Permitted Exceptions.

7.1.2All representations and warranties made in this Agreement by Seller are true and correct as of the date of this Agreement, and shall be true and correct as of the Closing Date.

7.1.3Buyer has not duly provided a Termination Notice.

7.1.4Seller shall have satisfied all of its obligations hereunder.

In the event that all of the above conditions are not satisfied or excused by reason of Buyer’s default on or prior to the Closing Date, then Buyer may (x) waive satisfaction of such condition or conditions in writing (delivered to Seller and Escrow Holder) on or prior to the Closing Date, and the closing of Escrow shall proceed, (y) if the reason for the failure of a condition is a default on the part of Seller, elect one of the remedies set forth in Section 8.2, or (z) terminate this Agreement in writing (delivered to Seller and Escrow Holder), in which event Buyer shall be entitled to the return of the Deposit, with no further action required by Buyer or Seller, and neither Buyer nor Seller shall have any further obligations to one another under this Agreement, except that Buyer and Seller shall continue to be obligated under the provisions of this Agreement that expressly survive the termination of this Agreement.

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7.2Conditions Precedent to Seller’s Obligation to Close. Seller's obligation to consummate the transaction contemplated hereunder is subject to the following conditions:

7.2.1All representations and warranties made in this Agreement by Buyer are true and correct as of the date of this Agreement, and shall be true and correct as of the Closing Date.

7.2.2Buyer shall have satisfied all of its obligations hereunder.

In the event that one or more of the above conditions are not satisfied on or before the Closing Date, then Seller may (x) waive satisfaction of such condition or conditions in writing (delivered to Buyer and Escrow Holder) on or prior to the Closing Date, and the closing of Escrow shall proceed, or (y) if the reason for the failure of a condition is a default on the part of Buyer under this Agreement that results in the Closing not occurring as and when contemplated by the terms of this Agreement, terminate this Agreement in writing (delivered to Buyer and Escrow Holder), in which event Escrow Holder shall deliver to Seller the liquidated damages provided in Section 8.1, below, with no further action required by Buyer or Seller, and neither Buyer nor Seller shall have any further obligations to one another under this Agreement, except that Buyer and Seller shall continue to be obligated under the provisions of this Agreement that expressly survive the termination of this Agreement.

8.Remedies.

8.1LIQUIDATED DAMAGES. IN THE EVENT THAT BUYER DEFAULTS IN ITS OBLIGATION TO CLOSE THE PURCHASE OF THE PROPERTY FOR ANY REASON OTHER THAN SELLER’S DEFAULT, BUYER’S DISAPPROVAL OF ANY CONTINGENCY, THE FAILURE OF A CONDITION PRECEDENT IN FAVOR OF BUYER, OR BUYER’S EXERCISE OF ITS RIGHT TO TERMINATE THIS AGREEMENT PURSUANT TO THE TERMS OF THIS AGREEMENT, AND BUYER FAILS TO CURE SUCH DEFAULT WITHIN 10 DAYS AFTER RECEIVING WRITTEN NOTICE OF SUCH DEFAULT FROM SELLER, THEN, UPON DEMAND BY SELLER, THE DEPOSIT SHALL BE PAID TO AND RETAINED BY SELLER AS LIQUIDATED DAMAGES. THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT SELLER’S ACTUAL DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE PARTIES’ REASONABLE ESTIMATE OF SUCH DAMAGES. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER FOR ALL PURPOSES. SELLER EXPRESSLY WAIVES ITS RIGHTS TO SEEK DAMAGES IN THE EVENT THE SALE OF THE PROPERTY AS CONTEMPLATED HEREUNDER IS NOT CONSUMMATED DUE TO BUYER’S DEFAULT HEREUNDER, INCLUDING ANY RIGHT SELLER MAY HAVE RELATING TO BUYER’S DEFAULT RESULTING IN THE FAILURE OF THE CLOSE OF ESCROW TO OCCUR AS PROVIDED UNDER THIS AGREEMENT. EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 8, SELLER DOES HEREBY SPECIFICALLY WAIVE ANY RIGHT TO PURSUE ANY OTHER REMEDY AT LAW OR EQUITY FOR SUCH DEFAULT OF BUYER, INCLUDING,

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WITHOUT LIMITATION, ANY RIGHT TO SEEK, CLAIM, OR OBTAIN RESCISSION, DAMAGES, PUNITIVE DAMAGES OR CONSEQUENTIAL DAMAGES. IN ANY AND ALL ACTIONS BROUGHT PURSUANT TO OR TO ENFORCE BUYER’S OBLIGATIONS UNDER THIS AGREEMENT, IT SHALL BE CONCLUSIVELY PRESUMED THAT THE ABOVE-DESCRIBED LIQUIDATED DAMAGES SHALL BE THE SOLE REMEDY OF SELLER IN THE EVENT OF BUYER’S DEFAULT HEREUNDER AND IT SHALL NOT BE PROPER UNDER ANY CIRCUMSTANCES THAT BUYER’S OBLIGATION TO PURCHASE THE PROPERTY BE SPECIFICALLY ENFORCED.

SELLER’S INITIALS: _____BUYER’S INITIALS: ______

8.2Buyer’s Remedies. If Seller fails to perform its obligations pursuant to this Agreement after notice thereof and the lapse of one (1) business day for any reason except failure by Buyer to perform hereunder and such failure results in the Closing not occurring as and when contemplated by the terms of this Agreement, and provided that Buyer is otherwise ready and able to perform hereunder, then, Buyer shall elect, as its sole and exclusive remedy, to (i) terminate this Agreement by giving Seller and Escrow Holder timely written notice of such election prior to or at Closing, and recover the Deposit, whereupon the Deposit (minus the Independent Consideration) shall be immediately returned to Buyer, and Seller shall release, waive all claims against, indemnify and defend Buyer against and with respect to any actions taken by Buyer to preserve the Property, and thereafter both Buyer and Seller will be relieved of any further obligations or liabilities hereunder, except for those obligations which expressly survive any termination hereof, or (ii) waive said failure or breach and proceed to Closing.

9.Deliveries to Escrow. At least two (2) business days prior to the close of the Escrow,

9.1Buyer shall deposit, or cause to be deposited, with Escrow Holder the balance of the Purchase Price as described in Section 3.2, above, the Deed, two originally executed counterparts of a general assignment and bill of sale in the form attached hereto as Exhibit D (the “General Assignment and Bill of Sale”), and such other reasonable and customary documents requested by Escrow Holder and/or Title Company; and

9.2Seller shall deposit, or cause to be deposited, with Escrow Holder the Deed, executed and acknowledged by Seller, two originally duly executed counterparts of the General Assignment and Bill of Sale, and such other reasonable and customary documents requested by Escrow Holder and/or Title Company including, without limitation, a FIRPTA certificate in Escrow Holder’s standard form.

10.Prorations and Closing Costs. Real estate taxes shall be prorated as of the Closing Date based on the current tax bill so that Seller bears all such taxes applicable to the period prior to the Closing and Buyer bears all such taxes applicable to the period on and after the Closing. If the amount of the ad valorem taxes for the current year are not available, the amount of ad valorem taxes for the prior year will be used. Seller shall be responsible for the payment of the premium attributable to the Title Policy to the extent applicable to the standard coverage portion, and Buyer shall be responsible for the payment of the premium attributable to the extended coverage portion of the Title Policy in the event the same is issued as an Extended Policy and

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any endorsements desired by Buyer (unless the endorsement is required in order for Seller to remove an exception to which Buyer has given timely objection and which Seller has agreed to remove, in which case, Seller shall bear the cost of such endorsement). Any costs incurred by Buyer to preserve the Property as of the Closing Date (including, but not limited to any repairs, mitigation measures and security costs) shall be Seller’s costs and submitted to Escrow Holder to be offset against the Purchase Price. Except as may be expressly set forth in this Agreement to the contrary, Seller shall pay all recording fees and documentary transfer taxes, Buyer and Seller shall each pay one-half of Escrow Holder’s fee, and all other closing costs shall be divided and borne in accordance with common escrow practices in Tunica County, Mississippi. Prior to the Closing Date, Escrow Holder shall prepare and deliver to Buyer and Seller for review and approval estimated closing statements setting forth the foregoing prorations and allocations of closing costs. Notwithstanding the foregoing or anything to the contrary herein, except to the extent such items are liens against the Property or otherwise obligations relating to Seller or the Property, which shall remain Seller’s obligations and to the extent recorded or filed and known at Closing, shall be paid through escrow as Seller costs, any abatements, concessions, incentives or reimbursements relating to the Property or its operations, received by Buyer, including but not limited to any such incentives from the State of Mississippi and Tunica County, shall be Buyer’s property and for the benefit of Buyer; to the extent any such incentives are received by Seller after the Effective Date, such incentives shall be paid over to or otherwise reimbursed to Buyer, as Buyer’s property.

11.Instructions on Closing. When all conditions precedent to the Close of Escrow have been satisfied or waived as provided herein, Escrow Holder shall (i) cause the Deed to be recorded in the office of the Chancery Clerk of Tunica County, and (ii) deliver (a) to Seller, funds in the amount of the Purchase Price, less or plus the net debit or credit to Seller by reason of the proration and allocation of closing costs, an appropriate escrow closing statement, and an originally executed General Assignment and Bill of Sale, and (b) to Buyer, a file-stamped of the Deed, as recorded in the Chancery Clerk’s office, the Title Policy, an originally executed General Assignment and Bill of Sale, the FIRPTA certificate, and an appropriate escrow closing statement.

12.Representations and Warranties.

12.1Seller’s Representations and Warranties. Except as may be otherwise set forth in the Property Documents, Seller hereby makes the following representations and warranties, as of the date of this Agreement and as of the Close of Escrow:

12.1.1Seller has the requisite right, legal capacity and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transaction contemplated hereby. This Agreement and all other agreements, documents and instruments to be executed in connection herewith have been effectively authorized by all necessary action on the part of Seller, which authorizations remain in full force and effect, have been duly executed and delivered by Seller, and no other proceedings on the part of Seller are required to authorize this Agreement and the transactions contemplated hereby.

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12.1.2Performance of this Agreement by Seller shall not result in any breach of, or constitute any default under, any contract, agreement or instrument to which Seller is a party or render Seller insolvent.

12.1.3Seller is duly formed and validly existing in its state of formation and in good standing in the State of Delaware. Seller has the power, right and authority to enter into this Agreement and the instruments and documents referenced herein, and to consummate the transaction contemplated hereby. The individuals executing this Agreement and the instruments referenced herein on behalf of Seller have the power, right and authority to bind Seller.

12.1.4Seller has not received any written notice from any governmental authority, and Seller does not otherwise have knowledge, that the Property does not comply with any applicable law, ordinance, regulation or governmental order, or that any investigation has been commenced respecting any possible failure to comply with any applicable law, ordinance, regulation or governmental order.

12.1.5There is no claim, action, litigation, arbitration or other proceeding pending or to Seller’s knowledge, threatened, against the Property, Seller or the transactions contemplated hereby and there is currently no governmental investigation, threatened litigation or arbitration proceedings to which Seller is, or would be, a party which relates or would relate to the Property. There is no action, suit, investigation or proceeding (administrative or otherwise) or governmental investigation, formal or informal, including, but not limited to, eminent domain, condemnation, assessment district or zoning change or the environmental condition of the Property (or portion thereof), pending, or to Seller’s knowledge, threatened against or affecting Seller or the Property or any portion of it, the transactions contemplated hereby, or which might affect the right of Buyer to own, operate, or possess the Property or which might have a material effect on the Property, or which adversely affects Seller’s ability to perform hereunder, nor does Seller know of any fact which might give rise to any such action, suit, investigation or proceeding.

12.1.6To Seller’s knowledge, there are no presently pending or anticipated special assessments, except those shown on the Permitted Exceptions. To Seller’s knowledge, there are no existing, proposed or contemplated plans to widen, modify, or realign any street or highway which affects the contemplated size of, use of, or set-backs on the Property and the improvements.

12.1.7To Seller’s knowledge, (i) no Hazardous Materials are now or were formerly used, stored, generated, manufactured, installed, treated, discharged, disposed of or otherwise present at or about the Property, no Hazardous Material was removed or transported from the Property and no underground storage tanks exist on any part of the Property, (ii) the Property is free and has always been free from Hazardous Materials and is not and has never been in violation of any Environmental Laws, (iii) Seller, nor to Seller’s knowledge, any predecessor of Seller, has received no notice, warning, notice of violation, administrative complaint, judicial complaint, or other formal or informal notice alleging that conditions on the Property are or have been in violation of any Environmental Law, or informing Seller that the Property is subject to investigation or inquiry regarding Hazardous Substances on the Property or

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the potential violation of any Environmental Law, (iv) there is no monitoring program required by the Environmental Protection Agency or any similar state agency concerning the Property, and (v) the Property has never been used as a dump or landfill. For purposes hereof, “Hazardous Materials” means (i) petroleum or chemical products, whether in liquid, solid, or gaseous form, or any fraction or by-product thereof, (ii) asbestos or asbestos-containing materials, (iii) polychlorinated biphenyls (PCBs), (iv) radon gas, (v) underground storage tanks, (vi) any explosive or radioactive substances, (vii) lead or lead-based paint, or (viii) any other substance, material, waste or mixture which is or shall be listed, defined, or otherwise determined by any governmental authority to be hazardous, toxic, dangerous or otherwise regulated, controlled or giving rise to liability under any Environmental Laws. “Environmental Laws” means any federal, state or local law (whether imposed by statute, ordinance, rule, regulation, administrative or judicial order, or common law), now or hereafter enacted, governing health, safety, industrial hygiene, the environment or natural resources, or Hazardous Materials, including, without limitation, such laws governing or regulating (i) the use, generation, storage, removal, recovery, treatment, handling, transport, disposal, control, release, discharge of, or exposure to, Hazardous Materials, (ii) the transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of such property, or (iii) requiring notification or disclosure of releases of Hazardous Materials or other environmental conditions whether or not in connection with a transfer of title to or interest in property.

12.1.8Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the United States Internal Revenue Code of 1986.

12.1.9Neither Seller (which includes its partners, members, principal stockholders, any other constituent entities or persons, overseers, trustees and senior executive officers) nor any direct or indirect constituents or affiliates of Seller that either directly or indirectly own 25% or more of Seller or directly or indirectly control Seller have been designated as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx or at any replacement website or other replacement official publication of such list. Seller is not in violation of compliance with the regulations of the Office of Foreign Asset Control of the Department of Treasury and any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or any other governmental action relating thereto.  This representation will be true at all times from the time this is made and until all obligations under this Agreement are satisfied.  In connection with this representation, no later than ten (10) days prior to Closing, Seller shall provide to Buyer all information reasonably required by Buyer to confirm Seller’s compliance with this provision.  Seller represents that all OFAC information provided by Seller to Buyer in connection with this Agreement is true and complete. Buyer shall have the right to extend the Closing for up to ten (10) days as may be required for Buyer to confirm Seller’s compliance with the terms of this Paragraph.

12.1.10Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of any voluntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or

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substantially all of its assets; or (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets.

12.1.11Neither Seller nor, to Seller’s knowledge, any third party, has entered into any leases, licenses, rental agreements or other occupancy or use agreements of any kind or nature affecting the Property, or any agreements providing for a license, or right of entry or occupancy in or to the Property (other than to Buyer) which are effective as of and/or following the Effective Date, and Seller shall not enter into any such contracts or agreements during the term of this Agreement.

12.1.12Except for Buyer under this Agreement, no parties have any rights or options to purchase the Property or any portion thereof.

12.1.13No approval or consent from any third party or any government authority is required in order to consummate the transactions contemplated under this Agreement.

12.1.14To the best knowledge of Seller, all water, sewer, gas, electric, telephone, and drainage facilities and all other utilities required by law for the present use and operation of the Property are installed across public property or valid easements to the boundary lines, and are connected pursuant to valid permits, and Seller has received no notice that such facilities are inadequate to service the Property or are not in good operating condition.

12.1.15Seller is the sole owner of the Property and has good, valid and marketable title to the Property free and clear of all liens, encumbrances, rights, reservations, easements and other exceptions except of record. Without limiting the foregoing, there are no federal, state or local tax liens encumbering Seller’s interest in the Property other than non-delinquent real estate taxes and assessments which may be shown on the Preliminary Report.

12.1.16To Seller’s knowledge, all licenses, approvals, permits and certificates from governmental and quasi-governmental agencies or private parties necessary for the use and operation of the Property for EV manufacturing use and operations were obtained when the Property was conducting such manufacturing, and the Property has been used in accordance with (i) all such approvals, licenses, permits and certificates, (ii) all governmental regulations, and (iii) all covenants, conditions, restrictions, easements and agreements of any kind or nature affecting the Property.

12.1.17Seller has not granted any other person the right to acquire all or any part of the Property, which has not been validly and duly released, and to Seller’s knowledge no person (except for Buyer) has any right to acquire any interest in all or any part of the Property. In connection therewith, there is no right of first offer or right of first refusal granted by Seller in favor of any person with respect to the purchase of all or any part of the Property, which has not been validly and duly released.

12.2Seller's Knowledge. All references in this Agreement to “Seller's knowledge” or words of similar import shall refer to the knowledge of Charles Xiaolin Wang, and shall not be construed to refer to the knowledge of any other person or entity.

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12.3Limitations. No representation or warranty made by Seller in this Agreement shall merge into any instrument of conveyance delivered at the Close of Escrow, but shall survive the Close of Escrow for a period of 1 year. The representations, warranties and limited survival periods set forth herein shall not be deemed or construed as limiting, waiving or relinquishing any statutory or common law right or remedy, and the effect of the representations and warranties made in this Agreement shall not be diminished or deemed to be waived by any inspections, tests or investigations made by Buyer or its agents. Moreover, the provisions of this Section 12 with respect to Hazardous Materials and Environmental Laws are not intended as, nor shall the same be construed to be, a waiver or release by Buyer of any rights which Buyer may have after the Close of Escrow as to the Property or Seller under any Environmental Laws.

13.Seller Covenants. Seller hereby covenants to Buyer as follows:

13.1During the period between the Effective Date and the Close of Escrow or earlier termination of this Agreement, Seller shall not, without the prior written consent of Buyer (which consent may be given or withheld in Buyer’s sole and absolute discretion), enter into any contract with respect to the Property which will survive the Close of Escrow or will otherwise affect the use, operation or enjoyment of the Property after the Close of Escrow.

13.2Seller shall leave and shall not permit the removal of or damage to any items of personal property located within the Buildings or on the Property as of the physical inventory inspection documented by Buyer on February 23, 2021, except that the thirteen (13) S1 racing cars and five (5) Saleen cars owned or manufactured by Steve Saleen (the “Saleen Cars”) and certain documents unrelated to the use, ownership and/or operation of the Property (the “Unrelated Documents”) may be removed by Seller, the owner of the Saleen Cars, or their respective agents or employees, prior to Closing so long as (i) such removal is coordinated through Buyer and (ii) to the extent any damage is caused by or in connection with their removal, Seller shall be responsible for the costs of repairs or replacements either as a direct cost or reimbursed through Escrow. If the Saleen Cars are not removed prior to the Closing, such items shall be deemed abandoned and Buyer may remove or dispose of the Saleen Cars at any time from and after the Closing in its discretion. Seller shall indemnify, defend and hold Buyer harmless with respect to any such actions taken by Buyer prior to and after Closing which are made in accordance with this Agreement.

13.3Except as otherwise provided herein, Seller shall deliver the Property at the Close of Escrow in substantially the same condition as it was on the Effective Date, reasonable wear and tear excepted. Except as otherwise provided herein relating to the Saleen Cars and Unrelated Documents, none of the Personal Property shall be removed from the land or the improvements. Notwithstanding anything to the contrary in this Agreement, prior to Close of Escrow, Seller shall not perform any alterations to the Property without the prior written consent of Buyer, which consent may be withheld in Buyer’s sole and absolute discretion.

13.4Seller shall provide and maintain unfettered access to the Property for Buyer, its agents and employees during the pendency of this Agreement to perform any and all tests, due diligence and physical inspections deemed reasonably necessary by Buyer.

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13.5Seller has paid, or will pay in full, prior to the Close of Escrow, all bills and invoices for labor, goods, material and services of any kind relating to the Property, utility charges, and employee salary and other accrued benefits relating to the period prior to the Close of Escrow.

13.6During the pendency of the Escrow and until the Escrow and this Agreement is terminated as provided herein, Seller shall not market the Property to any person other than Buyer. Without limiting the generality of the foregoing, during such period of time, Seller shall not offer the Property for sale, discuss the terms of any possible sale of the Property with any person, accept or discuss back-up offers or list the Property with any brokers. As used in the foregoing, a “sale” shall include any long term lease other than any lease of space in the ordinary course of managing the Property, and shall also include any joint venture or equity participating loan.

13.7If not already provided, Seller covenants that within one (1) business day of the Close of Escrow, Seller shall deliver to Buyer or its designee (1) all keys, locks, security access codes, garage door openers, and operating manuals relating to the improvements, in Seller’s possession or control, (2) all books, records and other documents and Personal Property in the possession or control of Seller relating to the Property, and (3) executed original copies of all contracts including copies of all files related to such contracts which relate to the use or operation of the Property.

13.8Between the Effective Date and the date of the Close of Escrow, Seller shall not cause or permit the placement of any lien, encumbrance or other matter which would constitute an encumbrance or title exception on all or any portion of the Property.

13.9Between the Effective Date and the date of the Close of Escrow, Seller shall promptly notify Buyer of any of the following that are to Seller’s knowledge or for which Seller receives written notice: 1. violations of any applicable building codes, environmental, zoning, subdivision, and land use laws, and other applicable local, state and federal laws and regulations relating to the use, operation and sale of the Property, 2.condemnation, environmental, zoning or other land-use regulation proceedings relating to the Property, and 3. any actual or threatened litigation against Seller or its principals arising out of Seller’s ownership or operation of the Property. Seller shall promptly deliver, or make available electronically to Buyer legible copies of any such notices received by Seller.

13.10The liability of Seller for a breach of any covenant shall not be merged into any instrument of conveyance delivered at the Close of Escrow and shall survive the Close of Escrow for a period of 1 year. The covenants and survival periods set forth herein shall not be deemed or construed as limiting, waiving or relinquishing any statutory or common law right or remedy, and the effect of the covenants made in this Agreement shall not be diminished or deemed to be satisfied by any inspections, tests or investigations made by Buyer or its agents.

14.Buyer’s Representations and Warranties. Buyer hereby makes the following representations and warranties, as of the date of this Agreement and as of the Close of Escrow:

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14.1.1Buyer has the requisite right, legal capacity and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transaction contemplated hereby. This Agreement and all other agreements, documents and instruments to be executed in connection herewith have been effectively authorized by all necessary action on the part of Buyer, which authorizations remain in full force and effect, have been duly executed and delivered by Buyer, and no other proceedings on the part of Buyer are required to authorize this Agreement and the transactions contemplated hereby.

14.1.2Performance of this Agreement by Buyer shall not result in any breach of, or constitute any default under, any contract, agreement or instrument to which Buyer is a party or render Buyer insolvent.

14.1.3Neither Buyer (which includes its partners, members, principal stockholders, any other constituent entities or persons, overseers, trustees and senior executive officers) nor any direct or indirect constituents or affiliates of Buyer that either directly or indirectly own 25% or more of Buyer or directly or indirectly control Buyer have been designated as a “specifically designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx or at any replacement website or other replacement official publication of such list. Buyer is not in violation of compliance with the regulations of the Office of Foreign Asset Control of the Department of Treasury and any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or any other governmental action relating thereto.  This representation will be true at all times from the time this is made and until all obligations under this Agreement are satisfied.  In connection with this representation, upon request, no later than ten (10) days prior to Closing, Buyer shall provide to Seller all information reasonably required by Seller to confirm Buyer’s compliance with this provision.  Buyer represents that all OFAC information provided by Buyer to Seller in connection with this Agreement is true and complete. Seller shall have the right to extend the Closing for up to ten (10) days as may be required for Seller to confirm Buyer’s compliance with the terms of this Paragraph.

14.2Limitations. The representations and warranties of Buyer to Seller contained in this Agreement (the “Buyer Representations”) shall survive the Closing for a period of twelve (12) months. No claim for a breach of any Buyer Representation, or the failure or default of a covenant or agreement of Buyer that survives Closing, shall be actionable or payable unless (a) the breach in question results from, or is based on, a condition, state of facts or other matter which was not fully disclosed to, or which Seller did not have actual knowledge of prior to Closing, and (b) written notice containing a description of the specific nature of such breach shall have been delivered by Seller to Buyer prior to the expiration of said twelve (12) month survival period. Notwithstanding anything to the contrary contained herein, if Seller is notified in writing by Buyer, or otherwise becomes actually aware, that any Buyer Representation made by Buyer is not true or correct on or before the Closing and Seller nevertheless sells the Property, Seller shall not be entitled to commence any action after Closing to recover damages from Buyer due to such Buyer Representation(s) failing to be true or correct

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(and Seller shall not be entitled to rely on such Buyer Representation). The provisions of this Section 14.2 shall survive the Closing.

15.Right to Enter Property. Commencing on the Effective Date, and continuing thereafter until the Close of Escrow or earlier termination of this Agreement, Buyer and its agents and contractors shall have the right, at Buyer’s sole cost and expense, to: 1. enter onto the Property at all times and in a reasonable manner for the purpose of making such tests and inspections as Buyer deems necessary in connection with this Agreement, and 2. interview the neighbors and prior employees. As a condition to the Close of Escrow (solely for the benefit of Buyer), Buyer and its agents and contractors shall have the right to enter onto the Property to determine that the condition of the Property, with respect to the contingencies set forth in Section 7, above, has not materially and adversely changed from the date of the approval of said contingencies.

16.Operations and Risk of Loss. From and after the Effective Date through the earlier of Closing or the termination of this Agreement:

16.1Seller will perform its obligations under the Service Contracts, if any.

16.2Seller will not enter into any lease of all or any part of the Property, nor any contract that will be an obligation affecting the Property subsequent to the Closing, except contracts entered into at the direction of Buyer and/or that are terminable without cause and without the payment of any termination penalty on not more than thirty (30) days’ prior notice.

16.3Seller shall not alienate, lien, encumber, grant any easements, create any restrictions or otherwise change the current condition of title to the Property or transfer all or any portion of the Property or enter into any agreement to transfer all or any portion of the Property (other than to Buyer at the Closing).

16.4Seller shall comply with all covenants, conditions, restrictions, laws, statutes, rules, regulations and ordinances applicable to the Property.

16.5Seller shall provide Buyer with copies of all written notices received by Seller after the Effective Date which assert any breach of Service Contracts upon receipt or any written notices received by Seller from any governmental agency or authority relating to any investigation of the Real Property or from any third party asserting a breach or violation of any covenants, conditions and restrictions or any other agreements affecting the Property.

17.Miscellaneous.

17.1“As Is” Transaction. Buyer acknowledges that the rights under Section 4 are being afforded to Buyer in order to enable Buyer to conduct its own inspections, reviews and investigations, and Buyer hereby represents and warrants that, as of the Closing Date, Buyer will have made such independent inspections, reviews and investigations as Buyer has deemed necessary or appropriate (or, in the alternative, Buyer has elected at its risk not to make such independent inspections, reviews and investigations) concerning the condition, ownership, use, development, and suitability for development of the Property. With the exception of the representations and warranties of Seller set forth in this Agreement (and subject to the limitations

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with respect to such representations and warranties), and Seller’s warranties of title in the Deed, the sale of the Property shall be strictly on an “as is, where is” basis. With the exception of the representations and warranties of Seller set forth in this Agreement (and subject to the limitations with respect to such representations and warranties), Seller has not made, does not hereby make, and shall not hereafter be required to make any warranties, representations or guaranties, express, implied or statutory, written or oral, concerning the Property or any portion thereof or any interest therein.

17.2Casualty. If prior to Closing the Property is damaged by fire, earthquake or other casualty, Buyer shall estimate the cost to repair and the time required to complete repairs and will provide Seller written notice of Buyer’s estimation (the “Casualty Notice”) as soon as reasonably possible after the occurrence of the casualty. If the damage is Material Damage (defined below), Buyer may, at its option, terminate this Agreement by delivering written notice to Seller on or before the expiration of five (5) business days after the date Seller receives the Casualty Notice. Upon any such termination, the Deposit shall be returned to Buyer and the parties hereto shall have no further rights or obligations hereunder, other than those that by their terms survive the termination of this Agreement. If Buyer does not so terminate this Agreement or if the damage to the Property is not Material Damage, Buyer’s obligation to pay the Purchase Price shall be credited by the estimated cost to complete the repairs. For the purposes of this Agreement, “Material Damage” means damage which, in the reasonable estimation of the licensed contractor as selected below, exceeds $100,000 to repair. Any such estimate of the repair costs shall be performed by a licensed contractor selected and approved by Buyer.

17.3Condemnation. If proceedings in eminent domain are instituted with respect to the Property or any portion thereof, then Buyer may, at its option, by written notice to Seller given on the later of five (5) days prior to the Closing Date or within ten (10) days after Seller notifies Buyer of such proceedings, either: (i) terminate this Agreement, in which case the Deposit shall be immediately returned to Buyer and the parties hereto shall have no further rights or obligations, other than those that by their terms survive the termination of this Agreement, or (ii) proceed under this Agreement, in which event Seller shall, at the Closing, assign to Buyer its entire right, title and interest in and to any condemnation award (and deliver to Buyer all amounts received by Seller), and Buyer shall have the sole right after the Closing to negotiate and otherwise deal with the condemning authority in respect of such matter. If Buyer does not give Seller written notice of its election within the time required above, then Buyer shall be deemed to have elected option (i) above.

17.4Assignment. The provisions hereof shall inure to the benefit of, and shall be binding upon, the heirs, executors, administrators, successors and assigns of the respective parties. Buyer may assign all of its rights or interests under this Agreement to an entity (i) owned, controlled or managed by, or under common ownership, control or management with, Buyer, or (ii) that is a joint venture with any of the foregoing, and/or (iii) to nominate any entity in whom the title of the Property is to vest at the Close of Escrow.

17.5Notices. All notices and other communications pertaining hereto shall be in writing and delivered to the party to receive notice at the address for such party shown on the signature page hereof. Notices shall be deemed to have been given when delivered personally or via email transmittal or three days after being deposited in U.S. certified or registered mail,

16


return receipt requested, postage prepaid, or upon delivery by a reputable overnight courier which keeps records of actual delivery as such delivery is reflected in the records maintained by the overnight courier, provided that any email transmittal given after 5:00 p.m. California time shall be deemed given on the next business day. A party may change its address for notice from time to time in writing pursuant to the provisions of this paragraph.

17.6Time. As used herein, the term “days” shall mean calendar days unless otherwise expressly stated; provided, however, that if a deadline or date for performance under this Agreement falls on a Saturday, Sunday or legal holiday, the deadline or the date for performance shall automatically be extended to the next day which is not a Saturday, Sunday or legal holiday, provided that if the Closing Date is scheduled to fall on the first day following a Saturday, Sunday or legal holiday, the Closing Date shall automatically be extended to the second day following a Saturday, Sunday or legal holiday. Time is of the essence of this Agreement with respect to every provision in which time is a factor. Buyer and Seller acknowledge that their agreement to make time of the essence forms an integral part of this Agreement, that they would not have entered into this Agreement but for such provision.

17.7Entire Agreement. This Agreement, including the recitals and the exhibits attached hereto represents a final expression and a complete and exclusive statement of the agreement of the parties hereto pertaining to the subject matter hereof, and fully supersedes all prior agreements, understandings and/or discussions between the parties hereto pertaining to the subject matter hereof. No change in, modification of or addition, amendment or supplement hereto shall be valid unless set forth in writing signed and dated by each of the parties hereto following the signing of this Agreement.

17.8Applicable Law, Construction. The existence, validity, construction and operational effect of this Agreement, and the respective rights and obligations of each of the parties hereto hereunder, shall be determined in accordance with the laws of the State of Mississippi, provided, however, any and all other provisions of this Agreement to the contrary notwithstanding, (a) in the event that any provision of this Agreement is found to be prohibited by law or is otherwise held invalid, such provision shall be ineffective only to the extent of such prohibition or invalidity and shall not invalidate or otherwise render ineffective any or all of the remaining provisions of this Agreement, (b) this Agreement shall be construed as if equally drafted by each of the parties hereto, (c) nothing herein shall be construed as creating either a partnership or an employment relationship between the parties hereto, and (d) neither the failure of any party hereto to insist at any time upon the strict performance of any provision of this Agreement or to act upon or exercise any right or remedy available or possibly available to such party, whether hereunder at law, in equity, or otherwise shall be interpreted as a waiver or a relinquishment of any provision, right or remedy unless specifically expressed in writing signed by such party and no payment hereunder or otherwise shall constitute any such writing.

17.9Further Assurances. Except as otherwise expressly provided hereunder, each of the parties hereto, without further consideration, does hereby covenant and agree (a) to execute such documents, and to take such further action, as may be reasonably necessary to further the purposes of this Agreement, and (b) to otherwise act in good faith and deal fairly hereunder. The foregoing sentence is not intended, nor should it be construed, as a limitation on, or a derogation of, a party’s right to act in its “sole and absolute discretion” whenever (and if)

17


such right is expressly granted herein. Buyer and Seller agree to execute such instructions to the Title Company and such other instruments and to do such further acts as may be reasonably necessary to carry out the provisions of this Agreement. The provisions of this subsection shall survive the Close of Escrow.

17.10Counterparts. This Agreement may be executed in several counterparts and all such executed counterparts shall constitute one agreement binding on all of the parties hereto exactly as if all parties hereto had executed the same counterpart in spite of the fact that they did not execute the same counterpart. A facsimile or electronic PDF of a party’s signature or initials shall have the same force and effect as the original ink signed signature and initials of such party.

17.11Headings, Gender and Clarifications. The section headings used in this Agreement are intended solely for convenience of reference and shall not in any way or manner amplify, limit, modify or otherwise be used in the interpretation of any of the provisions hereof. The masculine, feminine and neuter gender, and the singular or plural number, shall be deemed to include the other. Whenever the context so indicates or requires, items identified in this Agreement as conditions shall also be covenants and agreements.

17.12Successors. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto.

17.13Brokers. In connection with the transaction contemplated by this Agreement, Buyer and Seller each represent to the other that they have not entered into any agreement or incurred any obligation which might result in the obligation to pay a sales or brokerage commission or finder’s fee with respect to this transaction. The party through whom any other broker or finder makes a claim shall hold harmless, indemnify and defend the other party hereto, its successors and assigns, agents, employees, officers and directors, and the Property from and against any and all obligations, liabilities, claims, demands, liens, encumbrances and losses (including, without limitation, attorneys’ fees), whether direct, contingent or consequential, arising out of, based on, or incurred as a result of such claim. The obligations of Buyer and Seller under this Section 17.13 shall survive the Closing or earlier termination of this Agreement.

17.14No Third Party Benefit. This Agreement is intended to benefit only the parties to this Agreement, and no other person or entity has or shall acquire any rights under this Agreement.

17.15Relationship. Notwithstanding anything to the contrary contained herein, this Agreement shall not be deemed or construed to make the Parties hereto partners or joint venturers, or to render either Party liable for any of the debts or obligations of the other, it being the intention of the Parties to merely create the relationship of Seller and Buyer with respect to the Property to be conveyed as contemplated hereby.

17.16Attorneys’ Fees and Costs. In the event of litigation, arbitration or other judicial or quasi-judicial process to enforce this Agreement or any of its terms, the prevailing

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party shall be entitled to reimbursement from the other party of its reasonable attorneys’ fees and costs.

[The remainder of this page is intentionally blank; signatures on the next page.]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

Seller:

    

Buyer:

Saleen Motors International, LLC,

Mullen Technologies, Inc.,

a Delaware limited liability company

a California corporation

By:

/s/ Charles X. Wang

By:

/s/ David Michery

Name:

Charles X. Wang

Name:

David Michery

Title:

President & CEO

Title:

Chairman & CEO

Address:

Address:

Saleen Motors International, LLC

Mullen Technologies, Inc.

c/o 11301 Kellie Jean Ct

1405 Pioneer Rd.

Great Falls, VA 22066

Brea, CA 92821

Attention: Charles X. Wang,

Attention: David Michery,

President & CEO

Chairman and CEO

With a copy to:

Manatt, Phelps & Phillips, LLP

2049 Century Park East, Suite 1700

Los Angeles, California 90067

Attention: Alison Weinberg-Fahey, Esq.

E-mail Address: aweinberg-fahey@manatt.com

Phone No. (310) 312-4167

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ACCEPTANCE BY ESCROW HOLDER:

First American Title Insurance Company hereby acknowledges that it has received a fully executed copy of the foregoing Agreement of Purchase and Sale of Real Property and Joint Escrow Instructions and agrees to act as Escrow Holder thereunder and to be bound by and strictly perform the terms thereof as such terms apply to Escrow Holder.

FIRST AMERICAN TITLE INSURANCE COMPANY

By:

Name:

Maria Martinez

Title:

Lead Commercial Escrow Officer

Address:

777 South Figueroa Street

Fourth Floor

Los Angeles, CA 90017

Direct: 213.271.1780

Email: mariamartinez@firstam.com

Attention: Maria Martinez

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Exhibit A

Legal Description

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Exhibit B

Property Documents

1. Any real estate and personal property tax bills and assessment notices for the Property for the previous calendar year and year to date.
2. All existing title documents related to the Property, including any legal description, title commitment or policy, attorney’s certificate of title, survey, plat maps and/or deed.
3. All Service Contracts, including all contracts and agreements pertaining to the operation of the Property, including, without limitation, service contracts (including but not limited to landscaping, alarms(s) and fire monitoring), management agreements, leasing agreements, maintenance agreements and equipment leases.
4. All site plan, subdivision, zoning, construction or other development permits, licenses, approvals, resolutions and authorizations issued by any government authority relating to the Property.
5. Any existing certificates of occupancy, licenses, permits, authorizations, consents and other governmental approvals relating to the Property.
6. All leases, and any guaranties thereof, and any other occupancy agreements, and all amendments and modifications thereof, affecting the Property.
7. Any and all environmental and engineering reports or studies related to the Property, including soil tests.
8. Any demand by the State of Mississippi or Tunica County regarding claw-backs of economic incentives.

23


Exhibit C

Special Warranty Deed


Prepared by Rod Clement (MS Bar 6294), Bradley Arant Boult Cummings LLP, 188 E. Capitol Street, Suite 1000, Jackson, MS 39201, telephone 601-592-9944

After recording return to: Manatt, Phelps & Phillips, LLP, Attn: Alison Weinberg-Fahey, Esq., 2049 Century Park East, Suite 1700, Los Angeles, CA 90067, telephone (310) 312-4167

Grantor: Saleen Motors International, LLC, c/o 11301 Kellie Jean Ct., Great Falls, VA 22066 Attention: Charles X. Wang, President & CEO, telephone (202) 676-6189

Grantee: Mullen Technologies, Inc., 1405 Pioneer St., Brea, CA 92821, Attn: David Michery, President & CEO, telephone (562) 565-9967

Indexing instructions:

SPECIAL WARRANTY DEED

For and in consideration of Ten Dollars ($10.00) cash in hand paid, and other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Saleen Motors International LLC, a Delaware limited liability company (“Grantor”),  hereby GRANTS, BARGAINS, SELLS CONVEYS AND WARRANTS SPECIALLY to Mullen Technologies, Inc., a California corporation (“Grantee”), all that certain land situated in the City of Robinsonville, County of Tunica, State of Mississippi, and more particularly described on Schedule 1 attached hereto, together with all of Grantor’s right, title and interest in and to all appurtenances thereon or in any way appertaining thereto and all of Grantor’s right, title and interest in and to all buildings, structures, fixtures and improvements located thereon (said land, real property, rights improvements and appurtenances being herein collectively referred to as the “Property”).

Grantor’s special warranty of title is subject to the matters listed on Schedule 2 attached hereto.  Grantor will forever warrant and defend the title of the Property unto Grantee and its assigns and successors against the claims of all persons claiming by, through or under Grantor.

IN WITNESS WHEREOF, Grantor has caused this Special Warranty Deed to be executed on the date of its acknowledgment below, and effective as of April 22, 2021.

24


    

GRANTOR:

SALEEN MOTORS INTERNATIONAL, LLC,

a Delaware limited liability company

By:

Name:

Charles X. Wang

Title:

President & CEO

STATE OF ____________________

COUNTY OF  ___________________

Personally appeared before me, the undersigned authority in and for the said county and state, on this __ day of ____________, 2021, within my jurisdiction, the within named _____________________, who proved to me on the basis of satisfactory evidence to be the person whose name is subscribed in the above and foregoing instrument and acknowledged that he executed the same in his representative capacity, and that by his signature on the instrument, and as the act and deed of the entity upon behalf of which he acted, executed the above and foregoing instrument, after first having been duly authorized so to do.1

Notary Public

My commission expires:

____________________

(seal


1Prior to Closing the notary form may be updated based on where the deed is notarized. In all cases, the deed will be notarized on the Mississippi form or a form that meets Mississippi requirements.

25


Exhibit A to Special Warranty Deed

Legal Description


Exhibit B to Special Warranty Deed

Exceptions to Grantor’s Special Warranty

1. Ad valorem taxes for 2021, which taxes are not due or payable until 2022.

2.


Exhibit D

Bill of Sale and General Assignment

This Bill of Sale and General Assignment (“Bill of Sale and Assignment”) is made as of April 22, 2021 by and between Saleen Motors International, LLC, a Delaware limited liability company (“Assignor”), for the benefit of Mullen Technologies, Inc., a California corporation (“Assignee”).  All capitalized terms used but not defined herein shall have the same meanings ascribed to such terms in the Purchase Agreement.

Pursuant to that certain Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions, dated as of March 9, 2021 (the “Purchase Agreement”), Assignor agreed to sell to Assignee certain real property located in the City of Robinsonville, County of Tunica, State of Mississippi, commonly known as 1 GreenTech Drive, designated as APN 3104-20000-0000202, and more particularly described on Schedule 1 attached hereto and incorporated by this reference herein (the “Real Property”).  In addition to the Real Property, Assignor agreed to sell to Assignee all of the appurtenances and other rights associated with the Real Property (collectively, the “Property”).  Effective as of the date hereof, Assignor hereby conveys, grants, transfers, sets over, assigns, releases, delivers and confirms to Assignee all of Assignor’s right, title and interest in and to and under free and clear of all liens and encumbrances all tangible personal property owned by Seller and/or used in connection with the operation and/or ownership of the Property (the “Tangible Personal Property”); and all right, title and interest of Assignor in and to all intangible personal property now owned by Assignor and/or used in connection with the operation, ownership, maintenance, management or occupancy of the Property including, without limitation, any and all of the following: plans, drawings and specifications, if any, including as-built plans (subject to the rights of the architects and/or engineers preparing same and/or of other third parties); warranties, guarantees, indemnities and claims against third parties; permits, approvals and licenses; insurance proceeds and condemnation awards to the extent provided in the Purchase Agreement and records relating to the Property to be delivered to and/or made available by Assignor to Assignee; applications, governmental approvals, development rights and entitlements, surveys, maps, books and records, licenses, authorizations, and permits, if any, owned by Assignor and located on, and used in connection with the operation of the Property or the Property Agreements (“Intangible Personal Property” and collectively with the Tangible Property, the “Personal Property”).

Assignor hereby represents that it has legal title to the Personal Property and conveys such title free and clear of all liens and encumbrances in order to assign, transfer and convey such Personal Property to Assignee hereunder.

Effective as of the date hereof, Assignee accepts the foregoing assignment of Personal Property and shall be entitled to all rights and benefits accruing to Assignor thereunder and hereby assumes all obligations arising or accruing thereunder from and after the date hereof.

28


This Assignment shall be governed by and interpreted in accordance with the laws of the State of Mississippi.  The parties shall execute all further instruments and undertakings or further assurance as may be reasonably required in connection with this Assignment.  This Assignment shall be binding on the parties and their respective successors and assigns.

In witness whereof, the parties have executed this Bill of Sale and Assignment as of the date first written above.

Assignor:

    

Assignee:

Saleen Motors International, LLC,

Mullen Technologies, Inc.,

a Delaware limited liability company

a California corporation

By:

By:

Name:

Charles X. Wang

Name:

David Michery

Title:

President & CEO

Title:

Chairman & CEO

29


Schedule “1”

to

General Assignment and Bill of Sale

Legal Description of the Real Property

30


FIRST AMENDMENT

TO

AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY

AND JOINT ESCROW INSTRUCTIONS

AND TO

LEASE

This First Amendment to both the Purchase Agreement and Lease (each, as defined in the Recitals below) (this “First Amendment”) is made and entered into as of July 23, 2021, by and among SALEEN MOTORS INTERNATIONAL, LLC, a Delaware limited liability company (“Seller”), and MULLEN TECHNOLOGIES, INC., a California corporation (“Buyer”).  Buyer and Seller shall be collectively referred to as the “Parties” herein.

WITNESSETH:

WHEREAS, pursuant to the terms of that certain Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions dated as of March 9, 2021 by and between Buyer and Seller (the “Purchase Agreement”), Buyer agreed to purchase from Seller and Seller agreed to sell to Buyer the Property (as defined in the Purchase Agreement) located in Tunica Resorts, MS.  Capitalized terms used but not defined in this First Amendment shall have the meanings ascribed to such terms in the Purchase Agreement or the Lease, as applicable.

WHEREAS, pursuant to the terms of that certain Lease dated as of April 28, 2021 between Buyer (as “Tenant”) and Seller (as “Landlord”) (the “Lease”), Buyer currently occupies and leases the Property from Seller.

WHEREAS, the Expiration Date (as defined in the Lease) is currently set to expire July 31, 2021.

WHEREAS, Buyer and Seller have desire to amend and have agreed to set the Closing Date (under the Purchase Agreement) and extend the Expiration Date (under the Lease) for up to an additional six (6) calendar months in exchange for a One Million and 00/100 Dollar ($1,000,000.00) as an extension payment from Buyer to Seller (the “Extension Payment”).

WHEREAS, Buyer and Seller are entering into this First Amendment to (i) amend the Closing Date to a date no later than January 31, 2022; (ii) extend the Expiration Date for up to six (6) calendar months, to expire January 31, 2022, unless sooner terminated; and (iii) provide for the Extension Payment.

NOW, THEREFORE, in consideration of the foregoing, the Parties do hereby enter into this First Amendment and hereby agree as follows:

A.Extension Payment.  Section 3 of the Purchase Agreement is hereby amended to insert a new Section 3.4, as follows:

3.4Extension Payment.  Not later than July 23, 2021, Buyer shall deliver to Seller by wire transfer the amount of One Million and 00/100 Dollar ($1,000,000.00) (the “Extension Payment”).  The Extension Payment shall be non-refundable to Buyer, provided, however, that at the Close of Escrow, the Extension Payment shall be credited in full toward payment of the Purchase Price.  The Extension Payment shall be delivered to Seller in accordance with the following wire instructions:

31


B.Closing Extension.  The first sentence Section 6 of the Purchase Agreement is hereby amended and modified to delete the stricken language and insert the italicized language, as follows:

“6Close of Escrow.  The close of the Escrow (“Close of Escrow” or “Closing”) shall occur on the date January 31, 2022 (the “Closing Date”) which is one (1) business day after the expiration of the Feasibility Inspection Period, or at such other time mutually agreed upon by the parties earlier date set by Buyer, with advance notice via email to Seller.”

C.Extension of Term of Lease.  Section 3 of the Lease is hereby amended to delete the existing language in its entirety and replace it with the following:

3.Term.The term of this Lease shall commence on May 1, 2021 (the “Commencement Date”) and expire on January 31, 2022 (the “Expiration Date”).  Notwithstanding the foregoing or anything to the contrary herein, the term of this Lease shall automatically terminate effective as of the earlier of (i) the Closing, or (ii) Tenant’s termination prior to the expiration of this Lease.

D.Rent.  Section 6 of the Lease is hereby amended to delete the existing language in its entirety and replace it with the following:

6.Rent.  Tenant pre-paid rent for the first three (3) months of the term (through and including July 31, 2021) in the amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00), which amount is not refundable if the Tenant terminates this Lease before the expiration of the term.  Thereafter, monthly rent shall be prepaid by the fifth (5th) day of each calendar month in the amount of Fifty Thousand and 00/100 Dollars ($50,000.00) per month (“Rent”).  If this Lease terminates prior to the Expiration Date, Tenant shall be entitled to a pro rata (based on the number of calendar days in such month) credit against the Purchase Price for Rent paid in advance under the Lease for time periods occurring after the Closing Date or the termination date.

E.Ratification.  The Parties hereby agree that, except as expressly modified by the terms of this First Amendment, the Purchase Agreement and the Lease shall each remain in full force and effect and its provisions (and each Party’s rights, obligations and agreements thereunder) are hereby reaffirmed, ratified and affirmed.

E.Additional Assurances.  Each Party shall execute such additional instruments as may be reasonably required to carry out the intent of this First Amendment.

F.Binding Effect.  This First Amendment shall bind the Parties and their heirs, successors and assigns.
G.Entire Agreement.  The Purchase Agreement and the Lease, each as amended by this First Amendment, constitute the entire agreement of the Parties, as a complete and final integration thereof.  All understandings and agreements heretofore had between and among the parties with respect to the subject matter of the Purchase Agreement and the Lease, each as amended by this First Amendment, are merged into Purchase Agreement and the Lease, which fully and completely expresses the Parties’ understandings.

32


H.Counterparts.  This First Amendment may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. A facsimile or electronic PDF of a Party’s signature or initials shall have the same force and effect as the original ink signed signature of such Party.

[The remainder of this page is intentionally left blank]

33


IN WITNESS WHEREOF, the parties have executed the foregoing effective as of the date first set above.

SELLER:

SALEEN MOTORS INTERNATIONAL, LLC,

a Delaware limited liability company

By:

/s/ Charles X. Wang

Name:

Charles X. Wang

Its:

President & CEO

BUYER:

MULLEN TECHNOLOGIES, INC.,

a California corporation

By:

/s/ David Michery

Name:

David Michery

Its:

Chairman & CEO

ESCROW HOLDER (with respect to acknowledging the modified terms to the Purchase Agreement, including application of the Extension Payment and Rent (being paid directly to Seller and not through escrow) against the Purchase Price:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:

/s/ Maria Martinez

Name:

Maria Martinez

Its:

Lead Commercial Escrow Officer


Exhibit 10.25

CONSULTING AGREEMENT

This Amendment is made and entered into this 26th day of October 2021, by and between Mullen Technologies, Inc., located at 1405 Pioneer Street, Brea, CA 92821 (the “Company”) and Mary Winter, (the “Consultant”).

The Company hereby enters into this Agreement for services with Consultant to compensate for Corporate Secretary services and Director duties provided for the period of October 1, 2021 for one calendar year through Sept. 30, 2022 in the amount of $60,000 annually or $5,000 per month.

1. Any notice or other communication required under this Agreement shall be in writing and sent to the address set forth as follows:

Mullen Technologies, Inc.

1405 Pioneer Street

Brea, CA 92821

Mary Winter

Notices or communications to or between the Parties shall be deemed to have been delivered when mailed by first class mail, provided that notice of default or termination shall be sent by registered or certified mail, or, if personally delivered, when received by such party.

2. In the event that any court of competent jurisdiction shall hold any provision of this Agreement unenforceable or invalid, such holding shall not invalidate or render unenforceable any other provision hereof.

3. All other prior discussions, communications and representations concerning the subject matter of this Agreement are superseded by the terms of this Agreement, and except as specifically provided herein, this Agreement constitutes the entire agreement with respect to the subject matter hereof.

1


In Witness Whereof, the parties signify their agreement effective the date above first written by the signatures affixed below.

COMPANY

    

CONSULTANT

BY:

/s/ David Michery

BY:

/s/ Mary Winter

David Michery

Mary Winter

10/26/2021

10/26/2021

(Date)

(Date)

2


Exhibit 10.26

CONSULTING AGREEMENT

This Consulting Agreement (this “Agreement”) is made and entered into this 17th day of September 2021, by and between Mullen Technologies, Inc., located at 1405 Pioneer Street, Brea, CA 92821 (the Company”) and Preferred Management Partners Inc. located at 1543 Villa Rica Dr., Henderson, NV   89052, (the Consultant”).

In consideration of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the Company and the Consultant (individually “Party” and collectively “Parties”) agree as follows:

SERVICES PROVIDED

1.

The Company hereby agrees to engage the Consultant to resume negotiations between the Company and Quiantu Motor Cars to enable the Company procure the complete intellectual property ownership rights related to the K-50 automobile (“Services”).

2.

The Services may also include any other consulting tasks which the Parties may agree on. The Consultant hereby agrees to provide such Services to the Company.

TERMS OF THE AGREEMENT

3.

The term of the Agreement (“Term”) will begin on the date of this Agreement and will remain in full force and effect until September 17, 2022, unless extended in writing by the Parties hereto..

PERFORMANCE

4.

The Consultant agrees devote such time, attention and energy as reasonably necessary to perform the Services.

COMPENSATION

5.

As compensation for entering into this Agreement and providing the Services to the Company, the Company will compensate the Consultant with 750,000 restricted shares of the Company’s common stock.  In the event the Consultant is successful in assisting the Company with obtaining the intellectual property rights to the Quiantu Motor Cars K-50 automobile, the Company shall pay the Consultant and additional 750,000 shares of restricted common stock of the Company. .

REIMBURSEMENT OF EXPENSES

1


6.

The Company will not be responsible for any expenses of the Consultant and all fees and expenses Consultant incurs while providing the Services will be the sole responsibility of the Consultant.

CONFIDENTIALITY

7.

Confidential information (“Confidential Information”) refers to any data or any information relating to the Company, whether business or personal, which would reasonably be considered to be private or proprietary to the Company and that is not generally known and where the release of that Confidential Information could reasonably be expected to cause harm to the Company.

8.

The Consultant agrees that they will not disclose, divulge, reveal, report or use, for any purpose, any Confidential Information which the Consultant has obtained, except as authorized by the Company or as required by law. The obligations of confidentiality will apply during the term of this Agreement and will survive indefinitely upon termination of this Agreement.

9.

All written and oral information and material disclosed or provided by the Company to the Consultant under this Agreement is Confidential Information regardless of whether it was provided before or after the date of this Agreement or how it was provided to the Consultant.

OWNERSHIP OF INTELLECTUAL PROPERTY

10.

All intellectual property and related material, including any trade secrets, moral rights, goodwill, relevant registrations or applications for registration, and rights in any patent, copyright, trademark, trade dress, industrial design and trade name (“Intellectual Property”) that is developed or produced under this Agreement, is a “work made for hire” and will be the sole property of the Company.

11.

The Consultant will be responsible for any and all damages resulting from the unauthorized use of the Intellectual Property.

RETURN OF PROPERTY

12.

Upon the expiration of this Agreement, the Consultant will return to the Company any property, documentation, records, or Confidential Information which is the property of the Company.

CAPACITY/INDEPENDENT CONTRACTOR

13.

In providing the Services under this Agreement it is expressly agreed that the Consultant is acting as an independent contractor and not as an employee. The Consultant and the Company acknowledge that this Agreement does not create a partnership or joint venture between them, and is exclusively a contract for service. The

2


Company is not required to pay, or make contributions to, any social security, local, state or federal tax, unemployment compensation, workers’ compensation, insurance premium, profit-sharing, pension or any other employee benefit for the Consultant during the term of this Agreement. The Consultant is responsible for paying, and complying with reporting requirements for, all local, state and federal taxes related to payments made to the Consultant under this Agreement.

RIGHT OF SUBSTITUTION

14.

Except as otherwise provided in this Agreement, Consultant may not engage a third-party subcontractor to perform any of the obligations of the Consultant under this Agreement unless authorized in writing by the Company.

15.

In the event the Consultant, with the consent of the Company, hires a sub-contractor:

·

The Consultant shall pay the sub-contractor for its services and the compensation shall remain payable by the Company to the Consultant.

·

For the purposes of indemnification, the sub-contractor is an agent of the Consultant.

AUTONOMY

20.

Except as otherwise provided in this Agreement, the Consultant shall have full control over working time, methods, and decision making in relation to provisions of the Services in accordance with the Agreement. The Consultant will work autonomously and not at the direction of the Company. However, the Consultant will be responsive to the reasonable needs and concerns of the Company.

EQUIPMENT

21.

Except as otherwise provided in this Agreement, the Consultant will provide at the Consultant’s own expense, any and all equipment, software, materials, and any other supplies necessary to deliver the Services in accordance with the Agreement.

NO EXCLUSIVITY

22.

The Parties acknowledge that this Agreement is non-exclusive and either Party will be free, during and after the term of this Agreement, to engage or contract with third-parties for the provision of services similar to the Services.

NOTICE

22.

Any notice or other communication required under this Agreement shall be in writing and sent to the address set forth as follows:

3


Mullen Technologies, Inc.

1405 Pioneer Street

Brea, CA 92821

23.

Notices or communications to or between the Parties shall be deemed to have been delivered when mailed by first class mail, provided that notice of default or termination shall be sent by registered or certified mail, or, if personally delivered, when received by such party.

INDEMNIFICATION

24.

Expect to the extent paid in settlement from any applicable insurance policies, and to the extent permitted by applicable law, each Party agrees to indemnify and hold harmless the other Party, and its respective affiliates, officers, agents, employees, and permitted successors and assigns against any and call claims, losses, damages, liabilities, penalties, punative damages, expenses, reasonable legal fees and costs of any kind or amount whatsoever, which result from or arise out of any act or omission of the indemnifying party, its respective affiliates, officers, agents, employees, and permitted successors and assigns that occurs in connection with this Agreement. This indemnification will survive the termination of this Agreement.

MODIFICATION OF AGREEMENT

25.

Any amendment or modification of this Agreement or additional obligation assumed by either Party in connection with this Agreement will only be binding if evidenced in writing signed by each Party or an authorized representative of each Party.

ASSIGNMENT

26.

The Consultant will not voluntarily, or by operation of law, assign or otherwise transfer its obligations under this Agreement without the prior written consent of the Company.

ENTIRE AGREEMENT

27.

All other prior discussions, communications and representations concerning the subject matter of this Agreement are superseded by the terms of this Agreement, and except as specifically provided herein, this Agreement constitutes the entire agreement with respect to the subject matter hereof.

GOVERNING LAW

28.

This Agreement will be governed by and construed in accordance with the laws of the State of California.

4


SEVERABILITY

29.

In the event that any court of competent jurisdiction shall hold any provision of this Agreement unenforceable or invalid, such holding shall not invalidate or render unenforceable any other provision hereof.

WAIVER

30.

The waiver by either Party of a breach, default, delay or omission of any of the provisions of this Agreement by the other Party will not be construed as a waiver of any subsequent breach of the same or other provisions.

DISPUTES

31

Any controversy or claim by Consultant against the Company or any of its parent companies, subsidiaries, affiliates (and/or officers, directors, employees, representatives or agents of the Company and such parent companies, subsidiaries and/or affiliates), including any controversy or claim arising from, out of or relating to this Agreement, the breach thereof, or the Services or termination thereof of Consultant by the Company which would give rise to a claim under federal, state or local law (including, but not limited to, claims based in tort or contract, claims for discrimination under state or federal law, and/or claims for violation of any federal, state or local law, statute or regulation), or any claim against Consultant by the Company (individually and/or collectively, “Claim[s]”) shall be submitted to an impartial mediator (“Mediator”) selected jointly by the Parties. Both Parties shall attend a mediation conference and attempt to resolve any and all Claims. If the Parties are not able to resolve all Claims, then upon written demand for arbitration to the other Party, which demand shall be made within a reasonable time after the Claim has arisen, any unresolved Claims shall be determined by final and binding arbitration in California, in accordance with the provisions of the American Arbitration Association (collectively, “Rules”) by a neutral arbitrator experienced in employment law, licensed to practice law in California. In no event shall the demand for arbitration be made after the date when the institution of legal and/or equitable proceedings based upon such Claim would be barred by the applicable statute of limitations. Each Party to the arbitration will be entitled to be represented by counsel and will have the opportunity to take depositions in California, of any opposing Party or witnesses selected by such Party and/or request production of documents by the opposing Party before the arbitration hearing. By mutual agreement of the Parties, additional depositions may be taken at other locations. In addition, upon a Party's showing of need for additional discovery, the arbitrator shall have discretion to order such additional discovery. Consultant acknowledges and agrees that Consultant is familiar with and fully understands the need for preserving the confidentiality of the Company's agreements with third parties and compensation of the Company's employees. Accordingly, Consultant hereby agrees that to the extent the arbitrator determines that documents, correspondence or other writings (or portions thereof)

5


whether internal or from any third party, relating in any way to Consultant’s agreements with third parties and/or compensation of other employees are necessary to the determination of any Claim, Consultant and/or Consultant’s representatives may

discover and examine such documents, correspondence or other writings only after execution of an appropriate confidentiality agreement. Each Party shall have the right to subpoena witnesses and documents for the arbitration hearing. A court reporter shall record all arbitration proceedings. With respect to any Claim brought to arbitration hereunder, either Party may be entitled to recover whatever damages would otherwise be available to that Party in any legal proceeding based upon the federal and/or state law applicable to the matter. The arbitrator shall issue a written decision setting forth the award and the findings and/or conclusions upon which such award is based. The decision of the arbitrator may be entered and enforced in any court of competent jurisdiction by either the Company or Consultant. Notwithstanding the foregoing, the result of any such arbitration shall be binding but shall not be made public (including by filing a petition to confirm the arbitration award), unless necessary to confirm such arbitration award after non-payment of the award for a period of at least fifteen (15) days after notice to the Company of the arbitrator's decision or otherwise required by law. Each Party shall pay the fees of their respective attorneys (except as otherwise awarded by the arbitrator), the expenses of their witnesses, and all other expenses connected with presenting their Claims or defense(s). Other costs of arbitration shall be borne by the Company. Except as set forth herein, should the Consultant or Company pursue any Claim by any method other than said arbitration, the responding Party shall be entitled to recover from the other Party all damages, costs, expenses, and reasonable outside attorneys' fees incurred as a result of such action. The provisions contained in this paragraph shall survive the termination of the Consultant’s Services to the Company. Notwithstanding anything set forth above, Consultant agrees that any breach or threatened breach of this Agreement may result in irreparable injury to the Company, and therefore, in addition to the procedures set forth above, the Company may be entitled to file suit in a court of competent jurisdiction to seek a Temporary Restraining Order and/or preliminary or permanent injunction or other equitable relief to prevent a breach or contemplated breach of such provisions.

In Witness thereof, the parties signify their agreement effective the date above first written by the signatures affixed below.

COMPANY

    

CONSULTANT

BY:

/s/ David Michery

BY:

/s/ Preston Smart

David Michery

Preston Smart

Preferred Management Partners Inc.

(Date)

(Date)

6


Exhibit 10.27

Execution Version

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 4, 2021 (the “Execution Date”), between Mullen Automotive, Inc., a California corporation (the “Company”), and Michael Friedlander (“Buyer”).

RECITALS

A.The Company and Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B. Buyer wishes to irrevocably commit to purchase, and the Company wishes to irrevocably sell, upon the terms and conditions stated in this Agreement, (i) up to $110,000 principal face amount in 15% convertible unsecured notes in the form attached hereto as Exhibit A (the “Convertible Note,” and with any Additional Notes (as defined below), collectively, the “Convertible Notes”) convertible into shares of Common Stock as set forth therein, and (ii) warrants, in the form attached hereto as Exhibit C (with any Additional Warrants (as defined below), collectively, the “Warrants”), to acquire shares of Common Stock as set forth therein.  “Conversion Shares” means all or a portion of the total number of shares of Common Stock issuable upon full exercise of the Convertible Notes. “Warrant Shares” means all or a portion of the total number of shares of Common Stock issuable upon full exercise of the Warrants.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Buyer hereby agree as follows:

1.

PURCHASE AND SALE OF THE CONVERTIBLE NOTE AND WARRANTS.

(a)Convertible Note and Warrants.  Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to Buyer, and Buyer s irrevocably commits to purchase from the Company on the Closing Date (as defined below), Convertible Note in an original principal amount of $110,000, along with Warrants to initially acquire up to an aggregate of 12,452 Warrant Shares.

(b)Closing.  The date and time of the closing (the “Closing”) of the purchase of the Convertible Note and the Warrants by Buyer as contemplated by this Agreement shall be 12:00 p.m., New York City time, on November 4, 2021 (the “Closing Date”).

(c)Purchase Price.  The aggregate purchase price for the Convertible Note and the Warrants to be purchased by Buyer (the “Purchase Price”) shall be $100,000 and shall be paid to the Company at the Closing.

(d)Payment of Purchase Price; Delivery of Securities.  On the Closing Date, (i) Buyer


shall pay the Purchase Price to the Company by wire transfer of immediately available funds in accordance with the Company’s written wire instructions and (ii) the Company shall issue to Buyer a Convertible Note in principal amount of $110,000 (which amount shall include an Original Issue Discount of 10% or $10,000), and Warrants to acquire up to 12,452 Warrant Shares, in all cases, duly executed on behalf of the Company and registered in the name of Buyer or its designee.

(e)Beneficial Ownership Limitation.  The Company shall not issue and Buyer shall not accept any Common Stock under the Transaction Documents, and Buyer shall not otherwise purchase Common Stock or securities exercisable or exchangeable for or convertible into Common Stock from any party, in the public market or otherwise, if such shares proposed to be sold or otherwise issued, or the Common Stock proposed to be purchased or issuable upon exercise, exchange or conversion of the securities proposed to be purchased (after giving effect to any limitation on exercise, exchange or conversion therein), when aggregated with all other shares of Common Stock then owned beneficially (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) by Buyer and its affiliates, constitute more than the Maximum Percentage of the then issued and outstanding shares of Common Stock.  The number of shares of Common Stock constituting the Maximum Percentage determination shall be appropriately adjusted for any stock dividend, stock split, reverse stock split or similar transaction.  For the avoidance of doubt, any such shares of Common Stock that are determined at any time to cause Buyer’s beneficial ownership of Common Stock to exceed the Maximum Percentage upon issuance shall be issued to Buyer at such later time to the extent such issuance would not cause Buyer’s beneficial ownership of Common Stock to exceed the Maximum Percentage.

(f)Weighted Average Anti-Dilution.  To the extent that the Company makes a Subsequent Financing (as defined below) during the Restricted Period (as defined below) for consideration per share of Common Stock less than the consideration per share of Common Stock paid by Buyer (as adjusted for stock splits, stock dividends, reclassifications, reorganizations or other similar transactions) for any Conversion Shares, then the Company shall issue to Buyer, concurrently with such dilutive Subsequent Financing, the number of shares of Common Stock to ensure that Buyer has the number of shares of Common Stock that it would have had if it had converted the Convertible Note into Conversion Shares at the price per share as determined in accordance with the following formula (the “Post-Dilution Conversion Price”):

CP2 = CP1 x (A + B) / (A + C)

For purposes of the foregoing formula:

A=

The total number of Conversion Shares with respect to which the Convertible Notes were exercised.

B=

The total number of Common Stock that would be issued or issuable under the Subsequent Financing if issued at a per share equal to CP1.

C=

The total number of Common Stock actually issued or issuable under the Subsequent Financing.

CP1=

The Conversion Price (as defined in the Convertible Note and as adjusted thereunder).

2


CP2=

The Post-Dilution Conversion Price; provided, however, that such Post-Dilution Conversion Price shall in no event be less than $0.01 per share of Common Stock (as adjusted for stock splits, stock dividends, reclassifications, reorganizations or other similar transactions).

(g)Taxes.  The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any Securities to the Buyer made under this Agreement or the other Transaction Documents (as defined below).

(h)Legal Expenses.  On the Closing Date, Buyer shall pay by wire transfer to the Company’s legal counsel cash in the amount of Fifteen Thousand Dollars ($15,000) and such amount shall be deducted from the Purchase Price paid on the Closing Date.

2.

BUYER’S REPRESENTATIONS AND WARRANTIES.

Buyer represents and warrants to the Company, on behalf of itself, that:

(a)Organization; Authority.   Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

(b)No Public Sale or Distribution.  Buyer (i) is acquiring, or will acquire, the Convertible Notes and Warrants, (ii) upon conversion of its Convertible Note, will acquire the Conversion Shares issuable upon conversion thereof, and (iii) upon exercise of its Warrants, will acquire the Warrant Shares issuable upon exercise thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, Buyer does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities in violation of applicable securities laws.

(c)Accredited Investor Status.  Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

(d)Reliance on Exemptions.  Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of Buyer to acquire the Securities.

(e)No Governmental Review.  Buyer understands that no United States federal or state

3


agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(f)Transfer or Resale. Buyer understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel to Buyer, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) except as provided in Section 5(h) hereof, neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(g)Validity; Enforcement.  The execution and delivery of the Transaction Documents and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of Buyer and no further consent or authorization of Buyer or its members is required.  Each Transaction Document has been duly executed by Buyer and when delivered in accordance with terms hereof and thereof, constitutes the legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

(h)No Conflicts.  The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Buyer is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations hereunder.

(i)Experience of Buyer.  Buyer has such knowledge, sophistication and experience in business and financial matter so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such

4


investment.  Buyer is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

(j)Foreign Corrupt Practices.  Neither Buyer, nor any of its subsidiaries or affiliates, nor to the knowledge of Buyer, any of its directors, officers, agents, employees, members or other Persons acting on behalf of Buyer or any its subsidiaries or affiliates has, in the course of its actions for, or on behalf of, Buyer or any of its subsidiaries or affiliates (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any foreign or domestic government official or employee.

(k)General Solicitation.  Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or advertisement.

(l)

Patriot Act Representations.

(i)Buyer represents that all evidence of identity provided is genuine and all related information furnished is accurate.

(ii)Buyer hereby acknowledges that the Company seeks to comply with all applicable anti-money laundering laws and regulations. In furtherance of such efforts, Buyer hereby represents and agrees that: (1) no part of the funds used by Buyer to acquire the Securities have been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene federal, state, or international laws and regulations, including anti-money laundering laws and regulations; and (ii) no payment to the Company by Buyer shall cause the Company to be in violation of any applicable anti-money laundering laws and regulations including without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Executive Order 13224 (2001) (the “Patriot Act”) issued by the President of the United States and the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations.

(iii)Buyer represents and warrants that the amounts to be paid by Buyer to the Company will not be directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. Buyer represents and warrants that, to the best of its knowledge, none of: (a) Buyer; (b) any person controlling or controlled by Buyer; or (c) any person having a beneficial interest in Buyer is (i) a country, territory, individual or entity named on a list maintained by OFAC, (ii) a person prohibited under the OFAC Programs, (iii) a senior

5


foreign political figure,1 or any immediate family member2 or close associate3 of a senior foreign political figure as such terms are defined in the footnotes below or (iv) a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. §5311 et seq.), as amended (the “Bank Secrecy Act”) and the regulations promulgated thereunder by the U.S. Department of the Treasury.

(iv)Buyer further represents and warrants that Buyer: (i) has conducted thorough due diligence with respect to all of its beneficial owners, (ii) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (iii) will retain evidence of any such identities, any such source of funds and any such due diligence.

(v)Neither Buyer nor any person directly or indirectly controlling, controlled by or under common control with Buyer is a person identified as a terrorist organization on any relevant lists maintained by governmental authorities.

(vi)Buyer agrees to provide the Company all information that may be reasonably requested to comply with applicable laws and regulations of any applicable jurisdiction, or to respond to requests for information concerning the identity of Buyer from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information. Buyer agrees to notify the Company promptly if there is any change with respect to the representations and warranties provided herein. Buyer consents to the disclosure to regulators and law enforcement authorities by the Company and its affiliates and agents of any information about Buyer or its constituents as the Company reasonably deems necessary or appropriate to comply with applicable anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.

3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Buyer the matters set forth in this Section 3, as may be qualified by the corresponding section of the Company Disclosure Schedule. These representations and warranties, and the information set forth in the Company Disclosure Schedule, are current only as of the date hereof, except to the extent that a representation, warranty or section of the Company Disclosure Schedule expressly states that such representation or warranty, or information in such section of the Company Disclosure Schedule, is current only as of an earlier


1A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

2“Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

3A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.

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date.  If any information is so reflected as of an earlier date, there have been no material changes since such date to the date hereof.

(a)Organization and Qualification.  Each of the Company and each of its subsidiaries are entities duly organized and validly existing and, except as provided on Section 3(a) of the Disclosure Schedule, in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.  Except as provided on Section 3(a) of the Disclosure Schedule, the Company has no material subsidiaries.

(b)Authorization; Enforcement; Validity.  The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Notes and the issuance of the Warrants and the reservation for issuance and issuance of the Conversion Shares upon conversion of the Convertible Notes and issuance of the Warrant Shares issuable upon exercise of the Warrants) have been (i) duly authorized by the Company’s board of directors and (ii) no further filing, consent or authorization is required by the Company, its board of directors or its stockholders or other governing body of the Company (other than the filing of one or more Piggyback Registration Statements and a Form D with the SEC and any other filings as may be required by any state securities agencies). This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.

(c)Issuance of Securities.  The issuance of the shares of Common Stock pursuant to this Agreement is duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof (other than pursuant to the securities laws). The issuance of the Convertible Notes and Warrants pursuant to the Transaction Documents is duly authorized, and upon the due execution, issuance and delivery thereof against payment in full therefor in accordance with the terms of this Agreement, the Convertible Notes and Warrants will be valid and binding obligations of the Company enforceable against the Company in accordance with their terms. The issuance of the Conversion Shares is duly authorized, and upon issuance in accordance with the Convertible Notes, the Conversion Shares will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the

7


issue thereof (other than pursuant to the securities laws), with the holders being entitled to all rights accorded to a holder of shares of Common Stock. The issuance of the Warrant Shares is duly authorized, and upon issuance in accordance with the Warrants, the Warrant Shares will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof (other than pursuant to the securities laws), with the holders being entitled to all rights accorded to a holder of shares of Common Stock. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the sum of (i) 200% of the maximum number of Conversion Shares issuable upon conversion of the Convertible Notes (without taking into account any limitations on the conversion of the Convertible Notes set forth therein) and (ii) 200% of the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein). Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act.  Upon issuance in accordance with the terms of this Agreement, Buyer will have good and marketable title to the Securities.

(d)No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Notes, the Conversion Shares, the Warrants and the Warrant Shares and the reservation for issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the certificate of incorporation of the Company (including, without limitation, any certificate of designation contained therein) or other organizational documents of the Company or any of its subsidiaries, any capital stock of the Company or any of its subsidiaries or bylaws or operating agreements of the Company or any of its subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations by which the Common Stock or any property or asset of the Company is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.

(e)Consents.  Neither the Company nor any subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, governmental agency or any regulatory or self-regulatory agency or any other Person (other than the filing of one or more Piggyback Registration Statements and a Form D with the SEC and any other filings as may be required by any state securities agencies), in order for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date, and the Company is not aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents.

8


(f)Acknowledgment Regarding Buyer’s Purchase of Securities.  Buyer is not (i) an officer or director of the Company, (ii) an affiliate (as defined in Rule 405 of the 1933 Act) of the Company (an “Affiliate”) or (iii) to the Company’s knowledge, a “beneficial owner” (as defined for purposes of Rule 13d-3 of the 1934 Act) of more than 10% of the shares of Common Stock. The Company’s decision to enter into the Transaction Documents has been based on its and its representative’s independent evaluation of the transactions contemplated hereby and the Company has neither been induced by, nor has it relied upon, any representation, warranty, covenant or statement (written or oral), whether express or implied, made by Buyer except those that are expressly set forth in this Agreement.

(g)No General Solicitation; Placement Agent’s Fees.  None of the Company, any of its Affiliates, or any Person acting on the behalf of the Company or any of its Affiliates, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, or brokers’ commissions, relating to or arising out of the transactions contemplated hereby.

(h)No Integrated Offering.  None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.

(i)Dilutive Effect.  The Company understands and acknowledges that the number of Conversion Shares and Warrant Shares may increase in certain circumstances. The Company further acknowledges that, except to the extent an issuance would exceed the beneficial ownership limitation in Section 1(e) of this Agreement, its obligation to issue the Conversion Shares upon conversion of the Convertible Notes and the Warrant Shares upon exercise of the Warrants in accordance therewith and with this Agreement is absolute and unconditional, regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

(j)Application of Takeover Protections; Rights Agreement.  The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the certificate of incorporation, bylaws or other organizational documents of the Company or any of its Affiliates or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to Buyer as a result of the transactions

9


contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and Buyer’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or a change in control of the Company or any of its Affiliates.

(k)Absence of Certain Changes. Except as provided on Section 3(k) of the Disclosure Schedule, since January 1, 2021, there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), or condition (financial or otherwise) of the Company and its subsidiaries. Except as provided on Section 3(k) of the Disclosure Schedule, since January 1, 2021, neither the Company nor any of its subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up.  Neither the Company nor any of its subsidiaries has any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. The Company is not, and after giving effect to the transactions contemplated hereby to occur at the Closing will not be, Insolvent (as defined below). The Company has not engaged in any business or in any transaction, and is not about to engage in any business or in any transaction, for which the Company’s remaining assets constitute unreasonably small capital.

(l)No Undisclosed Events, Liabilities, Developments or Circumstances. Except as provided on Section 3(l) of the Disclosure Schedule, since January 1, 2021, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company or any of its subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise) that would have a Material Adverse Effect on the Company.

(m)Conduct of Business; Regulatory Permits.  Neither the Company nor any of its subsidiaries is in violation of any term of or in default under its organizational documents including its certificate of incorporation, bylaws, certificate of formation, any other organizational charter, any certificate of designation, preferences or rights of any outstanding series of preferred stock of the Company or any of its subsidiaries, respectively. Neither the Company nor any of its subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its subsidiaries, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of its subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

10


(n)Foreign Corrupt Practices.  Neither the Company nor any of its subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its subsidiaries (as applicable) has, in the course of its actions for, or on behalf of, the Company or any of its subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

(o)Transactions With Affiliates.  Except as provided on Section 3(o) of the Disclosure Schedule, none of the officers, directors, employees or Affiliates of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees, officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director, employee or Affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other Person in which any such officer, director, employee or Affiliate has a substantial interest or is an employee, officer, director, trustee or partner.

(p)Equity Capitalization.  As of the date hereof, the authorized capital stock of the Company consists solely of (i) 600,000,000 shares of Common Stock, of which 64,996,501 are issued and outstanding and 226,878,906 are reserved for issuance pursuant to Convertible Securities (as defined below) (other than the Convertible Notes and Warrants) (150,025,000 are reserved for issuance upon conversion of Series A Preferred Stock and 73,800,250 are reserved for issuance upon conversion of Series B Preferred Stock), and (ii) 73,800,250 shares of preferred stock, of which, 1,500,250 are designated as Series A Preferred Stock and 72,300,000 are designated as Series B Preferred Stock, of which 1,500,250 and 71,516,534 are issued and outstanding, respectively. No shares of Common Stock are held in treasury. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and non-assessable. Except as provided on Section 3(p) of the Disclosure Schedule, (i) to the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities, whether or not presently exercisable or convertible, have been fully exercised or converted (as the case may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws); (ii) the Company’s capital stock and the capital stock of its subsidiaries are not subject to preemptive rights or any other similar rights or any Liens; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional capital stock or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, respectively (other than as may be issued from time to time under any equity incentive plan

11


maintained); (iv) there are no outstanding debt securities, convertible notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its subsidiaries or by which the Company or any of its subsidiaries is or may become bound; (v) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its subsidiaries; (vi) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except as provided in Section 5(h) hereof); (vii) there are no outstanding securities or instruments of the Company or any of its subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to redeem a security of the Company or any of its subsidiaries; (viii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; and (ix) neither the Company nor any of its subsidiaries has stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company has provided to Buyer a true, correct and complete copy of the Company’s charter as in effect on the date hereof, and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof.

(q)Indebtedness and Other Contracts.  Except as provided on Section 3(q) of the Disclosure Schedule, each of the Company and its subsidiaries (i) does not have any material outstanding Indebtedness, Indebtedness secured by any Lien on any assets of the Company or any of its Subsidiaries or other material debt obligations, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. The Company has no current intention or expectation to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction

(r)Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, the shares of Common Stock or any of the Company’s or its subsidiaries’ executive officers or directors which would be reasonably likely to adversely affect the transactions contemplated by this Agreement. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any of its subsidiaries or any current or former director or officer of the Company or any of its subsidiaries.

(s)Insurance.  The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. The Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain

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similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

(t)Employee Relations.  Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement nor does it employ any member of a union. No executive officer or other key employee of the Company or any of its subsidiaries has notified the Company or any such subsidiary that such officer intends to leave the Company or any such subsidiary or otherwise terminate such officer’s employment with the Company or any such subsidiary. To the knowledge of the Company, no executive officer or other key employee of the Company or any of its subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

(u)Title.  The Company and its subsidiaries have good and marketable title to (i) all real property owned by it and (ii) all personal property, owned by them which is material to the business of the Company and its subsidiaries, in each case, free and clear of all Liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its subsidiaries. Any real property and facilities held under lease by the Company and any of its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its subsidiaries.

(v)Intellectual Property Rights.  The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted and as presently proposed to be conducted. None of the Company’s or its subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement, which could reasonably be expected to result in a Material Adverse Effect.  The Company has no knowledge of any material infringement by the Company or any of its subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company or any of its subsidiaries, being threatened, against the Company or any of its subsidiaries regarding their Intellectual Property Rights and which would reasonably be expected to have a Material Adverse Effect.  The Company is not aware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and each of its subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual

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Property Rights, except where failure to take such measures would not, either individually or in the aggregate, reasonably be expected to materially affect the value of their respective Intellectual Property Rights.

(w)Environmental Laws.  The Company and its subsidiaries (i) are in compliance with all Environmental Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

(x)Subsidiary Rights.  The Company or one of its subsidiaries has unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its subsidiaries as owned by the Company or such subsidiary.

(y)Tax Status.  Except as set forth on Section 3(y) of the Disclosure Schedule, each of the Company and its subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except in each case where the failure to file, pay or set aside could not be reasonably expected to have a Material Adverse Effect. Except as set forth on Section 3(y) of the Disclosure Schedule, there are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and it subsidiaries know of no basis for any such claim.  The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

(z)Investment Company Status.  The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

(aa)No Disqualification Events.  None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.

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(bb)Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance, sale and transfer of the Securities to be sold to Buyer hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

(cc)Shell Company Status.  The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).

(dd)Fixtures and Equipment.  Each of the Company and its subsidiaries (as applicable) has good title to, or a valid leasehold interest in, the tangible personal property, equipment, improvements, fixtures, and other personal property and appurtenances that are used by the Company or its subsidiary in connection with the conduct of its business (the “Fixtures and Equipment”). The Fixtures and Equipment are structurally sound, are in good operating condition and repair, are adequate for the uses to which they are being put, are not in need of maintenance or repairs except for ordinary, routine maintenance and repairs and are sufficient for the conduct of the Company’s and/or its subsidiaries’ businesses (as applicable) in the manner as conducted prior to the Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and Equipment free and clear of all Encumbrances except for (a) Liens for current taxes not yet due and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto.

(ee)Illegal or Unauthorized Payments; Political Contributions.  Neither the Company nor any of its subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its executive officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its subsidiaries or any other business entity or enterprise with which the Company or any of its subsidiaries is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its subsidiaries.

(ff)Money Laundering. The Company and its subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

(gg)Registration Rights.  Except as provided in Section 5(h) hereof, no holder of securities of the Company has rights to the registration of any securities of the Company because of the issuance of the Securities hereunder that could expose the Company to material liability or Buyer to any liability or that could impair the Company’s ability to consummate the issuance and

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sale of the Securities in the manner, and at the times, contemplated hereby, which rights have not been waived by the holder thereof as of the date hereof.

(hh)Disclosure.  Each representation and warranty of the Company made herein is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Company confirms that neither it nor any other Person acting on its behalf has provided Buyer or their agents or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information concerning the Company or any of its subsidiaries, other than the existence of the transactions contemplated by this Agreement and the other Transaction Documents.  The Company understands and confirms that Buyer will rely on the foregoing representations in effecting transactions in securities of the Company. No event or circumstance occurring or information arising after the date hereof  with respect to the Company or any of its subsidiaries or their respective businesses, properties, liabilities, prospects, operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation, requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed. The Company acknowledges and agrees that Buyer makes no and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 2.

4.

COVENANTS.

(a)Form D and Blue Sky.  The Company shall file a Form D with respect to the Securities as required under Regulation D and provide a copy thereof to Buyer promptly after filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities for sale to Buyer at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide confirmation of any such action, if applicable, so taken to Buyer on or prior to such Closing Date. Without limiting any other obligation of the Company under this Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue Sky” laws), and the Company shall comply with all applicable federal, foreign, state and local laws, statutes, rules, regulations and the like relating to the offering and sale of the Securities to Buyer.

(b)Use of Proceeds.  The Company shall use the proceeds from the sale of the Securities solely to fund the Company’s electric vehicle business.

(c)Fees.  The Company shall be responsible for the payment of any transfer agent fees, DTC fees or broker’s commissions, relating to or arising out of the issuance and sale of the Securities by the Company as contemplated hereby. The Company shall pay, and hold Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities to Buyer.

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(d)Pledge of Securities.  Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by Buyer in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and Buyer effecting a pledge of Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. At Buyer’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by Buyer provided that the Company shall be under no obligation to deliver any legal opinion required in connection therewith unless required by the Company’s transfer agent to be issued by the Company’s legal counsel.

(e)Disclosure of Transactions and Other Material Information.  The Company shall not, and the Company shall cause each of its officers, directors, employees and agents not to, provide Buyer with any material, non-public information regarding the Company from and after the Execution Date without the express prior written consent of Buyer. Subject to the foregoing, neither the Company nor Buyer shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of Buyer, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (provided that Buyer shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of Buyer, the Company shall not (and shall cause each of its affiliates to not) disclose the name of Buyer in any filing (other than as required by applicable law or rules and regulations), announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that, from and after the Execution Date, and except as set forth in Section 4(l), Buyer shall not have (unless expressly agreed to by Buyer after the date hereof in a written definitive and binding agreement executed by the Company and Buyer), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any information regarding the Company or any of its subsidiaries (as applicable) that Buyer receives from the Company, any of its subsidiaries or any of its or its officers, directors, employees, stockholders or agents.

(f)Additional Registration Statements.  Whenever the Company (or a Successor Entity (as defined in the Warrants)) proposes to register the offer and sale of any shares of its common stock under the 1933 Act (other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), or (ii) in connection with any dividend or distribution reinvestment or similar plan), which includes the registration of shares of Common Stock for the account of one or more stockholders of the Company and the form of registration statement (a “Piggyback Registration Statement”) to be used may be used for any registration of Registrable Securities, the Company shall include in such registration all Registrable Securities unless the Company has received a written request for exclusion from the Buyer.  The Company shall give prompt written notice (in any event no later than ten (10) Trading Days prior to the filing of such Piggyback Registration Statement) to the Buyer of its intention to effect such a registration.  The Company shall notify the Buyer, promptly

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after the Company receives notice thereof, of the time when such Piggyback Registration Statement has been declared effective or a supplement to any prospectus forming a part of such Piggyback Registration Statement has been filed with the SEC.  The Company shall further notify Buyer, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, of the happening of any event that would cause the prospectus included in such Piggyback Registration Statement to contain an untrue statement of a material fact or omit any fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  The Company shall use its reasonable efforts such that upon effectiveness of any such Piggyback Registration Statement, the Registrable Securities registered thereunder shall be listed on each securities exchange on which the Common Stock is then listed. The Company shall otherwise use its reasonable efforts to take all other steps necessary to effect the registration and sale of the Registrable Securities included on such Piggyback Registration Statement as contemplated hereby.

(g)[Reserved].

(h)Reservation of Shares.  As long as any of the Convertible Notes and Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance, no less than 200% of the shares of Common Stock issuable upon conversion of the Convertible Note (assuming the Convertible Notes are exercisable in full and without regard to any limitations on the exercise of the Convertible Notes set forth therein) or exercise of the Warrants (assuming the Warrants are exercisable in full and without regard to any limitations on the exercise of the Warrants set forth therein).

(i)Conduct of Business.  The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.

(j)Passive Foreign Investment Company.  The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

(k)Corporate Existence.  So long as Buyer owns any Convertible Notes or Warrants, the Company shall not be party to any Fundamental Transaction (as defined in the Convertible Notes and Warrants) unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the Convertible Notes and Warrants.

(l)Due Diligence.  In connection with any reasonable request by Buyer made in connection with the filing of a Piggyback Registration Statement, or any amendment or supplement thereto, Buyer shall have the right, from time to time as Buyer may reasonably deem appropriate, to perform reasonable due diligence on the Company during normal business hours and subject to reasonable prior notice to the Company.  The Company and its officers and

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employees shall provide information (“Confidential Information”) and reasonably cooperate with Buyer in connection with Buyer’s due diligence; provided, however, that at no time is the Company required or permitted to disclose material nonpublic information to Buyer or breach any obligation of confidentiality or non-disclosure to a third party or make any disclosure that could cause a waiver of attorney-client privilege.  Except as may be required by law, court order or governmental authority, each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information of such other party for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby.  In the event a party is required by law, court order or governmental authority to disclose the Confidential Information of the other party, such party shall give the other party written notice of the information to be disclosed as far in advance of its disclosure as practicable and use its commercially reasonable efforts, and shall reasonably cooperate with the other party’s efforts, to obtain assurances that confidential treatment will be accorded such information. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party.

5.

REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a)Register.  The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Convertible Notes and the Warrants in which the Company shall record the name and address of the Person in whose name the Convertible Notes and the Warrants have been issued (including the name and address of each transferee) reflecting the principal amount of the Convertible Notes and the Warrants held by such Person.  The Company shall keep the register open and available at all times during business hours for inspection by Buyer or its legal representatives.

(b)Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to Buyer to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of Buyer or its respective nominee(s), for the Conversion Shares and the Warrant Shares in such amounts as specified from time to time by Buyer to the Company, and confirmed by the Company, upon the conversion of the Convertible Notes or the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than such irrevocable transfer agent instructions referred to in this Section 5(b), and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If Buyer effects a sale, assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144 or another exemption from registration, the transfer agent shall issue such shares to Buyer, assignee or transferee (as the case may be) without any restrictive legend in

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accordance with Section 5(d) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to Buyer. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(b), that Buyer shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion referred to in the irrevocable transfer agent instructions to the Company’s transfer agent on the Closing Date. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.

(c)Legends.  Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares and Warrant Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

(d)Removal of Legends.  Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c) above or any other legend (i) while a registration statement (including a Piggyback Registration Statement) covering the resale of such Securities is effective under the 1933 Act (provided that Buyer provides the Company with any certificates from Buyer or its broker reasonably required by the Company’s transfer agent), (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company) or a registration statement, (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144 without current public information being available and without volume and manner of sale limitations (provided that Buyer provides the Company with reasonable

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assurances that such Securities are eligible for sale, assignment or transfer under Rule 144, which shall not include an opinion of counsel, but which may include any certificates from Buyer or its broker reasonably required by the Company’s transfer agent), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that Buyer provides the Company with an opinion of counsel to Buyer from reputable counsel to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than five (5) Trading Days following either (x) the delivery by Buyer to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), or (y) the delivery by Buyer to the Company of a notice of exercise or conversion, in each case, together with any other deliveries from Buyer as may be required above in this Section 5(d), as directed by Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program and such Securities are Warrant Shares, credit the aggregate number of shares of Common Stock to which Buyer shall be entitled to Buyer’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to Buyer, a certificate representing such Securities that is free from all restrictive and other legends, registered in the name of Buyer or its designee (the date by which such credit is so required to be made to the balance account of Buyer’s or Buyer’s nominee with DTC or such certificate is required to be delivered to Buyer pursuant to the foregoing is referred to herein as the “Required Delivery Date”).

(e)Failure to Timely Deliver; Buy-In. If the Company fails to issue and deliver (or cause to be delivered) to Buyer by the Required Delivery Date a certificate representing the Securities so delivered to the Company by Buyer that is free from all restrictive and other legends or credit the balance account of Buyer’s or Buyer’s nominee with DTC for such number of Securities so delivered to the Company, then, in addition to all other remedies available to Buyer, at the sole discretion of Buyer, the Company shall:

(i)pay in cash to Buyer on each Trading Day after the Required Delivery Date that the issuance or credit of such shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to Buyer or Buyer’s nominee multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required Delivery Date; or

(ii)if on or after the Required Delivery Date, Buyer (or any other Person in respect, or on behalf, of Buyer) purchases (in an open market transaction or otherwise) shares of Common Stock (“Replacement Shares”) to deliver in satisfaction of a sale by Buyer of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that Buyer so anticipated receiving from the Company without any restrictive legend, then, within five (5) Trading Days after Buyer’s request and in Buyer’s sole

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discretion, either (x) pay cash to Buyer in an amount equal to Buyer’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Replacement Shares (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit Buyer’s balance account shall terminate and such shares shall be cancelled or (B) promptly honor its obligation to so deliver to Buyer a certificate or certificates or credit Buyer’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (1) such number of shares of Common Stock that the Company was required to deliver to Buyer by the Required Delivery Date multiplied by (2) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date Buyer purchased Replacement Shares and ending on the date of such delivery and payment under this clause (ii).

(f)Manner of Sale.  Buyer agrees with the Company that Buyer will sell any Securities pursuant to either the registration requirements of the 1933 Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5 is predicated upon the Company’s reliance upon this understanding.

6.

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a)The obligation of the Company hereunder to issue and sell the Convertible Note and the related Warrants to Buyer at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing Buyer with prior written notice thereof:

(i)Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.

(ii)Buyer shall have delivered to the Company the Purchase Price (less Fifteen Thousand Dollars ($15,000) which shall be paid directly to legal counsel) by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.

(iii)The representations and warranties of Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer at or prior to the Closing Date.

7.

CONDITIONS TO BUYER’S OBLIGATION TO PURCHASE.

(a)The obligation of Buyer hereunder to purchase the Convertible Note and related Warrants at the Closing is subject to the satisfaction, at or before the applicable Closing Date and in respect of the Closing Date, of each of the following conditions, provided that these conditions

22


are for Buyer’s sole benefit and may be waived by Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

(i)The Company shall have duly executed and delivered to Buyer each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to Buyer the Convertible Note and Warrants so purchased at the Closing and the Company shall have complied in all respects with all obligations under this Agreement and the other Transaction Documents, including, without limitation, the Convertible Note and the Warrants.

(ii)Each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to (i) the foregoing effect, (ii) verifying the accuracy of Section 7(a)(v) herein, (iii)  and as to such other matters as may be reasonably requested by Buyer in the form reasonably acceptable to Buyer.

(iii)The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.

(iv)No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents, and no actions, suits or proceedings shall be in progress or pending by any Person that seeks to enjoin, prohibit or otherwise adversely affect any of the transactions contemplated by the Transaction Documents.

(v)Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect and the Company has not filed for nor is it subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company.

(vi)The Company shall have delivered to Buyer such other documents, instruments or certificates relating to the transactions contemplated by this Agreement reasonably required to consummate the transactions contemplated hereby.

8.

TERMINATION.

In the event that the Closing shall not have occurred within ten (10) days after the date hereof, then Buyer shall have the right to terminate its obligations under this Agreement at any time on or after the close of business on such date without liability of Buyer to any other party;

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provided, however, the right to terminate this Agreement under this Section 8 shall not be available to Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of Buyer’s breach of this Agreement.  Notwithstanding anything to the contrary above, nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

9.

CERTAIN DEFINITIONS

(a)1934 Act. The “1934 Act” means the Securities Exchange Act of 1934, as amended.

(b)Approved Share Plan. “Approved Share Plan” means any employee benefit plan or other compensatory contract, agreement or other arrangement (including an arrangement with a single officer or director) which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided or to be provided to the Company in their capacity as such.

(c)Business Day. “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

(d)Closing Sale Price. “Closing Sale Price” shall mean for any security as of any date, the last closing trade price for such security on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (“Bloomberg”), or if the foregoing do not apply, the average of the bid prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(e)Common Stock. “Common Stock” means the common stock, par value $0.001 per share, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

(f)Contingent Obligation.  “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

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(g)Convertible Securities. “Convertible Securities” means any capital stock or other security of the Company that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock).

(h)Environmental Laws.  “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

(i)Indebtedness.  “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the purchase price of property or assets, including indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), other than trade payables entered into in the ordinary course of business, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, (E) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (F) all indebtedness referred to in clauses (A) through (E) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any material property or assets (including accounts and contract rights) owned by such Person, even though the Person has not assumed or become liable for the payment of such indebtedness, and (G) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (F) above.

(j)Insolvent.  “Insolvent” means the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total Indebtedness (as defined below).

(k)Lien. “Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the 1933 Act and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.

(l)Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof),

25


condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its subsidiaries to perform any of its respective obligations under any of the Transaction Documents (as defined below).

(m)Maximum Percentage. “Maximum Percentage” means 9.9%.

(n)Person. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(o)Registrable Securities. “Registrable Securities” means (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any capital stock of the Company issued or issuable with respect to such Conversion Shares, the Warrant Shares, the Convertible Notes or the Warrants, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Common Stock is converted or exchanged and shares of capital stock of a Successor Entity (as defined in the Warrants) into which the Common Stock is converted or exchanged, in each case, without regard to any limitations on exercise or exchange of the Warrants. As to any Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a registration statement with respect to the sale of such securities shall have become effective under the 1933 Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent public distribution of them shall not require registration under the 1933 Act; or (c) such securities are freely saleable under Rule 144 under the 1933 Act without the requirement for current public information and without volume or manner of sale limitations.

(p)Restricted Period. “Restricted Period” means the period commencing on the Execution Date and ending on the earlier of (i) the date immediately following the 90th day after a registration statement registering for resale the Registrable Securities has been declared effective by the SEC and (ii) the 90th day after the Securities purchased hereunder are saleable under Rule 144 without the requirement for current public information and without volume or manner of sale limitations.

(q)Securities. “Securities” means the Convertible Notes, the Conversion Shares, the Warrants and the Warrant Shares.

(r)Trading Day. “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other

26


than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

(s)Transaction Documents. “Transaction Documents” means, collectively, this Agreement, the Convertible Notes, the Warrants, and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.

10.

MISCELLANEOUS.

(a)Governing Law; Jurisdiction; Jury Trial.

All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or under any of the other Transaction Documents or in connection herewith or therewith or with any transaction contemplated hereby or thereby or discussed herein or therein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude Buyer from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to Buyer or to enforce a judgment or other court ruling in favor of Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b)Counterparts.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

(c)Headings; Gender.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the

27


context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

(d)Severability.  If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

(e)Entire Agreement; Amendments.  This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyer, the Company, its affiliates and Persons acting on its behalf solely with respect to the matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein. Except as specifically set forth herein or therein, neither the Company nor Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and Buyer.  No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction Documents or all holders of the Warrants (as the case may be). The Company has not, directly or indirectly, made any agreements with Buyer relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. As a material inducement for Buyer to enter into this Agreement, the Company expressly acknowledges and agrees that no due diligence or other investigation or inquiry conducted by Buyer, any of its advisors or any of its representatives shall affect Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document.

(f)Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to

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have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail could not be delivered to such recipient) and (iii) if sent by overnight courier service, one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses and e-mail addresses for such communications shall be:

If to the Company:

Mullen Automotive, Inc.
1405 Pioneer Street

Brea, California 92821

Attention: David Michery, CEO
Email: david@mullenusa.com

With a copy (for informational purposes only) to:

Manatt, Phelps & Phillips, LLP

695 Town Center Drive, 14th Floor

Costa Mesa, California 92626

Attn: Thomas J. Poletti

Email: tpoletti@manatt.com

If to the Transfer Agent:

Continental Stock Transfer & Trust Company

1 State Street, 30th Floor,

New York, NY 10004-1561

(212) 845-3240

If to Buyer:

Michael Friedlander

46 Tarryhill Road

Tarrytown, NY 10591

or to such other address or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication or (B) provided by an overnight courier service shall be rebuttable evidence of personal service or receipt from an overnight courier service in accordance with clause (i) or (iii) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail in

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accordance with clause (ii) above.

(g)Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and its successors and assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer, including, without limitation, by way of a Fundamental Transaction (as defined in the Convertible Notes and Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the applicable Convertible Notes and Warrants).

(h)No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and its permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 9(k).

(i)Survival.  The representations, warranties, agreements and covenants shall survive the Closing.  Buyer shall be responsible only for its representations, warranties, agreements and covenants hereunder.

(j)Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(k)Indemnification.

(i)In consideration of Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless Buyer and each holder of any Securities and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or (c) any cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company, but other than by an affiliate of Buyer) or which otherwise involves such Indemnitee that arises out of or results from (i) the execution, delivery, performance or enforcement of any of the Transaction Documents, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the

30


Securities, (iii) any disclosure properly made by Buyer pursuant to Section 4(e), or (iv) the status of Buyer or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement (including, without limitation, as a party in interest or otherwise in any action or proceeding for injunctive or other equitable relief), unless such action is based primarily upon a breach of Buyer’s representations, warranties, or covenants under the Transaction Documents, or any agreements or understandings Buyer may have with any such third party, or any violations by Buyer of state or federal securities laws or any conduct by Buyer which constitutes fraud, gross negligence or willful misconduct. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

(ii)Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Section 9(k), deliver to the Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; (ii) the Company shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability; or (iii) the named parties to any such Indemnified Liability (including any impleaded parties) include both such Indemnitee and the Company, and such Indemnitee shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnitee and the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, then the Company shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Company), provided further, that in the case of clause (iii) above the Company shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably withhold, delay or condition its consent. The Company shall not, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such Indemnified Liability or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnitee. Following indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the Company within a reasonable time of the commencement of any such action shall not relieve the Company of any liability to the

31


Indemnitee under this Section 9(k), except to the extent that the Company is materially and adversely prejudiced in its ability to defend such action.

(iii)The indemnification required by this Section 9(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.

(iv)Notwithstanding any provision in this Agreement or any other Transaction Documents, the aggregate indemnification obligations of the Company pursuant to this Section 9(k) shall not exceed 100% of the aggregate Purchase Price actually paid by the Buyer.

(v)The sole and exclusive remedies for any breach of any representation, warranty, covenant or agreement hereunder shall be the indemnification provided by this Section 9(k), and Buyer expressly waives any other rights or remedies it may have; provided however, that equitable relief, including remedies of specific performance and injunction, shall be available with respect to any matter where money damages would not be sufficient to compensate Buyer or to preserve the rights of Buyer pending resolution of a dispute, and this Section 9(k) shall not relieve the Company from liability for willful misconduct, gross negligence, bad faith, fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.

(l)Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, Common Stock and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock dividends, stock splits, stock combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

(m)Remedies.  Buyer and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security, to the extent permitted by law), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to Buyer. The Company therefore agrees that Buyer shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.

(n)Exercise of Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever Buyer exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then Buyer may continue

32


to exercise it other rights, elections, demands and options hereunder and under any other Transaction Document from time to time as if such original right, election, demand or option had not been exercised without prejudice to its future actions and rights and remedies.

(o)Payment Set Aside; Currency.  To the extent that the Company makes a payment or payments to Buyer hereunder or pursuant to any of the other Transaction Documents or Buyer enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.

[signature pages follow]

33


IN WITNESS WHEREOF, Buyer and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

COMPANY:

MULLEN AUTOMOTIVE, INC.

By:

/s/ David Michery

Name:

David Michery

Title:

CEO


IN WITNESS WHEREOF, Buyer and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

BUYER:

/s/ Michael Friedlander

Michael Friedlander


Exhibit 10.27(a)

Execution Version

NEITHER THIS CONVERTIBLE NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), FROM REPUTABLE COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(c)(vi) AND 8 HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(c)(vi) OF THIS NOTE.

MULLEN AUTOMOTIVE, INC.

CONVERTIBLE NOTE

Issuance Date:  November 4, 2021

Original Principal Amount: U.S. $110,000

FOR VALUE RECEIVED, Mullen Automotive, Inc., a California corporation (the “Company”), hereby promises to pay to the order of Michael Friedlander or its registered assigns (“Holder”) the principal sum set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal Amount”) together with interest on any outstanding Principal (as such interest on any outstanding Principal may be reduced pursuant to the terms hereof pursuant to redemption or otherwise) from the date set out above as the Issuance Date.  This Convertible Note (with all notes issued in exchange, transfer or replacement hereof, this “Note”) is issued pursuant to that certain Securities Purchase Agreement, dated as of November 4, 2021, by and between the Company and the Holder (the “Securities Purchase Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement.

1. Payments of Principal and Interest. Interest and principal under this Note shall be payable as follows:

(a)Except as otherwise provided in this Note, the outstanding Principal Amount shall accrue interest at an annual rate equal to the Interest Rate from the date of this Note until the entire Principal Amount is paid in full, whether at maturity, upon acceleration, by prepayment, or otherwise.

(b) The Company shall pay accrued interest at the Interest Rate on the Principal Amount in arrears on the last Business Day of each calendar year quarter (each an “Interest Payment Date”), with the first interest payment accrued on the outstanding Principal Amount due on December 31, 2021.

(c)Unless earlier converted into Conversion Shares (as defined below), the outstanding Principal and accrued but unpaid interest of this Note will be due and payable by the Company on November 4, 2022 (the “Maturity Date”).

(d) From and after the occurrence and during the continuance of any Event of Default, the Interest Rate shall automatically be increased to twenty percent (20.0%) per annum.  In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.


(e) All computations of interest shall be made on the basis of the actual number of days elapsed in a year of 360 days. Interest shall commence to accrue on the Principal Amount on the Execution Date and shall not accrue on the Principal Amount on the day on which it is paid if payment is made to Holder prior to 12:00 p.m. ET. Any payment of principal on this Note after 12:00 p.m. ET on any Business Day shall be credited against this Note on the next Business Day and interest will continue to accrue until so credited.

(f)All payments made under this Note will be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the Holder may from time to time designate in writing to the Company. Payment will be credited first to accrued interest due and payable, with any remainder applied to Principal.

(g)The agreements made by Company with respect to this Note and the other Transaction Documents are expressly limited so that in no event shall the amount of interest received, charged, or contracted for by Holder exceed the highest lawful amount of interest permissible under the laws applicable to the Loan. If at any time performance of any provision of this Note or the other Transaction Documents results in the highest lawful rate of interest permissible under applicable laws being exceeded, then the amount of interest received, charged, or contracted for by Holder shall automatically and without further action by any party be deemed to have been reduced to the highest lawful amount of interest then permissible under applicable laws. If Holder shall ever receive, charge, or contract for, as interest, an amount which is unlawful, at Holder’s election, the amount of unlawful interest shall be refunded to the Company (if actually paid) or applied to reduce the then unpaid Principal Amount. To the fullest extent permitted by applicable laws, any amounts contracted for, charged, or received under the Transaction Documents included for the purpose of determining whether the Interest Rate would exceed the highest lawful rate shall be calculated by allocating and spreading such interest to and over the full stated term of this Note.

2. Conversion. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock on the terms and conditions set forth in this Section 2.

 (a) Holder’s Conversion Right. Subject to the provisions of Section 2(e), at any time or times on or after the Execution Date, the Holder shall be entitled to convert any portion or the entirety of the outstanding Principal and/or accrued interest under this Note into validly issued, fully paid and non-assessable shares of Common Stock (“Conversion Shares”) in accordance with Section 2(c).  Any such portion of the outstanding Principal and/or accrued interest to be converted in accordance with this Section 2 is referred to herein as the “Conversion Amount.”

 (b) Conversion Shares. The number of Conversion Shares issuable upon conversion of the Conversion Amount shall be determined according to the following formula:

Conversion Amount

Conversion Price

No fractional shares of Common Stock are to be issued upon the conversion of this Note. If the issuance would result in the issuance of a fraction of a share, the Company shall round such fraction of a share up to the nearest whole share.

 (c) Mechanics of Conversion. The conversion shall be conducted in the following manner:

 (i) Holder’s Conversion. To convert all or a portion of this Note into Conversion Shares on any date or, if later, the Issuance Date (a “Conversion Date”), a Holder shall deliver to the Company (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”).

 (ii) Company’s Response. Not later than the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by email an acknowledgment of confirmation, in the form attached hereto as Exhibit B, of receipt of such Conversion Notice to such Holder and the Company’s transfer


agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice (the “Required Delivery Date”), the Company shall (1) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, upon the request of the Holder, credit such aggregate number of Conversion Shares to which the Holder is entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Conversion Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Conversion Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Conversion Notice), for the number of Conversion Shares to which the Holder is entitled pursuant to such conversion.

 (iii) Record Holder. Upon delivery of a Conversion Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Conversion Shares with respect to which such Conversion Notice was issued, irrespective of the date such Conversion Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Conversion Shares (as the case may be).

 (iv) Company’s Failure to Timely Deliver Securities. If the Company fails to issue and deliver (or cause to be delivered) to the Holder by the Required Delivery Date a certificate representing the Conversion Shares that is free from all restrictive and other legends or credit the balance account of Holder or Holder’s nominee with DTC for such number of Conversion Shares so delivered to the Company, then, in addition to all other remedies available to Holder, at the sole discretion of Holder, the Company shall:

(A) pay in cash to Holder on each Trading Day after the Required Delivery Date that the issuance or credit of such Conversion Shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to Holder or Holder’s nominee multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required Delivery Date; or

(B) if on or after the Required Delivery Date, Holder (or any other Person in respect, or on behalf, of Holder) purchases (in an open market transaction or otherwise) shares of Common Stock (“Replacement Shares”) to deliver in satisfaction of a sale by Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that Holder so anticipated receiving from the Company without any restrictive legend, then, within five (5) Trading Days after Holder’s request and in Holder’s sole discretion, either (x) pay cash to Holder in an amount equal to Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Replacement Shares (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit Holder’s balance account shall terminate and such shares shall be cancelled, or (y) promptly honor its obligation to so deliver to Holder a certificate or certificates or credit Holder’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (1) such number of shares of Common Stock that the Company was required to deliver to Holder by the Required Delivery Date multiplied by (2) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date Holder purchased Replacement Shares and ending on the date of such delivery and payment under this clause (B).

To the extent permitted by law, the Company’s obligations to issue and deliver the Conversion Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation


of law by the Holder or any other person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of the Conversion Shares.  Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver the Conversion Shares as required pursuant to the terms hereof.

 (v) Disputes. In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the number of Conversion Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Conversion Shares that are not disputed, provided that following such issuance to Holder such dispute shall be resolved in accordance with Section 23.

 (vi) Book-Entry. Notwithstanding anything to the contrary set forth in this Section 2, upon conversion of any portion of this Note in accordance with the terms hereof, no Holder thereof shall be required to physically surrender this Note to the Company. If this Note is surrendered as provided by Section 8, then, provided that there remains outstanding Principal and accrued interest under this Note at the time of surrender, the Company shall, as soon as practicable and in no event later than three (3) Trading Days after receipt of this Note and at its own expense, issue and deliver to such Holder (or its designee) a new Note (in accordance with Section 8(d)) representing the outstanding Principal and accrued interest (if any) under this Note. Each Holder and the Company shall maintain records showing the portion of the Note so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the Note upon each such conversion. In the event of any dispute or discrepancy, such records of such Holder establishing the portion of the Note to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any portion of the Note, the outstanding Principal represented by such Note may be less than stated on the face thereof.  Each Note shall bear the following legend:

ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(c)(vi) AND 8(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO  SECTION 2(c)(vi) OF THIS NOTE.

 (d) Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery of Conversion Shares upon the conversion of the Note.

 (e) Limitation on Beneficial Ownership. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible or exchangeable by the Holder hereof to the extent (but only to the extent), after giving effect to the issuance of Common Stock issuable upon such conversion, the Holder or any of its affiliates would beneficially own in excess of 9.9% of the number of shares of Common Stock then outstanding, as calculated in accordance with Section 13(d) of the Exchange Act (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Note shall be convertible or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert or exchange this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility or exchangeability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained


or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into shares of Common Stock, including, without limitation, pursuant to this Note or securities issued pursuant to the Securities Purchase Agreement.

 (f) Reservation of Shares; Insufficient Authorized Shares.  The Company shall initially reserve out of its authorized and unissued shares of Common Stock a number of shares of Common Stock equal to 200% of the maximum number of Conversion Shares issuable to satisfy the Company's obligations to issue shares of Common Stock hereunder, and the Company shall at all times keep reserved for issuance under this Note a number of shares of Common Stock equal to 200% of the maximum number of Conversion Shares issuable to satisfy the Company’s obligation to issue Common Stock hereunder.

3. Rights upon Event of Default; Acceleration.

(a)Event of Default.  Each of the following events shall constitute an “Event of Default”:

(i) [Reserved];

(ii)  the Company’s failure, from the Execution Date to maintain sufficient reserves of its authorized and unissued shares of Common Stock to redeem 200% of the maximum number of Conversion Shares issuable upon conversion of all the Convertible Notes then outstanding;

(iii) the Company’s failure to maintain sufficient reserves of its authorized and unissued shares of Common Stock to redeem 200% of the Warrant Shares that would be issuable upon exercise thereof;

(iv) the Company’s (A) failure to timely deliver the required number of shares of Common Stock upon conversion of this Note or exercise of the Warrants, and any such failure remains uncured for a period of five (5) Business Days, or (B) notice, written or oral, to any holder of the Convertible Notes or Warrants, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Convertible Notes into shares of Common Stock that is requested in accordance with the provisions of the Convertible Notes, in each case, other than pursuant to Section 2(e) or any comparable provision of the Warrants;

(v) the Company’s or any Subsidiary’s failure (A) to pay to the Holder any amount of Principal or Interest when and as due under this Note or (B) to pay to the Holder, within five (5) days after the delivery by the Holder of written notice thereof, any amount or penalties or other amounts due under this Note or any amount due under any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby;

(vi) the Company fails to remove any restrictive legend on any certificate or any Common Stock issued to the Holder upon conversion or exercise (as the case may be) of any Securities acquired by the Holder under the Securities Purchase Agreement (including this Note) as and when required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for a period of five (5) Business Days;

(vii) the occurrence of (A) any default under or acceleration prior to maturity of any Indebtedness (as defined in the Securities Purchase Agreement, but excluding clause (E) of such definition and clauses (F) and (G) to the extent they relate to Indebtedness describe in clause (E)) of the Company or any of its Subsidiaries


in an aggregate amount in excess of $300,000, subject to any cure or grace period provided in the governing documents of such Indebtedness, or (B) a payment default under any such Indebtedness, if such default remains uncured for a period of ten (10) consecutive Trading Days;

(viii) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within thirty (30) days of their initiation;

(ix) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law;

(x) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

(xi) a final judgment, judgments, any arbitration or mediation award or any settlement of any litigation or any other satisfaction of any claim made by any Person pursuant to any litigation, as applicable, (each a “Judgment”, and collectively, the “Judgments”) with respect to the payment of cash, securities and/or other assets with an aggregate fair value (as determined in accordance with Section 6(a)(iv) below) in excess of $300,000 are rendered against, agreed to or otherwise accepted by, the Company and/or any of its Subsidiaries and which Judgments are not, within thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any Judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $300,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such Judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such Judgment;

(xii) other than as specifically set forth in another clause of this Section 3(a), the Company or any Subsidiary breaches any representation or warranty when made, or any covenant or other term or condition of any Transaction Document, and, only, in the case of a breach of a covenant or other term or condition that is curable, if such breach remains uncured for a period of ten (10) consecutive Trading Days after the delivery by Holder of written notice thereof;


(xiii) any breach or failure in any respect by the Company or any subsidiary to comply with any provision of Section 11 of this Note, and any such breach or failure remains uncured for a period of ten (10) consecutive Trading Days after the delivery by Holder of written notice thereof;

(xiv) any provision of any Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document.

Upon the occurrence of an Event of Default with respect to this Note the Company shall promptly, but in no case later than two (2) Business Days, deliver written notice thereof via email and overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the Holder.

(b) Remedies. Upon the occurrence of an Event of Default and at any time thereafter, Holder may at its option: (a) declare the entire principal amount of this Note, together with all accrued interest thereon, immediately due and payable; and (b) exercise any or all of its rights, powers, or remedies under the Transaction Documents or applicable law or available in equity; provided, however that, if an Event of Default described in Sections 3(a)(viii)-(x) of this Note shall occur, the principal of and accrued interest shall become immediately due and payable automatically and without any notice, declaration, or other act on the part of Holder.

(c) Acceleration by Subsidiary Spin-Off. Upon the occurrence of a Subsidiary Spin-Off and at any time thereafter, Holder may at its option declare the entire principal amount of this Note, together with all accrued interest thereon, immediately due and payable.

4.       Adjustment of Conversion Price and Number of Conversion Shares. The Conversion Price and number of Conversion Shares issuable upon conversion of this Note are subject to adjustment from time to time as set forth in this Section 4.

(a)   Stock Dividends and Splits. Without limiting any provision of Section 6, if the Company, at any time on or after the date of the Securities Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Common Stock into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

(b)   Adjustment Upon Issuance of Common Stock. If, during the Restricted Period (as defined in the Securities Purchase Agreement), the Company effects a Subsequent Financing (as defined in the Securities Purchase Agreement), or in accordance with this Section 4 is deemed to have effected a Subsequent Financing, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company) issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive Issuance”),then immediately after such Dilutive Issuance, the Conversion Price then in


effect shall be reduced (and in no event increased) to the price per share as determined in accordance with the following formula:

CP2 = CP1 x (A + B) / (A + C)

For purposes of the foregoing formula:

A=

The total number of Conversion Shares with respect to which this Note may be converted.

B=

The total number of shares of Common Stock that would be issued or issuable under the Dilutive Issuance if issued at a per share equal to EP1.

C=

The total number of shares of Common Stock actually issued or issuable under the Dilutive Issuance.

CP1=

The Conversion Price in effect immediately prior to a Dilutive Issuance.

CP2=

The Conversion Price immediately after such Dilutive Issuance; provided, however, that such price shall in no event be less than $0.01 per share of Common Stock  (as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in Section 4(a) herein, the “Floor Price”);

provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received the Floor Price for each such share so issued or deemed to be issued.  For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and consideration per share under this Section 4(b)), the following shall be applicable:

(i)Issuance of Options. If, during the Restricted Period, the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 4(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to (A) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option minus (B) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(ii)Issuance of Convertible Securities. If, during the Restricted Period, the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section 4(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to (A) the sum of the lowest


amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security minus (B) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 4(b), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

(iii)Change in Option Price or Rate of Conversion. If, during the Restricted Period, the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 4(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 4(b) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

(iv)Calculation of Consideration Received. If, during the Restricted Period, any Option or Convertible Security is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, (A) such Option or Convertible Security (as applicable) will be deemed to have been issued for consideration equal to the Black Scholes Consideration Value thereof and (B) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (1) the aggregate consideration received by the Company, minus (2) the Black Scholes Consideration Value of each such Option or Convertible Security (as applicable).  If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

(v)Record Date. If, during the Restricted Period, the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common


Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

(c)Calculations. All calculations under this Section 4 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of shares of Common Stock.

(d)Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price and the number of Conversion Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 4(d) will increase the Conversion Price or decrease the number of Conversion Shares as otherwise determined pursuant to this Section 4, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

5.    Rights Upon Distribution of Assets.  In addition to any adjustments pursuant to Section 4, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of Common Stock covered by Section 4(a)) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, provision shall be made so that upon conversion of this Note, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

6.     Purchase Rights; Fundamental Transaction.

 (a)   Purchase Rights. In addition to any adjustments pursuant to Section 5 herein, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such


extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

 (b)   Fundamental Transactions. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents related to this Note in accordance with the provisions of this Section 6(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements confirming the obligations of the Successor Entity as set forth in this Note and an obligation to deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the Conversion Price hereunder to such shares of capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction).  Notwithstanding the foregoing, at the election of the Holder upon conversion of this Note following a Fundamental Transaction, the Successor Entity shall deliver to the Holder, in lieu of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 5 and 6(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Note prior to the applicable Fundamental Transaction, such shares of common stock (or its equivalent) of the Successor Entity (including its Parent Entity), or other securities, cash, assets or other property, which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been exercised immediately prior to the applicable Fundamental Transaction; provided, however, that such amount of reserved shares of Common Stock shall be limited by the Maximum Percentage of shares of Common Stock.

7.  [Reserved]

8.  Reissuance of Note.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 8(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 8(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 2(c)(vi) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 8(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 8(d) and in principal amounts of at least $10,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Note. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to


Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the Principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Execution Date of this Note, and (iv) shall have the same rights and conditions as this Note.

9.                Voting Rights. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to California corporate law, and as expressly provided in this Note.

10.               Covenants. Until this Note has been entirely converted, redeemed or otherwise satisfied in accordance with its terms:

(a) Rank. This Note shall be senior in right of payment to all other current and future notes to which the Company is a party, other than the Senior Indebtedness.

(b) Secured Indebtedness. Except with respect to Senior Indebtedness, the Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, incur any Indebtedness of the Company or any of the Subsidiaries, or amend or modify any Indebtedness in such a manner that results in it being, secured by any Lien on any assets of the Company or any of its Subsidiaries.

(c) Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (excluding payments with respect to the Drawbridge Note), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness, if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute an Event of Default has occurred and is continuing.

(d) Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or pay any cash dividend or distribution on any of its capital stock (other than dividends by wholly-owned Subsidiaries to the Company) without the prior express written consent of the Holder.

(e) Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than  sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries that, in the aggregate, do not have a fair market value in excess of $1,000,000 in any twelve (12) month period, and other than  (i) sales, leases, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company in the ordinary course of business and (ii) sales of inventory in the ordinary course of business.

(f) Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto.  The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.

(g) Preservation of Existence, Etc.  The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.


(h) Maintenance of Properties, Etc.  The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

(i) Maintenance of Insurance.  The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

11.[Reserved]

12.[Reserved]

13.Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversions and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation, compliance with Section 4 hereof). The issuance of shares of Common Stock and certificates for shares of Common Stock as contemplated hereby upon the conversion of this Note shall be made without charge to the Holder or such shares of Common Stock for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

14.             Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.

15.              Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the


conversion of this Note, and (ii) shall, so long as any of the Principal under this Note remains outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Note, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of this Note.

16.            Failure or Indulgence Not Waiver.  No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

17.   Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities, indebtedness, or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information (to the extent it constitutes, or contains, material, non-public information regarding the Company shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction.  It is expressly understood and agreed that the time of execution specified by the Holder in each Conversion Notice shall be definitive and may not be disputed or challenged by the Company.

18.          [Reserved].

19.   Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer of immediately available funds by providing the Company with prior written notice setting out the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amounts due under the Transaction Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of fifteen percent (15%) per month from the date such amount was due until the same is paid in full.

20.           Transferability of Note. A Holder may transfer some or all of this Note, or any shares issuable upon conversion of this Note, without the consent of the Company, subject only to the limitations of Section 2(f) of the Securities Purchase Agreement.

21.            Register.  The Company shall maintain a register (the “Register”) and record the names and addresses of the holders of each Convertible Note and the Principal amount of the Convertible Notes held by such holders (the “Registered Notes”).  The entries in the Register shall be conclusive and binding for all purposes absent manifest error.  The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and interest hereunder, notwithstanding notice to the contrary.  A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register.  Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate Principal amount as the Principal amount of the surrendered Registered Note to the designated assignee or transferee.


22.          Amendment. Except as otherwise provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. The Holder shall be entitled, at its option, to the benefit of any amendment of any other similar Convertible Note issued by the Company under the Securities Purchase Agreement.

23.          Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the Conversion Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder or the Company (as the case may be) learned of the circumstances giving rise to such dispute.  If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed arithmetic calculation of the Conversion Shares and the disputed determination of the Conversion Price to an independent, reputable investment bank selected by the Holder, with the consent of the Company (which may not be unreasonably withheld, conditioned or delayed), or (b) if acceptable to the Holder, the disputed arithmetic calculation of the Conversion Shares and the disputed determination of the Conversion Price to the Company’s independent, outside accountant.  The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error. The fees and expenses of such investment bank or accountant shall be borne by the parties in the same proportion as the respective amounts by which the investment bank’s or accountant’s determination differs from such party’s calculation.

24.       Waiver of Notice.  To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

25.     Governing Law.  This Note shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

26.     Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings:

 (a)   “1934 Act means the Securities Exchange Act of 1934, as amended.


 (b)   “Black Scholes Consideration Value” means the value of the applicable Option or Convertible Security (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option or Convertible Security (as the case may be) as of the date of issuance of such Option or Convertible Security (as the case may be) and (iii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option or Convertible Security (as the case may be).

(c)   “Bloomberg” means Bloomberg, L.P.

(d)   “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and the last closing trade price, respectively, for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the average of the bid prices, or the ask prices, respectively, of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 (e)   “Conversion Price” means $8.8340, subject to adjustment as provided herein.

 (f)   “Common Stock” means the common stock, par value $0.001 per share, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

(g)   “Drawbridge Note” means that secured convertible promissory note and security agreement dated July 23, 2020 in the principal amount of $23,831,553.98 issued by the Company to DBI Lease Buyback Servicing LLC.

(h)   “Execution Date” shall have the meaning set forth in the Securities Purchase Agreement.

(i)   “Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving entity) any other Person unless the shareholders of the Company immediately prior to such consolidation or merger continue to hold more than 50% of the outstanding shares of Voting Stock after such consolidation or merger, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets to any other Person, in connection with which the Company is dissolved, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3


under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

(j)   “Interest Rate” means fifteen percent (15%) per annum, in each case as may be adjusted from time to time in accordance with Section 1(d).

(k)   “Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the federal and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.

(l)   [Reserved].

(m)   “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

(n)   “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(o)   “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(p)   [Reserved]

(q)   [Reserved]

(r)   “SEC” means the Securities and Exchange Commission or the successor thereto.

 (s)   “Securities Purchase Agreement” means that certain securities purchase agreement by and among the Company and the Holder, dated as of the Execution Date, as may be amended from time to time in accordance with the terms thereof.

 (t)   “Senior Indebtedness” means any Indebtedness of the Company or its Subsidiaries under the Drawbridge Note, as may be amended from time to time in accordance with the terms thereof, or any bank or seller-backed financing secured by real or personal property.

(u)   Subsidiary” means any Person in which the Company, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person  or (II) controls or operates all or any part of the business, operations or administration of such Person; provided, that after the Subscription Date, a Person (other than Subsidiaries as of the Subscription Date) shall not become a Subsidiary pursuant to clause (I) unless the Company, directly or indirectly, owns at least 10% of any of the outstanding capital stock or holds at least 10% of any equity or similar interest of such person.

(v)   Subsidiary Spin-Off” means any inquiry, proposal or offer from any Person relating to any (a) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of a Subsidiary (excluding sales of assets in the ordinary course of business) equal to 51% or more of the value of the assets of the Subsidiary or to which 51% or more of the revenues or earnings of the Subsidiary are attributable, (b) tender offer for, or direct or indirect acquisition (whether in a single transaction or a series of related transactions) of 51% or more of the outstanding equity securities of any Subsidiary, or (c) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving substantially all of any Subsidiary or involving the assets of the any Subsidiaries with a value set forth in clause (a) of this definition.


(w)   “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(x)   “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

(y)   “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 (z)   “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the three highest closing bid prices and the three lowest closing ask prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 23. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


IN WITNESS WHEREOF, Holder and the Company have caused their respective signature page to this Convertible Note to be duly executed as of the date first written above.

 

COMPANY 

 

 

 

 

 

MULLEN AUTOMOTIVE, INC. 

 

  

 

 

  

 

By:

/s/  

 

 

Name: David Michery 

 

 

Title: CEO 


*  *  *  *  *

EXHIBIT I

MULLEN AUTOMOTIVE, INC.

CONVERSION NOTICE

Reference is made to that certain Convertible Note (the “Note”) issued by Mullen Automotive, Inc., a California corporation (the “Company”) to the undersigned Holder on November 4, 2021. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Note.

The undersigned holder hereby exercises the right to convert the portion of the Note indicated below into shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) as of the date specified below.

Date of Conversion:

Principal Amount of Note to be Converted:

Tax ID Number (If applicable):

Applicable Conversion Price:

$

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock into which the Note is being converted in the following name and to the following address:

Issue to:

Address:

Telephone Number:

Facsimile Number:

Holder:

By:


Title:

Dated:

Account Number (if electronic book entry transfer):


Transaction Code Number (if electronic book entry transfer):


EXHIBIT II

ACKNOWLEDGMENT

Mullen Automotive, Inc., a California corporation (the “Company”) hereby acknowledges its receipt of the enclosed Conversion Notice and hereby directs [______________] to issue the above indicated number of shares of Common Stock in accordance with the Irrevocable Transfer Agent Instructions dated [_________ __, 20__] from the Company and acknowledged and agreed to by [______________].

 

MULLEN AUTOMOTIVE, INC. 

 

 

 

 

 

By:

  

 

Name:

  

 

Title:

  


Exhibit 10.27(b)

Execution Version

WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), FROM REPUTABLE COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

MULLEN AUTOMOTIVE, INC.

WARRANT TO PURCHASE COMMON STOCK

Date of Issuance: November 4, 2021 (“Issuance Date”)

Mullen Automotive, Inc., a California corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Michael Friedlander, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), 12,452 (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16. This Warrant is one of the Warrants to purchase Common Stock (the “SPA Warrants”) issued to Holder pursuant to that certain Securities Purchase Agreement, dated as of November 4, 2021, by and between the Company and the Holder (the “Securities Purchase Agreement”).

1.

EXERCISE OF WARRANT.

(a)Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following


an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (in respect of such specific exercise, the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate and issuance of a new Warrant certificate evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice (the “Required Delivery Date”), the Company shall (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such shares of Common Stock pursuant to Section 5(d) of the Securities Purchase Agreement, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder and upon surrender hereof by the Holder at the principal office of the Company, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued

2


shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

(b)Exercise Price. For purposes of this Warrant, “Exercise Price” means $8.8340, subject to adjustment as provided herein.

(c)Company’s Failure to Timely Deliver Securities.  If the Company fails to issue and deliver (or cause to be delivered) to the Holder by the Required Delivery Date a certificate representing the Warrant Shares that is free from all restrictive and other legends or credit the balance account of Holder or Holder’s nominee with DTC for such number of Warrant Shares so delivered to the Company, then, in addition to all other remedies available to Holder, at the sole discretion of Holder, the Company shall:

(i)pay in cash to Holder on each Trading Day after the Required Delivery Date that the issuance or credit of such Warrant Shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered or credited (as the case may be) to Holder or Holder’s nominee multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required Delivery Date; or

(ii)if on or after the Required Delivery Date, Holder (or any other Person in respect, or on behalf, of Holder) purchases (in an open market transaction or otherwise) Common Stock (“Replacement Shares”) to deliver in satisfaction of a sale by Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, that Holder so anticipated receiving from the Company without any restrictive legend, then, within five (5) Trading Days after Holder’s request and in Holder’s sole discretion, either (A) pay cash to Holder in an amount equal to Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the Replacement Shares (the “Buy-In Price”), at which point the Company’s obligation to so deliver such certificate or credit Holder’s balance account shall terminate and such shares shall be cancelled, or (B) promptly honor its obligation to so deliver to Holder a certificate or certificates or credit Holder’s DTC account representing such number of shares of Common Stock that would have been so delivered if the Company timely complied with its obligations hereunder and pay cash to Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (1) such number of shares of Common Stock that the Company was required to deliver to Holder by the Required Delivery Date multiplied by (2) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date Holder purchased Replacement Shares and ending on the date of such delivery and payment under this clause (ii).

To the extent permitted by law, the Company’s obligations to issue and deliver the Common Stock upon exercise of the Warrant in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any

3


breach or alleged breach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of the Common Stock.  Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver the Common Stock issuable upon exercise of this Warrant as required pursuant to the terms hereof.

(d)Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below) at any time commencing sixty (60) days after the Issuance Date, the Holder may in its sole discretion (and without limiting the Holder’s rights and remedies contained herein or in any of the other Transaction Documents (as defined in the Securities Purchase Agreement)), exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

Net Number = (A x B) / C

For purposes of the foregoing formulas:

A=

The total number of shares with respect to which this Warrant is then being exercised.

B=

The Black Scholes Value (as defined in Section 16 herein).

C=

The Closing Bid Price of the Common Stock as of two (2) Trading Days prior to the time of such exercise (as such Closing Bid Price is defined in Section 16 herein), but in any event not less than $0.01(as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in Section 2(a) herein).

(e)Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof (including, without limitation, the Net Number), the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed, provided that following such issuance to Holder such dispute shall be resolved in accordance with Section 13.

(f)Limitations on Exercises and Exchanges. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) that the Holder or any of its affiliates would beneficially own in excess of 9.9% of the number of shares of Common Stock outstanding after giving effect to the issuance of Common Stock issuable upon exercise of the Warrants calculated in accordance with Section 13(d) of the Exchange Act (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be exercisable or exchangeable (as among all such

4


securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise or exchange this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability or exchangeability. For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into shares of Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Securities Purchase Agreement.

(g)Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued shares of Common Stock a number of shares of Common Stock equal to 200% of the maximum number of Warrant Shares issuable to satisfy the Company's obligations to issue shares of Common Stock hereunder, and the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock equal to 200% of the maximum number of Warrant Shares issuable to satisfy the Company’s obligation to issue shares of Common Stock hereunder.

(h)Activity Restrictions. For so long as Holder holds this Warrant or any Warrant Shares, Holder will not:  (i) engage or participate in any actions, plans or proposals which relate to or would result in (a) acquiring additional securities of the Company, alone or together with any other Person, which would result in beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.9% of the total outstanding shares of Common Stock or other voting securities of the Company, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Company, (c) a sale or transfer of a material amount of assets of the Company, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company’s business or corporate structure, including but not limited to, if the Company is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by Section 13 of the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any Person, (h) causing a class of securities

5


of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act, or (j) any action, intention, plan or arrangement similar to any of those enumerated above, or (ii) request the Company or its directors, officers, employees, agents or representatives to amend or waive any provision of this Section 1(h); provided, however, that notwithstanding anything to the contrary contain in clauses (i) and (ii) above, Holder may vote any shares of Common Stock owned or controlled by it, solicit any proxies, or seek to advise or influence any Person with respect to any voting securities of the Company.  Holder may only exercise this Warrant for a cash exercise price if the trading price at the time of exercise is greater than the then applicable Exercise Price.

2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.

(a)Stock Dividends and Splits. Without limiting any provision of Section 4, if the Company, at any time on or after the date of the Securities Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

(b)Adjustment Upon Issuance of Common Stock.  If, during the Restricted Period (as defined in the Securities Purchase Agreement), the Company effects an Subsequent Financing (as defined in the Securities Purchase Agreement), or in accordance with this Section 2 is deemed to have effected an Subsequent Financing, any Common Stock (including the issuance or sale of Common Stock owned or held by or for the account of the Company) issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Exercise Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced (and in no event increased) to the price per share as determined in accordance with the following formula:

EP2 = EP1 x (A + B) / (A + C)

6


For purposes of the foregoing formula:

A=

The total number of Warrant Shares with respect to which this Warrant may be exercised.

B=

The total number of shares of Common Stock that would be issued or issuable under the Dilutive Issuance if issued at a per share equal to EP1.

C=

The total number of shares of Common Stock actually issued or issuable under the Dilutive Issuance.

EP1=

The Exercise Price in effect immediately prior to a Dilutive Issuance.

EP2=

The Exercise Price immediately after such Dilutive Issuance; provided, however, that such price shall in no event be less than $0.01 per share of Common Stock  (as may be adjusted for stock dividends, subdivisions, or combinations in the manner described in Section 2(a) herein, the “Floor Price”);

provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received the Floor Price for each such share so issued or deemed to be issued.  For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and consideration per share under this Section 2(b)), the following shall be applicable:

(i)Issuance of Options. If, during the Restricted Period, the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to (A) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option minus (B) the sum of all amounts paid or payable to the holder of such Option (or any other Person) upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible

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Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(ii)Issuance of Convertible Securities. If, during the Restricted Period, the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to (A) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security minus (B) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issue or sale.

(iii)Change in Option Price or Rate of Conversion. If, during the Restricted Period, the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for Common Stock increases or decreases at any time, the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.

(iv)Calculation of Consideration Received. If, during the Restricted Period, any Option or Convertible Security is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, (A) such Option or Convertible Security (as applicable) will be deemed to have been issued for consideration equal to the Black Scholes Value – Consideration thereof and

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(B) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (1) the aggregate consideration received by the Company, minus (2) the Black Scholes Value – Consideration of each such Option or Convertible Security (as applicable).  If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

(v)Record Date. If, during the Restricted Period, the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

(c)Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a), (b) or (c) of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).  In addition, and notwithstanding anything to the contrary contained herein, upon a Cashless Exercise as set forth in Section 1(d) hereof, the number of Warrant Shares for which this Warrant is exercisable immediately following such Cashless Exercise shall be equal to (i) the number of Warrant Shares for which this Warrant was exercisable immediately prior to such Cashless Exercise less (ii) the number of Warrant Shares as to which such Cashless Exercise was exercised (such number of Warrant Shares in this clause (ii) in respect of such Cashless Exercise being equal to “A” in such

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Cashless Exercise formula in respect of such Cashless Exercise) and the number of such Warrant Shares issuable hereunder shall automatically be adjusted, as necessary, to enable to the Company to comply with its obligations to issue the Net Number of shares of Common Stock under Section 1(d)(i) hereof upon any Cashless Exercise thereunder.

(d)Calculations. All calculations under this Section 2 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(e)Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(e) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

3.RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of Common Stock covered by Section 2(a)) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, provision shall be made so that upon exercise of this Warrant, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

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4.

PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a)Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

(b)Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents related to this Warrant in accordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance reasonably satisfactory to the Holder, including agreements confirming the obligations of the Successor Entity as set forth in this paragraph (b) and (c) and elsewhere in this Warrant and an obligation to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction).  Notwithstanding the foregoing, at the election of the Holder upon exercise of this Warrant following a Fundamental Transaction, the Successor Entity shall deliver to the Holder, in lieu of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of common stock (or its equivalent) of the Successor Entity (including its Parent Entity), or other securities, cash, assets or other property, which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction; provided, however, that such amount of reserved shares of Common Stock shall be limited by the Maximum Percentage of Common Stock as set forth in Section 1(f).

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(c)Black Scholes Value – FT. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (i) the public disclosure of any Fundamental Transaction, (ii) the consummation of any Fundamental Transaction and (iii) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction, the Company or the Successor Entity, at the election of the Holder, shall purchase this Warrant from the Holder on the date of the consummation of such Fundamental Transaction by paying to the Holder cash in an amount equal to the Black Scholes Value – FT.

(d)Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and shall be applied as if this Warrant (and any such subsequent warrants issued hereunder) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).

5.NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding; provided, however, that such amount of reserved Common Stock shall be limited by the Maximum Percentage of Common Stock as set forth in Section 1(f).

6.WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the

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Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.

7.REISSUANCE OF WARRANTS.

(a)Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.  If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act.

(b)Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

(c)Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional share of Common Stock shall be given.

(d)Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this

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Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

8.NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities, indebtedness, or other property pro rata to holders of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information (to the extent it constitutes, or contains, material, non-public information regarding the Company shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction.  It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

9.AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. The Holder shall be entitled, at its option, to the benefit of any amendment of any other similar warrant issued under the Securities Purchase Agreement. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

10.SEVERABILITY.  If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

11.GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accor­dance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State

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of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

12.CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented to in writing by the Holder.

13.DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the arithmetic calculation of the Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder or the Company (as the case may be) learned of the circumstances giving rise to such dispute.  If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed arithmetic calculation of the Warrant Shares, the disputed determination of the Exercise Price, the Closing Sale Price, the Closing Bid Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Holder, with the consent of the Company (which may not be unreasonably withheld, conditioned or delayed), or (b) if acceptable to the Holder, the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s

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or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error. The fees and expenses of such investment bank or accountant shall be borne by the parties in the same proportion as the respective amounts by which the investment bank’s or accountant’s determination differs from such party’s calculation.

14.REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

15.TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

16.

CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

(a)Bid Price” means, for any security as of the particular time of determination, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the

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Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(b)Black Scholes Value” means the Black Scholes value of an option for one share of Common Stock at the date of the applicable Cashless Exercise, as such Black Scholes value is determined, calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Exercise Price, as adjusted, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate, (iii) a strike price equal to the Exercise Price in effect at the time of the applicable Cashless Exercise, (iv) an expected volatility equal to 135%, and (v) a deemed remaining term of the Warrant of five (5) years (regardless of the actual remaining term of the Warrant).

(c)Black Scholes Value – Consideration” means the value of the applicable Option or Convertible Security (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option or Convertible Security (as the case may be) as of the date of issuance of such Option or Convertible Security (as the case may be) and (iii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the date of issuance of such Option or Convertible Security (as the case may be).

(d)Black Scholes Value – FT” means the value of the unexercised portion of this Warrant remaining on the date of the Holder’s request pursuant to Section 4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (A) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the earliest to occur of (1) the public disclosure of the applicable Fundamental Transaction, (2) the consummation of the applicable Fundamental Transaction and (3) the date on which the Holder first became aware of the applicable Fundamental Transaction and ending on the Trading Day of the Holder’s request pursuant to Section 4(c) and (B) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (A) the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c) and (B) the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable Fundamental Transaction and (iv) an expected volatility equal to the greater of 135% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (A) the public

17


disclosure of the applicable Fundamental Transaction, (B) the consummation of the applicable Fundamental Transaction and (C) the date on which the Holder first became aware of the applicable Fundamental Transaction.

(e)Bloomberg” means Bloomberg, L.P.

(f)Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

(g)Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and the last closing trade price, respectively, for such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the average of the bid prices, or the ask prices, respectively, of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

(h)Common Stock” means the common stock, par value $0.001 per share, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

(i)Convertible Securities” means any capital stock or other security of the Company that is at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock)..

(j)Drawbridge Note” means that secured convertible promissory note and security agreement dated July 23, 2020 in the principal amount of $23,831,553.98 issued by the Company to DBI Lease Buyback Servicing LLC.

(k)Eligible Market” means the New York Stock Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market.

(l)Expiration Date” means the date that is November 4, 2026 or, if such date falls on a day other than a Business Day or on which trading does not take place on the principal securities exchange or trading market where the Common Stock is listed (a “Holiday”), the next date that is not a Holiday.

(m)Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or

18


not the Company is the surviving entity) any other Person unless the shareholders of the Company immediately prior to such consolidation or merger continue to hold more than 50% of the outstanding shares of Voting Stock after such consolidation or merger, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets to any other Person, in connection with which the Company is dissolved, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

(n)Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

(o)Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(p)Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(q)Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(r)Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Common Stock, any day on which the Common Stock is traded on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is

19


otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

(s)Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

(t)VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the three highest closing bid prices and the three lowest closing ask prices of all of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

[signature page follows]

20


IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

MULLEN AUTOMOTIVE, INC.

By:

/s/ David Michery

Name:

David Michery

Title:

CEO


EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

MULLEN AUTOMOTIVE, INC.

The undersigned holder hereby exercises the right to purchase _________________ shares of the Common Stock (“Warrant Shares”) of Mullen Automotive, Inc., a California corporation (the “Company”), evidenced by Warrant to Purchase Common Stock No. _______ (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

____________

a “Cash Exercise” with respect to _________________ Warrant Shares; and/or

____________

a “Cashless Exercise” with respect to _______________ Warrant Shares.

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares, the Holder represents and warrants that ____________ Common Stock are to be delivered pursuant to such Cashless Exercise, as further specified in Annex A to this Exercise Notice.

2.Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

3.Delivery of Warrant Shares and Net Number of Common Stock.  The Company shall deliver to Holder, or its designee or agent as specified below, __________ Common Stock in respect of the exercise contemplated hereby.  Delivery shall be made to Holder, or for its benefit, to the following address:

_______________________

_______________________

_______________________

_______________________

Date: _______________ __, ______


Name of Registered Holder

By:

Name:

Title:

Account Number:

(if electronic book entry transfer)

Transaction Code Number:

(if electronic book entry transfer)


ANNEX A TO EXERCISE NOTICE

CASHLESS EXERCISE EXCHANGE CALCULATION

TO BE FILLED IN BY THE REGISTERED HOLDER TO EXCHANGE THE

WARRANT TO PURCHASE COMMON STOCK IN A CASHLESS EXERCISE PURSUANT TO SECTION 1(d) OF THE WARRANT

Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

[    ]  Net Number = (A x B)/C = ________________ shares of Common Stock

For purposes of the foregoing formula:

A= the total number of shares with respect to which the Warrant is then being exercised = _________________.

B= Black Scholes Value (as defined in Section 16 of the Warrant) = ______________.

C= the Closing Bid Price of the Common Stock as of two (2) Trading Days prior to the time of such exercise (as such Closing Bid Price is defined in Section 16 of the Warrant) = ______________.

Date:

_______________ __, ______

Name of Registered Holder

By:

Name:

Title:


EXHIBIT B

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 20__, from the Company and acknowledged and agreed to by _______________.

MULLEN AUTOMOTIVE, INC.

By:

Name:

Title:


Exhibit 21.1

List of Subsidiaries

Subsidiary

Place or Organization

Ottava Automotive Inc.

California

Mullen Investment Properties, LLC

Mississippi


Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mullen Automotive Inc.

Brea, California

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-195476, No. 333-208364, No. 333-212277, No. 333-221082, No. 333-228647, No. 333-236719, No. 333-252767 and No. 333-260793) of Mullen Automotive Inc. (formerly Net Element, Inc.), of our report dated December 29, 2021, relating to the consolidated financial statements of Mullen Automotive Inc. at and for the years ended September 30, 2021 and 2020, which appear in this Form 10-K.

/s/ Daszkal Bolton, LLP

Fort Lauderdale, Florida

December 29, 2021


Exhibit 31.1

CEO Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David Michery, certify that:

1.

I have reviewed this report on Form 10-K of Mullen Automotive Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

December 29, 2021

By:

/s/ David Michery

David Michery

Chief Executive Officer


Exhibit 31.2

CFO Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kerri Sadler, certify that:

1.

I have reviewed this report on Form 10-K of Mullen Automotive Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:

December 29, 2021

By:

/s/ Kerri Sadler

Kerri Sadler

Chief Financial Officer


Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the period ended September 30, 2021 of Mullen Automotive Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.    The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report.

By:

/s/ David Michery

David Michery

Chief Executive Officer

December 29, 2021

By:

/s/ Kerri Sadler

Kerri Sadler

Chief Financial Officer

December 29, 2021