RISK FACTORS

You should carefully consider the following risk factors, together with the other information contained in this proxy statement/prospectus. If any of the following risks and uncertainties develops into actual events, these events could have a material adverse effect on both Net Element’s and Mullen’ businesses, financial conditions or results of operations. In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. The risk factors below primarily describe risk factors relating to the merger and risk factors relating to Mullen’s business, which will be the business of the post-merger continuing company. As described in more detail elsewhere in this proxy statement/prospectus, prior to the Closing of the Merger, Net Element will divest itself of its existing business and operations, see “PROPOSAL NO. 8—THE DIVESTITURE PROPOSAL” for more information. For a description of the risks relating to Net Element’s current business and operations, see the section entitled “BUSINESS OF NET ELEMENT—Risk Factors of Existing Net Element Business” in this proxy statement/prospectus.

Summary

Risks Related to the Merger

Risks Related to Mullen’s Capital Requirements and Financial Condition

Risks Related to Mullen’s Business and Operations

Risk Factors

Risks Related to the Merger

Failure to complete the Merger may negatively impact Net Element’s stock price, future business or operations.

If the Merger is not completed, Net Element may be subject to material risks, including, but not limited to, the following:

Further, if the Merger is terminated and either company’s board of directors determines to seek another merger or Merger Agreement, there can be no assurance that it will be able to find a partner on a timely basis or on terms as attractive as those provided for in the Merger Agreement.

Net Element is subject to business uncertainties while the Merger is pending.

Uncertainty about the effect of the contemplated Merger on employees, merchants, partners and other persons with whom we have a business relationship may have an adverse effect on our business, financial condition and results of operations. These uncertainties may impair our ability to attract, retain and motivate key personnel and merchants pending the consummation of the Merger, as such personnel and merchants may experience uncertainty about their future roles and relationships following the consummation of the Merger. Additionally, these uncertainties could cause our merchants, partners and others with whom we deal to seek to change, or fail to extend, existing business relationships with us. In addition, competitors may target our existing merchants by highlighting potential uncertainties that may result from or in connection with the Merger. The pursuit of the Merger may also place a burden on our management and internal resources. Any significant diversion of management attention away from ongoing business concerns could have a material adverse effect on our business, financial condition and results of operations.

The market price of Net Element Common Stock following the Merger may decline as a result of the Merger.

The market price of Net Element Common Stock may decline as a result of the Merger for a number of reasons including if:

Nasdaq may not accept the combined company’s relisting application, which would cause the company to evaluate options to list on other securities exchanges and may cause the company’s Common Stock to trade at a lower value, have less trading volume, or the company may not successfully list on any securities exchange.

Because Mullen is a non-Nasdaq entity and the Merger will result in a change of control of the Company, Net Element must apply for initial listing for the post-transaction company in connection with the Merger. This process can take several weeks and Nasdaq has broad discretion over this process and may deny an application even if technical requirements are met in order to protect investors. Consequently, even if the combined company meets the initial listing requirements, Nasdaq may still deny the application. In addition to the above, the combined company’s Series A Preferred Stock has super voting privileges. Such a governance structure may be deemed a dual class voting structure under Nasdaq Rule 5640, which may not be permitted by Nasdaq, forcing the company to amend the Merger Agreement and potentially causing delays or a denial of our application for listing. Additionally, listing on Nasdaq is a condition to the Closing of the Merger, so if the combined company fails to list on Nasdaq, then the Merger may not be consummated.

In order to satisfy listing requirements, among other things, the post-merger company must have at least $5 million of positive shareholders’ equity and enough available capital to satisfy said listing requirement for a period of time thereafter.  Mullen currently has significant negative shareholders’ equity and requires significant funding to meet this requirement.  Part of the funding that Mullen expects to satisfy this listing requirement is the $20 million that would be paid to purchase the Series C Preferred Stock and warrants pursuant to the New SPA described above under the heading “Description of Certain Mullen Agreements and Securities—Additional Stock Purchase Agreement and Related Warrants.”  The obligation of the investor in the New SPA to complete that purchase is subject to a number of stringent conditions, many of which are beyond our control.  If the conditions are not satisfied, and the investor does not purchase the securities, Mullen currently does not have other financing to replace said $20 million purchase price.  In the absence of that investment, it is likely that the post-merger company will not be able to meet the Nasdaq listing requirements and the conditions to the closing of the Merger would not be satisfied.  Even if that investment is made, Mullen and/or the Company will likely be required to obtain additional investment to satisfy the shareholders’ equity requirement and may not be able to do so. Additionally, even if the combined company is able to meet the aforementioned $5 million positive shareholders’ equity threshold, Nasdaq will require the combined company to provide evidence of liquidity necessary to satisfy said listing requirement for a substantial period of time thereafter. While following the effective time of the Merger, the combined company anticipates putting in place a $30 million equity line of credit with a major current investor in Mullen on standard terms and conditions that will further dilute all of the holders of common stock of the combined company on an equal basis, there is no assurance that Nasdaq will view such equity line as sufficient to satisfy the continued listing requirement. In such event, additional capital sources would have to be put in place prior to the Merger Effective Date to meet Nasdaq requirements. There is no assurance that such capital sources could be put in place in which case the conditions to the closing of the Merger would not be satisfied.

Net Element and Mullen stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined organization is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Net Element and Mullen stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined organization is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Net Element and Mullen from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith that an unsolicited alternative takeover proposal is or is reasonably likely to lead to a superior takeover proposal and is reasonably capable of being consummated and that failure to cooperate with the proponent of the proposal is reasonably likely to result in a breach of the board’s fiduciary duties. In addition, if Net Element or Mullen terminates the Merger Agreement under certain circumstances, including terminating because of a decision of a board of directors to recommend a superior or competing proposal, Net Element would be required to pay a termination fee of $750,000 to Mullen or Mullen would be required to pay a termination fee of $750,000 to Net Element, respectively. This termination fee may discourage third parties from submitting alternative takeover proposals to Net Element or Mullen or their stockholders and may cause the respective boards of directors to be less inclined to recommend an alternative proposal.

Because the lack of a public market for Mullen shares makes it difficult to evaluate the fairness of the merger, the stockholders of Mullen may receive consideration in the Merger that is less than the fair market value of the Mullen shares or Net Element may pay more than the fair market value of the Mullen shares.

The outstanding capital stock of Mullen is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Mullen. Because the percentage of Net Element equity to be issued to Mullen stockholders was determined based on negotiations between the parties, it is possible that the value of the Net Element common stock to be received by Mullen stockholders will be less than the fair market value of Mullen, or Net Element may pay more than the aggregate fair market value for Mullen.

Risks Related to Mullen

The value of your investment in Net Element following consummation of the Merger will be subject to the significant risks affecting Mullen and those inherent in the electric vehicles industry. You should carefully consider the risks and uncertainties described below and other information included in this proxy statement/prospectus. If any of the events described below occur, the post-acquisition business and financial results could be adversely affected in a material way. This could cause the trading price of the combined company’s common shares to decline, perhaps significantly, and you therefore may lose all or part of your investment. The following risk factors apply to the business and operations of Mullen and will also apply to the business and operations of the combined company following the Merger.

Risks Related to Mullen’s Capital Requirements and Financial Condition

Mullen has incurred significant losses since inception and expects that it will continue to incur losses for the foreseeable future, which makes it difficult to assess Mullen’s future viability.

Mullen has not been profitable since it commenced operations in 2014 and may never achieve or sustain profitability. In addition, Mullen has 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 electronic vehicle technology and vehicles is a highly speculative undertaking and involves a substantial degree of risk. Mullen has not yet commercialized any of its proposed EV products or generated any revenue from sales of such products. Mullen has devoted significant resources to research and development and other expenses related to its ongoing operations.

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

Mullen’s auditor has expressed substantial doubt about its ability to continue as a going concern.

The audit report on Mullen’s financial statements for the years ended September 30, 2020 and 2019, includes an explanatory paragraph related to Mullen’s recurring losses from operations and dependence on additional financing to continue as a going concern. In view of these matters, Mullen’s ability to continue as a going concern is dependent upon its ability to raise additional debt or equity financings or enter into strategic partnerships. Since its inception, Mullen has financed its operations through convertible debt financings. Mullen intends to continue to finance its operations through debt or equity financing and/or strategic partnerships. The failure to obtain sufficient financing or strategic partnerships could adversely affect Mullen’s ability to achieve its business objectives and continue as a going concern.

Mullen may not be able to engage in attractive strategic or capital-raising transactions as a result of the Mullen Spin-Off.

To preserve the anticipated tax-free treatment of the Mullen Spin-Off for U.S. federal income tax purposes, for the period ending two years after the distribution, Mullen may be prohibited from: (i) entering into or approving any transaction or series of transactions involving the acquisition of its outstanding or newly issued equity; (ii) liquidating or partially liquidating, or merging or consolidating (unless Mullen is the survivor); (iii) ceasing to be engaged in an active trade or business, or selling, transferring or disposing of 25% or more of the net or gross assets of any active trade or business; (iv) amending any of our organizational documents or taking any action affecting the voting rights of our capital stock; or (v) redeeming or otherwise repurchasing any of our outstanding stock or options. These restrictions may limit, for a period of time, Mullen’s ability to pursue certain strategic transactions, equity issuances or repurchases, or other transactions that Mullen may believe to be in the best interests of its shareholders or that might increase the value of its business.

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

For the years ended September 30, 2020 and 2019, Mullen incurred net losses from operations of $27 million and $38 million, respectively, and net cash used in operating activities was $4 million and $3 million, respectively. At September 30, 2020, Mullen had an accumulated deficit of $42 million and its working capital deficit was $34 million. Mullen will need significant capital to, among other things, conduct research and development, ramping up its production capacity and expand its sales and service network. Mullen expects to continue to incur substantial operating losses for the next several years as it advances its product development and commercialization efforts. No substantial revenue from operations will likely be available until, and unless, such efforts are successful.

Mullen’s ability to obtain the necessary financing to carry out its business plan is subject to a number of factors, including general market conditions and investor acceptance of its business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to Mullen. In particular, recent disruptions in the financial markets and volatile economic conditions could affect Mullen’s ability to raise capital. If Mullen raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, it may have to relinquish certain valuable rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If Mullen raises additional capital through public or private equity offerings, the ownership interest of its stockholders will be diluted, and the terms of any new equity securities may have preferential rights over its common stock. If Mullen raises additional capital through debt financing, it may be subject to covenants limiting or restricting its 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 its ability to develop and commercialize its product candidates or operate as a business.

Additional capital may not be available when Mullen needs it, on terms that are acceptable to it or at all. If adequate funds are not available to Mullen on a timely basis, it will be required to delay, limit, reduce or terminate its establishment of sales and marketing, manufacturing or distribution capabilities, development activities or other activities that may be necessary to commercialize its proposed products or other development activities.

Certain of Mullen’s lenders and also the Internal Revenue Service have liens on Mullen’s assets and if these lienholders foreclose, that would be detrimental to the business of Mullen, its financial condition and its ability to continue as a going concern.

Certain of Mullen’s lenders and also the Internal Revenue Service (the “IRS”) have liens of $3.9 million on Mullen’s assets and should Mullen enter into default on such loans and the lienholders foreclose, they could secure judgments against Mullen’s assets. This would be detrimental to the business of Mullen, its financial condition and its ability to operate as a going concern.

Mullen has not paid cash dividends on its common stock in the past and does not expect to pay dividends on its common stock in the future. Any return on investment may be limited to the value of its common stock.

Mullen has never paid cash dividends on its common stock and do not anticipate paying cash dividends in the near future. The payment of dividends on its common stock will depend on earnings, financial condition and other business and economic factors affecting Mullen at such time as the board of directors may consider relevant. If Mullen does not pay dividends, its common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.

Risks Related to Mullen’s Business and Operations

Mullen 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.

Mullen’s business depends in large part on its ability to develop, manufacture, market and sell or lease its electric vehicles. Its ability to effectively compete in the EV market will depend in large part on its entry into the electric Sport Utility Vehicle (“SUV”) market through the offering of competitively priced vehicles to a wider variety of potential buyers.

Mullen initially plans to manufacture vehicles in collaboration with one or more automotive component and engineering services suppliers, including large original equipment manufacturers (OEMs) or tier-one automotive suppliers. Mullen has not yet executed definitive supply or manufacturing agreements with any OEM or tier-one automotive supplier for the supply of parts for production of its initial proposed SUV vehicles or any of its other future vehicle offerings. If Mullen is unable to negotiate and finalize such supply and manufacturing agreements with an OEM or a tier-one automotive supplier, it will not be able to produce any SUV vehicles 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 its business, prospects, operating results and financial condition.

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

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

Mullen’s 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 lawsuits, product recalls, or redesign efforts.

The battery packs within Mullen’s 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 lawsuits, product recalls, or redesign efforts, all of which would be time consuming and expensive and could harm Mullen’s 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 Mullen’s business and reputation.

Mullen is substantially reliant on its relationships with OEMs, suppliers and service providers for the parts and components in its vehicles, as well as for the manufacture of its initial vehicles. If any of these OEMs, suppliers or service partners choose to not do business with Mullen, then Mullen would have significant difficulty in procuring and producing its vehicles and its 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 Mullen’s control. Mullen could experience delays to the extent its current or future partners do not continue doing business with Mullen or 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 Mullen could be affected by adverse publicity related to its partners whether or not such publicity is related to their collaboration with Mullen. In addition, although Mullen intends to be involved in material decisions in the supply chain process, given that Mullen also relies on its partners to meet its quality standards, there can be no assurance that Mullen will be able to maintain high quality standards.

Mullen may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further its business purpose. These alliances could subject Mullen 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 Mullen’s business.

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

Mullen will rely heavily on complex machinery for its operations and its production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. It is expected that Mullen’s 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 Mullen’s 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, it 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 fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on Mullen’s 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 Mullen’s electric vehicles, and there can be no assurance such systems will be successfully developed.

Mullen 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 Mullen will need to coordinate with its vendors and suppliers in order to reach production for its electric vehicles. Defects and errors may be revealed over time and Mullen’s control over the performance of third-party services and systems may be limited. Thus, Mullen’s potential inability to develop the necessary software and technology systems may harm its competitive position.

Mullen is relying on third-party suppliers to develop a number of emerging technologies for use in its 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 Mullen’s suppliers will be able to meet the technological requirements, production timing, and volume requirements to support its business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics Mullen anticipates in its business plan. As a result, Mullen’s business plan could be significantly impacted, and Mullen may incur significant liabilities under warranty claims which could adversely affect its business, prospects, and results of operations.

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

Any delay in the financing, design, manufacture, regulatory approval or launch of Mullen’s vehicles, including entering into agreements for platform sharing, supply of component parts, and manufacturing, could materially damage its 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 Mullen delays the launch of its vehicles, its growth prospects could be adversely affected as it may fail to establish or grow its market share. Mullen relies on third-party suppliers for the provision and development of the key components and materials used in its vehicles. To the extent Mullen’s suppliers experience any delays in providing it with or developing necessary components, it could experience delays in delivering on its timelines.

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

While Mullen plans to obtain components from multiple sources whenever possible, many of the components used in its vehicles will be purchased by Mullen from a single source. While Mullen believes that it may be able to establish alternate supply relationships and can obtain or engineer replacement components for its single source components, Mullen may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable to it. In addition, Mullen could experience delays if its 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 Mullen’s vehicles until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond Mullen’s control or which it does not presently anticipate, could also affect its suppliers’ ability to deliver components to Mullen on a timely basis. Any of the foregoing could materially and adversely affect Mullen’s results of operations, financial condition and prospects.

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

Mullen expects to purchase various types of equipment, raw materials and manufactured component parts from its suppliers. If these suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, Mullen 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 Mullen’s ability to deliver vehicles and could increase Mullen’s costs and negatively affect its liquidity and financial performance.

Mullen has a limited operating history and faces significant challenges as a new entrant into the automotive industry. Mullen vehicles are in development and Mullen does not expect its first vehicle to be produced until the second quarter of 2024, at the earliest, if at all.

Mullen was incorporated in 2014 and has a short operating history in the automobile industry, which is continuously evolving. Mullen has no experience as an organization in high volume manufacturing of the planned electric vehicles. Mullen cannot assure you that it or its partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable Mullen 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 Mullen’s business and prospects in light of the risks and significant challenges it faces as a new entrant into its industry, including, among other things, with respect to its ability to:

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

Mullen is 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 its ability to continue as a going concern.

Mullen has incurred a net loss since its inception. Mullen believes that it will continue to incur operating and net losses each quarter until at least the time it begins significant deliveries of its vehicles. Even if Mullen is able to successfully develop, manufacture, and sell or lease its vehicles, there can be no assurance that they will be commercially successful.

Mullen expects the rate at which it will incur losses to be significantly higher in future periods as it, among other things, designs, develops and manufactures its vehicles; builds up inventories of parts and components for its vehicles; increases its sales and marketing activities, including opening new Mullen Experience Centers; develops its distribution infrastructure; and increases its general and administrative functions to support its growing operations. Mullen may find that these efforts are more expensive than it currently anticipates or that these efforts may not result in revenues, which would further increase Mullen’s losses.

Mullen’s independent registered public accounting firm has included an emphasis of matter paragraph regarding Mullen’s ability to continue as a going concern in its opinion on Mullen’s consolidated financial statements as of September 30, 2020, due to insufficient capital for Mullen to fund its operations. Mullen’s consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty and do not reflect the transactions contemplated by the Merger Agreement.

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

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

Mullen’s operating and financial results forecast relies in large part upon assumptions and analyses developed by Mullen. If these assumptions or analyses prove to be incorrect, Mullen’s actual operating results may be materially different from its forecasted results.

The projected financial and operating information appearing elsewhere in this proxy statement/prospectus reflect current estimates of future performance. Whether actual operating and financial results and business developments will be consistent with Mullen’s expectations and assumptions as reflected in its forecast depends on a number of factors, many of which are outside Mullen’s control, including, but not limited to:

Unfavorable changes in any of these or other factors, most of which are beyond Mullen’s control, could materially and adversely affect its business, results of operations and financial results.

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

It is difficult to predict Mullen’s future revenues and appropriately budget for its expenses, and Mullen may have limited insight into trends that may emerge and affect its business. Mullen will be required to provide forecasts of its demand to its suppliers several months prior to the scheduled delivery of products to its prospective customers. Currently, there is no historical basis for making judgments on the demand for Mullen’s vehicles or its ability to develop, manufacture, and deliver vehicles, or Mullen’s profitability in the future. If Mullen overestimates its requirements, its suppliers may have excess inventory, which indirectly would increase Mullen’s costs. If Mullen underestimates its requirements, its suppliers may have inadequate inventory, which could interrupt manufacturing of its products and result in delays in shipments and revenues. In addition, lead times for materials and components that Mullen’s 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 Mullen fails to order sufficient quantities of product components in a timely manner, the delivery of vehicles to its customers could be delayed, which would harm Mullen’s business, financial condition and operating results.

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

Mullen may be unable to adequately control the costs associated with its operations. Mullen expects to incur significant costs related to procuring raw materials required to manufacture and assemble its vehicles. The prices for these raw materials fluctuate depending on factors beyond Mullen’s control. Mullen’s business also depends on the continued supply of battery cells for its vehicles. Mullen is 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 Mullen’s raw materials or components would increase Mullen’s operating costs and could reduce Mullen’s 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 Mullen or impact its prospects.

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

Once production commences, Mullen 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. Mullen 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. Mullen has a limited frame of reference by which to evaluate the long-term performance of its systems and vehicles. There can be no assurance that Mullen will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If any of Mullen’s vehicles fail to perform as expected, Mullen may need to delay deliveries or initiate product recalls, which could adversely affect Mullen’s brand in its target markets and could adversely affect its business, prospects, and results of operations.

Mullen’s services may not be generally accepted by its users. If Mullen is unable to provide quality customer service, its business and reputation may be materially and adversely affected.

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

The automotive market is highly competitive, and Mullen 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 Mullen will be competing for sales with both ICE vehicles and other EVs. Many of Mullen’s current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than Mullen does 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. Mullen expects 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 Mullen’s business, financial condition, operating results, and prospects.

The automotive industry and its 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 Mullen’s electric vehicles.

Mullen may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source and, as a result, its 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 Mullen’s business and prospects in ways Mullen does not currently anticipate. Any failure by Mullen to successfully react to changes in existing technologies could materially harm its competitive position and growth prospects.

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

It is expected that Mullen’s proposed vehicles will be designed with connectivity for future installation of an autonomous hardware suite and Mullen plans to partner with a third-party software provider in the future to implement autonomous capabilities. However, Mullen cannot guarantee that it 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 Mullen, 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 Mullen’s autonomous driving systems occur, Mullen could be subject to liability, negative publicity, government scrutiny, and further regulation. Any of the foregoing could materially and adversely affect Mullen’s results of operations, financial condition, and growth prospects.

Mullen’s distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating its business, operating results and future prospects difficult.

Mullen’s distribution model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating its business, operating results and future prospects difficult. Mullen’s distribution model is not common in the automotive industry today. Mullen plans 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, Mullen will not be able to utilize long established sales channels developed through a franchise system to increase sales volume. Moreover, Mullen will be competing with companies with well established distribution channels. Mullen’s success will depend in large part on its ability to effectively develop its own sales channels and marketing strategies. If Mullen is unable to achieve this, it could have a material adverse effect on its business, prospects, financial results and results of operations.

Mullen has identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect the reliability of Mullen’s consolidated financial statements and have other adverse consequences.

Mullen has identified material weaknesses in internal control over financial reporting, which relate to business processes and controls surrounding risk assessment, segregation of duties and accuracy of accruals.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to its consolidated financial statements that could not be prevented or detected on a timely basis.

Mullen’s management has concluded that these material weaknesses in Mullen’s internal control over financial reporting are due to the fact that, prior to the completion of the Merger, Mullen is a private company with limited resources and does not have the necessary business processes and related internal control formally designed and implemented coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee Mullen’s business processes and controls surrounding risk assessment, segregation of duties and accuracy of accruals.

Mullen’s management is in the process of developing a remediation plan. The material weaknesses will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Mullen’s management will monitor the effectiveness of Mullen’s remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could result in further material misstatements to Mullen’s annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If Mullen is unable to assert that its internal control over financial reporting is effective, or when required in the future, if Mullen’s independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of Mullen’s financial reports, the market price of the combined companies’ Common Stock could be adversely affected and Mullen could become subject to litigation or investigations by the Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources.

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

Mullen’s 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 Mullen 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 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 Mullen’s business, prospects, financial condition, and operating results.

In addition, the demand for Mullen’s 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:

Any of the factors described above may cause current or potential customers not to purchase electric vehicles in general, and Mullen electric vehicles in particular. If the market for electric vehicles does not develop as Mullen expects or develops more slowly than Mullen expects, its 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 Mullen’s 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 Mullen’s electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and Mullen’s 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, Mullen’s financial position could be harmed.

In addition, Mullen 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 Mullen’s ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of its applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. Mullen cannot assure you that it will be successful in obtaining any of these additional grants, loans and other incentives. If Mullen is not successful in obtaining any of these additional incentives and Mullen is unable to find alternative sources of funding to meet its planned capital needs, its business and prospects could be materially adversely affected.

If Mullen fails to manage its future growth effectively, it may not be able to develop, manufacture, market and sell or lease its vehicles successfully.

Mullen intends to expand its 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 Mullen’s 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 Mullen will need to expend significant time and expense training employees it hires. Mullen also requires sufficient talent in additional areas such as software development. Furthermore, as Mullen is a relatively young company, its ability to train and integrate new employees into its operations may not meet the growing demands of its business which may affect its ability to grow. Any failure to effectively manage its growth could materially and adversely affect Mullen’s business, prospects, operating results and financial condition.

For example, to manage the expected growth of its operations and increasing complexity, Mullen will need to improve its 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 Mullen’s billing and reporting. Mullen’s current and planned systems, procedures and controls may not be adequate to support its complex arrangements and the rules governing revenue and expense recognition for its future operations and expected growth. Delays or problems associated with any improvement or expansion of Mullen’s operational and financial systems and controls could adversely affect Mullen’s relationships with its customers, cause harm to its reputation and brand and could also result in errors in its financial and other reporting.

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

Once Mullen’s cars are in production, it will need to maintain warranty reserves to cover warranty-related claims. If Mullen’s warranty reserves are inadequate to cover future warranty claims on Mullen’s vehicles, Mullen’s business, prospects, financial condition and operating results could be materially and adversely affected. Mullen 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.

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

Once Mullen’s cars are in production, Mullen’s business and prospects will heavily depend on its ability to develop, maintain and strengthen the Mullen brand. If Mullen is not able to establish, maintain and strengthen its brand, it may lose the opportunity to build a critical mass of customers. Mullen’s ability to develop, maintain and strengthen the Mullen brand will depend heavily on the success of its marketing efforts. The automobile industry is intensely competitive, and Mullen may not be successful in building, maintaining and strengthening its brand. Many of Mullen’s 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 Mullen does. If Mullen does not develop and maintain a strong brand, its business, prospects, financial condition and operating results will be materially and adversely impacted.

Mullen 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.

Mullen 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 Mullen’s business will depend on a single or limited number of models, to the extent a particular model is not well-received by the market, Mullen’s sales volume, business, prospects, financial condition, and operating results could be materially and adversely affected.

Doing business internationally creates operational and financial risks for Mullen’s business.

Mullen’s 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 Mullen fails to coordinate and manage these activities effectively, its 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 Mullen sells its 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.

Mullen is highly dependent on the services of David Michery, its Chief Executive Officer.

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

Mullen’s business may be adversely affected by labor and union activities.

Although none of Mullen’s 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. Mullen 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 Mullen’s business, financial condition or operating results.

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

Mullen faces 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 Mullen’s employees and operations and the operations of its customers, suppliers, vendors and business partners, and may negatively impact its sales and marketing activities. In addition, various aspects of Mullen’s 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 Mullen’s manufacturing plans, sales and marketing activities, business and results of operations.

The spread of COVID-19 has caused Mullen to modify its 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 Mullen may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers, vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of Mullen’s workforce are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, Mullen’s operations will be impacted.

The extent to which the COVID-19 pandemic impacts Mullen’s 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 pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume. Even after the COVID-19 pandemic has subsided, Mullen may continue to experience an adverse impact to its business as a result of its 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 Mullen’s vehicles. Under difficult economic conditions, potential customers may seek to reduce spending by forgoing Mullen’s 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.

Mullen’s business plans require a significant amount of capital. In addition, its future capital needs may require Mullen to sell additional equity or debt securities that may dilute its stockholders or introduce covenants that may restrict its operations or its ability to pay dividends.

Mullen expects its capital expenditures to continue to be significant in the foreseeable future as it expands its business, and that once its cars are in production its level of capital expenditures will be significantly affected by user demand for its products and services. The fact that Mullen has a limited operating history means it has limited historical data on the demand for its products and services. As a result, Mullen’s future capital requirements may be uncertain and actual capital requirements may be different from those it currently anticipates. Mullen may need to seek equity or debt financing to finance a portion of its capital expenditures. Such financing might not be available to Mullen in a timely manner or on terms that are acceptable, or at all.

Mullen’s ability to obtain the necessary financing to carry out its business plan is subject to a number of factors, including general market conditions and investor acceptance of Mullen’s business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to Mullen. If Mullen is unable to raise sufficient funds, it will have to significantly reduce its spending, delay or cancel its planned activities or substantially change its corporate structure. Mullen might not be able to obtain any funding, and it might not have sufficient resources to conduct its business as projected, both of which could mean that Mullen would be forced to curtail or discontinue its operations.

In addition, Mullen’s future capital needs and other business reasons could require it to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute its stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict Mullen’s operations or its ability to pay dividends to its stockholders.

If Mullen cannot raise additional funds when it needs or wants them, its operations and prospects could be negatively affected.

Mullen has a substantial amount of debt which is considered significant for a company of Mullen’s size which could adversely affect its financial condition and its ability to react to changes in its business.

As of April 30, 2021, Mullen had an aggregate principal amount of debt outstanding of approximately $33 million – of that, approximately $10.0 million will be converted into shares of Mullen Series C Preferred Stock immediately prior to the Effective Time of the Merger. Mullen believes this is a substantial amount of indebtedness which is considered significant for a company of Mullen’s size and current level of operations. Mullen’s substantial debt could have important consequences to Mullen. For example, it could:

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

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

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

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

Reservations for Mullen’s 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 Mullen’s 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 vehicle 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 Mullen to penalties, damage its reputation and brand, and harm its business and results of operations.

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

Mullen has 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 Mullen grows. However, advances in technology, an increased level of sophistication and diversity of Mullen’s 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 it uses. If Mullen is unable to protect its systems, and hence the information stored in its systems, from unauthorized access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to Mullen’s liabilities to the owners of confidential information or even subject it to fines and penalties. In addition, complying with various laws and regulations could cause Mullen to incur substantial costs or require it to change its business practices, including its data practices, in a manner adverse to Mullen’s business.

In addition, Mullen 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 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 Mullen to legal and reputational risks.

Compliance with any additional laws and regulations could be expensive and may place restrictions on the conduct of Mullen’s business and the manner in which it interacts with its customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against Mullen, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against Mullen by governmental entities or others, and damage to its 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 Mullen’s 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 Mullen 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 Mullen’s customers to lose trust in Mullen and could expose Mullen 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 Mullen receives.

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

Companies, organizations, or individuals, including Mullen’s competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with Mullen’s ability to make, use, develop, sell, lease or market its vehicles or components, which could make it more difficult for Mullen to operate its business. From time to time, Mullen 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 Mullen to take licenses. Mullen’s applications and uses of trademarks relating to its design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In addition, if Mullen is determined to have infringed upon a third party’s intellectual property rights, it may be required to do one or more of the following:

In the event of a successful claim of infringement against Mullen and Mullen’s failure or inability to obtain a license to the infringed technology or other intellectual property right, Mullen’s 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.

Further, Mullen may not be able to prevent others from unauthorized use of its intellectual property, which could harm its business and competitive position. Mullen relies 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 its rights in its technology. Despite Mullen’s efforts to protect its proprietary rights, third parties may attempt to copy or otherwise obtain and use Mullen’s intellectual property or seek court declarations that they do not infringe upon its intellectual property rights. Monitoring unauthorized use of Mullen’s intellectual property is difficult and costly, and the steps Mullen has taken or will take may not prevent misappropriation. From time to time, Mullen may have to resort to litigation to enforce its intellectual property rights, which could result in substantial costs and diversion of its 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, Mullen’s intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect Mullen’s intellectual property rights could result in its competitors offering similar products, potentially resulting in the loss of some of Mullen’s competitive advantage and a decrease in its revenue which, would adversely affect its business, prospects, financial condition and operating results.

Mullen’s patent applications may not issue as patents and Mullen’s patents may expire and may not be extended, its patent applications may not be granted and its rights may be contested, circumvented, invalidated or limited in scope, or its rights may not protect it effectively, all of which may have a material adverse effect on Mullen’s ability to prevent others from commercially exploiting products similar to theirs.

Mullen cannot be certain that it is the first inventor of the subject matter to which it has filed a particular patent application, or if it is the first party to file such a patent application. If another party has filed a patent application for the same subject matter as Mullen has, Mullen 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, Mullen cannot be certain that the patent applications that it files will issue, or that its issued patents will afford protection against competitors with similar technology. In addition, Mullen’s competitors may design around Mullen’s issued patents, which may adversely affect its business, prospects, financial condition or operating results.

Mullen cannot assure you that it will be granted patents pursuant to its pending applications. Even if Mullen’s patent applications succeed and it is 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 Mullen with meaningful protection or competitive advantages. The claims under any patents that issue from Mullen’s patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to Mullen’s. The intellectual property rights of others could also bar Mullen from licensing and exploiting any patents that issue from its pending applications. Numerous patents and pending patent applications owned by others exist in the fields in which Mullen has developed and is developing its technology. These patents and patent applications might have priority over Mullen’s patent applications and could subject its patent applications to invalidation. Finally, in addition to those who may claim priority, any of Mullen’s existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable.

Mullen may be subject to damages resulting from claims that it or its employees have wrongfully used or disclosed alleged trade secrets of its employees’ former employers.

Many of Mullen’s employees were previously employed by other automotive companies or by suppliers to automotive companies. Mullen may be subject to claims that it 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 Mullen fails in defending such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent Mullen’s ability to commercialize its products, which could severely harm its business. Even if Mullen is successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

Mullen’s 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 its 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 Mullen to have its future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on its business and operating results.

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

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

Internationally, there may be laws in jurisdictions Mullen has not yet entered or laws it is unaware of in jurisdictions it has entered that may restrict its sales or other business practices. Even for those jurisdictions Mullen has 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 Mullen’s ability to sell or lease vehicles directly to consumers could have a negative and material impact on its business, prospects, financial condition and results of operations.

Mullen may become subject to product liability claims, which could harm its financial condition and liquidity if it is not able to successfully defend or insure against such claims.

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

Mullen is 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 Mullen to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect its business, results of operations, financial condition and reputation.

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

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject Mullen 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 Mullen’s business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact Mullen’s business and investments in its shares.

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

To manage the expected growth and increasing complexity of Mullen’s operations, Mullen will need to improve its 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 Mullen’s billing and reporting, Mullen’s current and planned systems, procedures and controls may not be adequate to support its complex arrangements and the rules governing revenue and expense reco0gntion for its future operations and expected growth. Delays or problems associated with any improvement or expansion of Mullen’s operational and financial systems and controls could adversely affect Mullen’s relationships with its customers, cause harm to its reputation and brand and could also result in errors in its financial and other reporting.

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

As a public company, Mullen will operate in an increasingly demanding regulatory environment, which requires it 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 Mullen to produce reliable financial reports and are important to help prevent financial fraud. Commencing with its fiscal year ending the year in which the Merger Agreement is completed, Mullen must perform system and process evaluation and testing of its internal controls over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. Prior to the Closing, Mullen has never been required to test its internal controls within a specified period and, as a result, it may experience difficulty in meeting these reporting requirements in a timely manner.

Mullen anticipates that the process of building its accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. Mullen expects that it will need to implement a new internal system to combine and streamline the management of its financial, accounting, human resources and other functions. However, such a system would likely require Mullen to complete many processes and procedures for the effective use of the system or to run its business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect Mullen’s controls and harm its business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, Mullen may discover additional weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. Mullen’s 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.

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

Mullen’s management has limited experience in operating a public company.

Mullen’s executive officers have limited experience in the management of a publicly traded company. Mullen’s management team may not successfully or effectively manage its 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. Mullen 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 the combined company will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.

The voting structure of Mullen’s Preferred Stock has the effect of concentrating voting control with David Michery, Mullen’s founder. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control.

Shares of Mullen’s Series A Preferred Stock has 1,000 votes per share and converts into Mullen Common Stock on a 100-for-1 basis, while shares of Mullen’s Series B and Series C Preferred Stock and Common Stock have one vote per share. David Michery, Mullen founder and Chief Executive Officer, holds substantially all of the issued and outstanding shares of Mullen’s Series A Preferred Stock. Accordingly, Mr. Michery will hold approximately [•]% of the voting power of our capital stock on a fully diluted basis and will be able to control matters submitted to its stockholders for approval, including the election of directors, amendments of its 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 its 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. For information about the contemplated structure of the combined company, see the section titled “DESCRIPTION OF SECURITIES.”

All of Mullen’s debt obligations and its senior equity securities will have priority over its 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 Mullen were to liquidate, dissolve or wind up, its Common Stock would rank below all debt claims against Mullen and claims of all of its 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 its debt holders have been satisfied and holders of senior equity securities have received any payment or distribution due to them.

In addition, Mullen’s Certificate of Incorporation currently requires it to pay substantial monthly dividends on its Series C Preferred Stock in cash or in stock. The requirement to pay dividends on the preferred stock will carry over to the combined company following the Merger. 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 the combined company’s common stock.

The number of shares of common stock underlying Mullen’s outstanding warrants and outstanding preferred stock is significant in relation to its currently outstanding common stock and the common stock of the combined company to be outstanding after the merger.

The number of shares of common stock issuable upon conversion of Mullen’s outstanding preferred stock and exercise of outstanding warrants is significant in relation to the number of shares of its common stock currently outstanding and the common stock of the combined company to be outstanding after the Merger.

All of Mullen’s obligations further to such shares of preferred stock and warrants will be assumed by the combined company in connection with the Merger. See the sections entitled “SUMMARY OF THE PROXY STATEMENT/PROSPECTUS—The Merger—Description of Certain Existing Mullen Agreements and Securities” and “PROPOSAL NO. 1—THE MERGER AGREEMENT PROPOSAL” of this proxy statement/prospectus for more information.  As a result, the combined company will have a significant number of additional warrants outstanding, in addition to those issued by Net Element and currently outstanding.

If any security holder determines to sell a substantial number of shares into the market at any given time, there may not be sufficient demand in the market to purchase the shares without a decline in the market price for our common stock. Moreover, continuous sales into the market of a number of shares in excess of the typical trading volume for our common stock could depress the trading market for our common stock over an extended period of time.

In addition, the fact that our stockholders, and warrant holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at all.

Common stockholders of the combined company may experience substantial dilution in the value of their investment or their ownership interest as a result of the proposed $30 million line of credit to be in place at the Effective Time or if the combined company issues additional shares of its capital stock in the future.

Mullen has agreed to put into place an ongoing equity line of credit with Esousa, under which Mullen may sell up to $30.0 million worth of common shares over a to be determined period of time. Mullen’s business is capital intensive, and it will likely need to raise additional capital to meet its business requirements in the future. The combined company may offer additional shares of common stock or other securities convertible into or exchangeable for common stock at prices that may not be the same as the price per share paid by other investors, and dilution to its stockholders in the value of their investment and their ownership and voting interest in the combined company could result. Furthermore, investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which the combined company sells additional shares of common stock or securities convertible or exchangeable into common stock in future transactions may be higher or lower than the price per share paid by other investors.

In addition, the combined company is expected to raise additional capital even if it believes it has sufficient funds for its current operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to stockholders or result in downward pressure on the price of the combined company’s common stock.

If securities or industry analysts do not publish research or reports about Mullen’s business or publish negative reports about its business, Mullen’s 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 Mullen or its business. Currently, Mullen does not have any analyst coverage and may not obtain analyst coverage in the future. In the event Mullen obtains analyst coverage, it will not have any control over such analysts. If one or more of the analysts who cover Mullen downgrade our shares or change their opinion of our shares, our share price would likely decline.

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

The following are answers to some questions that you, as a stockholder of Net Element, may have regarding the matters being considered at Net Element’s special meeting. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the matters being considered at the special meeting. Additional important information is also contained in the annexes to and the documents incorporated by reference into this proxy statement/prospectus.

Furthermore, if the Merger is not completed, the price of Net Element’s common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of Net Element’s common stock would return to the price at which it traded as of the date of this proxy statement/prospectus.

In this analysis, Alexander Capital reviewed and considered such financial and other matters as it deemed relevant, including, among other things:

Alexander Capital concluded that, based upon and subject to qualifications, assumptions, and other matters considered and described in connection with the preparation of its opinion, the Merger consideration to be paid by Net Element in connection with the Merger is fair from a financial point of view to the shareholders of Net Element.

The Bylaws Stockholder Vote Proposal (No. 4) and the Supermajority Stockholder Vote Proposal (No. 5) require the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of our capital stock entitled to vote generally in the election of directors. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” each of these two proposals.

The other Charter Proposals (Nos. 2, 3, 6 and 7) require the affirmative vote of a majority of the outstanding shares of our capital stock entitled to vote thereon. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” each of these proposals.

The election of each director named in the Director Election Proposal (No. 10) requires the affirmative vote of a plurality of the votes of the shares of capital stock present in person or represented by proxy at the special meeting and entitled to vote on the election of directors, meaning that the 7 directors with the most “FOR” votes will be elected. Abstentions and broker non-votes will have no effect on this proposal. Under our Certificate of Incorporation and Bylaws there is no cumulative voting in director elections.

All other proposals (Nos. 9, 11, 12, and 13) require the affirmative vote of the majority shares of our capital stock present in person or represented by proxy at the meeting and entitled to vote on said proposal. Abstentions will have the same effect as a vote “AGAINST” each of these proposals. Broker non-votes will have no effect on each proposal since brokers are not entitled to vote on any of these matters.

The Dodd-Frank Act and stock exchange rules prevent banks, brokers, and other nominees from casting votes on “non-routine” matters” when they have not received instructions on how to vote the shares held in street name on those matters. We believe none of these proposals is a routine matter. Further, since there are no routine matters up for vote, broker non-votes will not be counted towards a quorum.

The Closing is conditioned on the approval of the Merger Agreement Proposal, the Divestiture Proposal, the Charter Proposals, and the Nasdaq CM Proposal as well as the election of directors pursuant to the Director Election Proposal, being the Required Proposals. Each Required Proposal is conditioned on approval of the other Required Proposals. Also, the Equity Plan Proposal is conditioned on the approval of the Required Proposals. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

For the Merger Agreement Proposal (No. 1), the Charter Proposals (Nos. 2 – 7), and the Divestiture Proposal (No. 8), abstentions and broker non-votes will have the same effect as votes “AGAINST” such proposals.

For the Director Election Proposal (No. 10), abstentions and broker non-votes will have no effect on the outcome of the election.

For the Nasdaq CM Proposal (No. 9), the Say on Golden Parachute Proposal (No. 11), the Equity Plan Proposal (No. 12), and the Adjournment Proposal (No. 13), abstentions will have the same effect as a vote “AGAINST” the proposals and broker non-votes will have no effect.

Furthermore, since there are no non-routine matters, broker non-votes will not be counted for purposes of a quorum, but abstentions will be counted.

To obtain timely delivery, your request for materials must be received no later than five business days prior to the special meeting.