MULLEN AUTOMOTIVE INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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

In connection with the Merger Agreement (as defined below), and as disclosed in
our Current Report on Form 8-K filed with the SEC on November 12, 2021, our
fiscal year end has changed from December 31 to September 30, effective for our
fiscal year ended September 30, 2021. As a result, and unless otherwise
indicated, references to our fiscal year 2021 and prior years mean the fiscal
year ended on September 30 of such year.

presentation basis

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

Components of operating results

We are an early-stage company, and our historical results may not be indicative
of our future results for reasons that may be difficult to anticipate.
Accordingly, the drivers of our future financial results, as well as the
components of such results, may not be comparable to our historical or projected
results of operations.

Revenues

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

Cost of Goods Sold

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

General and administrative costs

General and administrative ("G&A") expenses include all non-production expenses
incurred by us in any given period. This includes expenses such as professional
fees, salaries, rent, repairs and maintenance, utilities and office expense,
employee benefits, depreciation and amortization, advertising and marketing,
settlements and penalties, taxes, licenses, and other expenses. Advertising
costs are expensed as incurred and are included in G&A expenses. We expense
advertising costs as incurred in accordance with ASC 720-35, "Other Expenses -
Advertising Cost."

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Research and development costs

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

Income Tax Charge/Profit

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

Operating results

Comparison of the three months ended December 31, 2021 at the end of three months
December 31, 2020

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


                                                     Three Months Ended
                                                        December 31,
                                                    2021             2020            $ Change       % Change

                                                     (dollar amounts in thousands, except percentages)
Operating costs and expenses:
General and administrative                     $   12,901,084    $   2,952,678    $    9,948,406      336.93 %
Research & development                              1,157,323          518,023           639,300      123.41 %
Total operating costs and expenses                 14,058,407        3,470,701        10,587,706      305.06 %
Loss from operations                           $ (14,058,407)        3,470,701      (10,587,706)      305.06 %

Other income (expense):
Interest expense                                   22,438,945        2,406,330        16,179,070      832.50 %
Loss on debt settlement                              (41,096)                -          (41,096)      100.00 %
Gain on extinguishment of indebtedness, net            74,509          880,581         (806,072)     (91.54) %
Total other income (expense)                     (22,405,532)      (1,525,749)      (20,879,783)     1368.49 %
Net loss                                       $ (36,463,938)    $ (4,996,450)    $   31,467,489      482.63 %




General and Administrative

General and administrative expenses increased by $9.9 million or 336.93% from
$2.9 million in the three months ended December 31, 2020 to $12.9 million in the
three months ended December 31, 2021, primarily due to increases in professional
services, marketing, and payroll related expenses with the growth of personnel
and resources.

Research and Development
Research and development expenses increased by $.63 million or 123.41% from $.51
million through the three months ended December 31, 2020 to $1.1 million through
the three months ended December 31, 2021. During the quarter ended December 31,
2021, the development of the Mullen FIVE show cars was completed in November
2021, and the Engineering Team is working on battery development and initial
stages of program car development.

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

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Interest Expense

Interest expense increased by $20.0 million or 672.35% from $2.4 million through
the three months ended December 31, 2020 to $22.4 million through the three
months ended December 31, 2021, primarily due to the significant increase in the
convertible debt portfolio, coupled with the conversion of these financial
instruments to equity due to merger with Net Element. The conversion to
preferred C stock increased the amortization expense.

Gain on extinguishment of debt

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

Net loss

The net loss was $36.4 million for the three months ended December 31, 2021an augmentation of $31.4 million or 629.80% of $4.9 million within three months
December 31, 2020mainly for the reasons mentioned above.

Cash and capital resources

As of the date of this Quarterly Report, we have yet to generate any revenue
from our business operations. To date, we have funded our capital expenditure
and working capital requirements through equity and debt capital, as further
discussed below. Our ability to successfully commence commercial operations and
expand our business will depend on many factors, including our working capital
needs, the availability of equity or debt financing and, over time, our ability
to generate cash flows from operations.

As of December 31, 2021, our cash and cash equivalents amounted to $0.61 million
and our total debt amounted to $19.1 million. Debt has red ced significantly
from September 30, 2021 due to principal paydowns, debt payoffs, and conversion
of convertible debt to equity. Tax liabilities slightly increased to $4.2
million from $3.9 million, which is comprised of IRS and other tax jurisdictions
related to payroll taxes and sales and use taxes.

During this quarter, the Company received $20 million from the equity purchase
of Series C Preferred Stock with warrants to an unaffiliated investor
immediately prior to the Effective Time of the Merger. There is approximately
$45 million in equity commitments to assist the Company throughout 2022; an
agreement with ESOUSA to provide us with a $30.0 million equity line of credit
beginning in February 2022 and a $15 million note receivable with CEOcast, Inc.
that will begin in 2022 after the registration of common shares with the SEC.

We received $7.4 million of the net proceeds of the Net Element merger transaction. We also received a supplement $7.62 million in convertible notes of TDR Capital and JADR Consulting Group Pty Limited.

As part of our agreement with NASDAQ, the Company must complete a qualified offer within six months of regulatory approval. In February 2022The Company has filed an S-3 registration statement which has become effective, which is expected to increase the number of common shares outstanding and improve market capitalization.

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

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Debt

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

Short and Long-Term Debt
The short-term debt classification primarily is based upon loans due within
twelve-months from the balance sheet date, in addition to loans that have
matured and remain unpaid. Management plans to renegotiate matured loans with
creditors for favorable terms, such as reduce interest rate, extend maturities,
or both; however, there is no guarantee favorable terms will be reached. Until
negotiations with creditors are resolved, these matured loans remain outstanding
and will be classified within short-term debt on the balance sheet. Interest and
fees on loans are being accounted for within accrued interest. The loans are
secured by substantially all the Company's assets. Several principal
shareholders have provided loans to and hold convertible debt of the Company and
are related parties.

Here is a summary of our debt to December 31, 2021:

                                 Net Carrying Value
                                 Unpaid Principal                                                      Contractual
        Type of Debt                  Balance             Current       Long-Term     Interest Rate      Maturity
Matured Notes                   $          3,718,585    $  3,718,585    $        -    0.00% - 15.00 %   2016 - 2021
Promissory Notes                          14,531,554      14,531,554             -        28.00     %   2021 - 2022
Real Estate Note                             274,983          36,724       238,259        5.00      %          2023
Loan Advances                                618,158         618,158             -    0.00% - 10.00 %   2019 - 2020
Less: Debt Discount                                -               -             -         NA               NA
Total Debt                      $         19,143,280    $ 18,905,021    $  238,259         NA               NA



Here is a summary of our debt to September 30, 2021:

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




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Cash Flows

The following table provides a summary of Mullen’s cash flow data for the three months ended December 31, 2021 and 2020:

                                                               Three Months Ended December 31,
                                                                   2021                  2020

                                                                (dollar amounts in thousands)
Net cash used (provided) in operating activities            $      (14,712,802)     $       85,312
Net cash used in investing activities                              (10,462,219)           (72,585)
Net cash provided by financing activities                            25,194,308            178,192



Cash flows used in operating activities

Our cash flow used in operating activities to date has been primarily comprised
of costs related to research and development, payroll, and other general and
administrative activities. As we continue to ramp up hiring ahead of starting
commercial operations, we expect our cash used in operating activities to
increase significantly before we start to generate any material cash flow from
our business.

Net cash used in operating activities was $14.7 million within three months December 31, 2021an augmentation of $0.85 million net cash provided by operations during the three months ended December 31, 2020.

Cash flows used in investing activities

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

Net cash used in investing activities was $10.5 million within three months December 31, 2021an augmentation of $0.72 million used in investing activities during the three months December 31, 2020.

Cash flows generated by financing activities

Through December 31, 2021we have financed our activities primarily through the issuance of convertible notes and equity securities.

Net cash provided by financing activities was $25.2 million for the three months
ended December 31, 2021 primarily due to issuance of notes payable, as compared
to $.17 million net cash provided by financing activities for the three months
ended December 31, 2020, which included (i) $7.3 million net proceeds from
issuance of notes payable; (ii) $10.8 million in net proceeds from issuance of
Common Stock which was partially offset by $13.0 million of payments of notes
payable; and (iii) $5.2 million in proceeds to issue preferred C shares.

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Contractual obligations and commitments

The following tables summarize our contractual obligations and other disbursement commitments as of December 31, 2021and the years in which these obligations are due:

Operating Lease Commitments


                                       Scheduled
Years Ended September 30,               Payments
2022 (9 months)                        $   908,149
2023                                     1,157,693
2024                                       824,287
2025                                       436,155
2026                                       222,787
2027 and Thereafter                              -

Total future minimum lease payments $3,549,071

We are currently renting our head office premises in the Los Angeles area covered by a single lease classified as an operating lease on expiry date March 2026. We have not signed any binding agreements for leases beyond 2026.

Scheduled debt maturities

Here are the scheduled debt maturities:

                                                                 Years Ended December 31,
                              2022 (9 months)       2023       2024     2025     2026     2027     Thereafter        Total
Total Debt                   $      18,905,021    $ 238,259    $   -    $   -    $   -    $   -    $         -    $ 19,143,280



Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements, as defined in SECOND
rules.

Significant Accounting Policies and Estimates

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

Our significant accounting policies are described in Note 3 to the condensed
consolidated financial statements included elsewhere in this Quarterly Report.
Because we are a pre-revenue company without commercial operations, management
believes it does not currently have any critical accounting policies or
estimates. Management believes that the accounting policies most likely to
become critical in the near future are those described below.

Stock-based compensation

We recognize the cost of share-based awards granted to employees and directors
based on the estimated grant-date fair value of the awards. Cost is recognized
on a straight-line basis over the service period, which is generally the vesting
period of the award. Our management reverses previously recognized costs for
unvested options in the period that

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confiscations occur. Mullen determines the fair value of stock options using the Black-Scholes option pricing model, which is influenced by the following assumptions:

? Expected duration – We use the simplified method to calculate the expected duration

due to insufficient historical exercise data.

Expected Volatility – As our shares were not actively traded during the periods

? presented, the volatility is based on a benchmark of comparable companies

in the automotive and energy storage sectors.

Expected dividend yield – Dividend rate used is zero because we never paid

? no cash dividend on the common stock and does not expect to do so in the

a foreseeable future.

Risk-free interest rate – Interest rates used are based on the implied yield

? Available on we Treasury zero-coupon issues with equivalent residual maturity

equal to the expected life of the award.

Recent accounting pronouncements

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

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