| Item 1.01 | Entry into a Material Definitive Agreement |
On June 7,
2022, Mullen Automotive Inc. (the “Company”) entered into a securities purchase (the “Securities
Purchase Agreement”) with certain investors, subject to stockholder approval, pursuant to which upon the terms and subject
to the conditions contained therein and solely upon the request of the Company, the investors will be required to purchase an
aggregate of $275 million (the "Commitment Amount") of the Company’s Series D Preferred Stock, par value
$0.001 per share (the “Series D Preferred Stock”), and five-year warrants exercisable for shares of Common
Stock (the “Warrants”). The number of Warrants that may be issued will equal 110% of the shares of Series D
Preferred Stock purchased by the investors. The purchase price per share of Series D Preferred Stock will be the lower of
(i) $1.27, the closing price of the Company's stock on the date the Securities Purchase Agreement was executed, or
(ii) the closing price of the Common Stock on the trading day immediately preceding the Purchase Date (as defined below),
subject to a floor price of $0.10 per share.
The date on which the Company may require the
investors to purchase the Series D Preferred Stock and Warrants is the 90th day (the “Purchase Date”) following
the date on which a registration statement covering the registration for resale of securities issued during May 2022 pursuant to
additional investment rights provided in the Exchange Agreement dated May 7, 2021 and a $20 million securities purchase agreement.
If the Company elects to issue the securities pursuant to the Securities Purchase Agreement, the Company plans to use the proceeds to
support the development of The Mullen class one, class two, class three, and Mullen five and Mullen five RS vehicle lineups.
The Company agreed that as long as any of the
Series D Preferred Stock and Warrants remain outstanding, it will have authorized and reserved for the purpose of issuance, no less
than 250% of the shares of Common Stock issuable upon conversion or exercise of the Series D Preferred Stock and Warrants. The Company
also agreed that, without the prior written consent of the investors, it will not, for a period of 90 days after the purchase of the Series D
Preferred Stock and Warrants offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares
of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company,
excluding shares issued upon conversion and exercise of the Series D Preferred Stock and Warrants and the issuance by the Company
of Common Stock upon the exercise of an outstanding options or warrants or the conversion of a security outstanding.
Prior to any sale and purchase may occur pursuant
to the Securities Purchase Agreement, the Company is required to satisfy certain conditions including, obtaining stockholder approval
and that a registration statement for the issuance of such securities has been declared effective; provided, that for the 10 trading days
prior to effectiveness of the registration statement, the average daily trading volume of the Common Stock is greater than $27.5 million.
If the Company does not deliver a notice of purchase
on the Purchase Date for the entire Commitment Amount then the Company is required to pay to the investors $27.5 million in cash or the
investors may choose to receive 28.5 million shares of Common Stock that will be registered on a registration statement; provided that,
if the failure is due solely to the Company's inability to have the registration statement declared effective by the Purchase Date, the
Company may extend the Purchase Date to no later than 180 days. The Company agreed that if it is unable to have a registration statement
declared effective, that it will not file any registration statement (excluding any registration statement on Form S-8) for another
investor for a period of 90 days from the extended deadline date. Furthermore, if the Company fails to deliver a notice of purchase on
the Purchase Date, then during the period ending 180 days after the termination date, the investors will have the right of first refusal
to participate in any offering of debt or equity securities of the Company (other than bank debt or similar financing).
Description of Series D Preferred Stock
If the Company receives the requisite
approval from the stockholders for the issuance of the Series D Preferred Stock, Warrants and underlying shares of Common Stock, the
Company intends to designate shares of Preferred Stock as Series D Preferred Stock.
Voting Rights. Except as otherwise
expressly provided by the amended and restated certificate of incorporation or as provided by law, the holders of shares of Common
Stock and Preferred Stock, including the Series D Preferred, will at all times vote together as a single class on all matters
(including the election of directors) submitted to a vote of the stockholders; provided, however, that, any proposal which adversely
affects the rights, preferences and privileges of the Series D Preferred Stock must be approved by a majority in interest of
the Series D Preferred Stock. Each holder of Series D Preferred Stock will have the right to one vote per share
(on a fully converted basis) held of record by such holder.
Conversion. The Series D Preferred
Stock will automatically be converted into shares of Common Stock at the applicable Conversion Rate at the time in effect immediately
upon (A) the issuance of shares of Common Stock underlying the Series D Preferred Stock being registered pursuant to the Securities
Act and such registration remaining effective, (B) the trading price for the Company’s Common Stock being more than two times
the Series D Conversion Price for 20 trading days in any period of 30 consecutive trading days on the Nasdaq Capital Market, and
(C) the average daily trading dollar volume of Common Stock during such 20 trading days is equal to or greater
than $27.5 million. The Series D Preferred Stock is convertible at the option of each holder at any time into the number of shares
of Common Stock determined by dividing the Series D Original Issue Price (plus all unpaid accrued and accumulated dividends thereon,
as applicable, whether or not declared), by the Series D Conversion Price (the “Conversion Rate”), in effect on
the date the certificate is surrendered for conversion. The initial “Series D Conversion Price” is the Series D
Original Issue Price, subject to adjustment as set forth in the amended and restated certificate of incorporation. The Series D Preferred Stock will
not be convertible by a holder to the extent that the holder or any of its affiliates would beneficially own in excess of 9.99% of the
Common Stock, subject to certain protections as provided in the amended and restated certificate of incorporation.
Dividends. The Series D
Preferred Stock will bear a cumulative 15.0% per annum fixed dividend payable no later than the 5th day after the end of each month
on the Series D Original Issue Price plus unpaid accrued and accumulated dividends. “Series D Original Issue
Price” means for each share of the Series D Preferred Stock the lower of (i) $1.27 or (ii) the closing price of
the Common Stock on the trading day immediately preceding the Purchase Date (as adjusted for any stock splits, stock dividends,
combinations, recapitalizations or the like with respect to the Series D Preferred Stock). Dividends on the Series D
Preferred Stock will be prior to any dividends on any other series of Preferred Stock or the Common Stock. The Company may elect to pay
dividends for any month with a paid-in-kind election (“PIK”) if (i) the shares issuable further to the PIK
are subject to an effective registration statement, (ii) the Company is then in compliance with all listing requirements of
Nasdaq and (iii) the average daily trading dollar volume of the Company’s common stock for ten trading days in any period
of twenty consecutive trading days on the NASDAQ is equal to or greater than $27.5 million.
Redemption Rights. There will be no
mandatory redemption date, but, subject to the conditions set forth below, all, but not less than all, of the shares will be
redeemable by the Company at any time, provided that if the Company issues notice to redeem, investors shall have 15 days to convert
such shares to Common Stock prior to the date of redemption. The redemption price will be equal to the Series D Original Issue
Price, plus accrued and accumulated dividends, (whether or not declared (the “Series D Redemption Price”).
The conditions to the redemption will be follows: (i) the shares have been issued and outstanding for at least one year,
(ii) the issuance of the shares of Common Stock underlying the shares has been registered pursuant to the Securities Act and
the registration statement is effective, and (iii) the trading price for the Common Stock is less than the Series D
Conversion Price (as such term is defined in the amended and restated certificate of incorporation) for 20 trading days in any
period of 30 consecutive trading days on the Nasdaq CM. In addition to the above, the shares will also be redeemable in accordance
with the following schedule provided the issuance of shares of Common Stock underlying the shares has been registered and the
registration statement remains effective:
| • | Year 2: Redemption at 120% of the Series D Redemption Price |
| • | Year 3: Redemption at 115% of the Series D Redemption Price |
| • | Year 4: Redemption at 110% of the Series D Redemption Price |
| • | Year 5: Redemption at 105% of the Series D Redemption Price |
| • | Year 6 and thereafter: Redemption at 100% of the Series D Redemption Price |
Description of the Warrants
If issued, the exercise price of the Warrants
will be the lower of (i) $1.27 or (ii) the closing price of the Common Stock on the trading day immediately preceding the Purchase
Date, subject to a floor price of $0.10 per share. The Company must reserve out of authorized and unissued shares a number of shares of
Common Stock equal to 250% of the maximum number of shares of Common Stock that are issuable upon exercise of the Warrants from time to
time. If the Company fails to timely deliver shares upon exercise of the Warrant, the Company will be required to either (A) pay the holder
for each trading day on which shares are not delivered 1% of the product of the number of shares not so issued multiplied by the closing
sale price of the Common Stock on the trading day immediately preceding the required delivery date, or (B) if the holder purchases
shares of Common Stock in anticipation of delivery of shares upon exercise of the Warrant, cash in an amount equal to holder’s total
purchase price of such shares.
The Warrants will provide for cashless
exercise pursuant to which the holder will receive upon exercise a “net number” of shares of Common Stock determined
according to the following formula (the “Cashless Exercise”):
Net Number = (A x B) / C
For purposes of the foregoing formula:
| A= | The total number of shares with respect to which the Warrant is then being exercised. |
| B= | The Black Scholes Value (as described below). |
| C= | The lower of the two Closing Bid Prices of the Common Stock in the two days prior the time of such exercise (as such Closing Bid Price
is defined in Section 16 herein), but in any event not less than $0.01(as may be adjusted for stock dividends, subdivisions, or combinations
in the manner described in Section 2(a) herein). |
For purposes of the cashless exercise,
“Black Scholes Value” means the Black Scholes value of an option for one share of Common Stock at the date of the applicable
Cashless Exercise, as such Black Scholes value is determined, calculated using the Black Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Exercise Price, as adjusted, (ii) a
risk-free interest rate corresponding to the U.S. Treasury rate, (iii) a strike price equal to the Exercise Price in effect at the
time of the applicable Cashless Exercise, (iv) an expected volatility equal to 135%, and (v) a deemed remaining term of the
Warrant of 5 years (regardless of the actual remaining term of the Warrant).
The exercise price and number of shares issuable
upon exercise of the Warrants will further be adjusted upon the occurrence of certain events and holders will be allowed to participate
in certain issuances and distributions (subject to certain limitations and restrictions), including certain stock dividends and splits,
dilutive issuances of additional common stock, and dilutive issuances of, or changes in option price or rate of conversion of, options
or convertible securities, as well as the issuance of purchase rights or distributions of assets.
If, during restricted period, the Company effects
a subsequent financing, including the issuance of options and convertible securities, any Common Stock, issued or sold or deemed to have
been issued or sold) for a consideration per share less than a price equal to the current exercise price of the Warrant (a “Dilutive
Issuance”), then immediately after such issuance, the exercise price will be reduced (and in no event increased) to the price
per share as determined in accordance with the following formula:
EP2 = EP1 x (A + B) / (A + C)
For purposes of the foregoing formula:
| A= | The total number of Warrant Shares with respect to which this Warrant may be exercised. |
| B= | The total number of shares of Common Stock that would be issued or issuable under the Dilutive Issuance if issued at a per share equal
to EP1. |
| C= | The total number of shares of Common Stock actually issued or issuable under the Dilutive Issuance. |
EP1= The Exercise Price
in effect immediately prior to a Dilutive Issuance.
EP2= The Exercise Price
immediately after such Dilutive Issuance; provided, however, that such price shall in no event be less than $0.01 per share of Common
Stock.
“Restricted period” means the period
commencing on the Purchase Date and ending on the earlier of (i) the date immediately following the 90th day after a registration
statement registering for the securities has been declared effective by the SEC and (ii) the 90th day after the securities purchased
are saleable under Rule 144 without the requirement for current public information and without volume or manner of sale limitations.
The Warrants will provide for certain
purchase rights whereby if the Company grants, issues or sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any class of Common Stock, then the holder will be entitled
to acquire such purchase rights which the holder could have acquired if the holder had held the number of shares of Common Stock
acquirable upon complete exercise of the Warrant.
The exercisability of the Warrants may also be
limited if, upon exercise, the holder and its affiliates would in aggregate beneficially own more than 9.99% of the Common Stock.
The Company would also agree not to enter into any
fundamental, transaction, such as a merger, sale of more than 50% of the outstanding voting shares, sale of substantially all assets,
or business combination, unless the successor entity assumes all of the obligations of the Company under the Warrants and the other transaction
documents related to the Warrants.