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ACQUISITION OF BOLLINGER MOTORS, INC. | 12 Months Ended
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Sep. 30, 2022
ACQUISITION OF BOLLINGER MOTORS, INC. |
ACQUISITION OF BOLLINGER MOTORS, INC. | NOTE 4 – ACQUISITION OF BOLLINGER MOTORS, INC. On September 7, 2022, the Company acquired, through a series of purchase agreements, 544,347 shares of common stock of Bollinger Motors, Inc. (“Bollinger Motors”), representing approximately 60% of the outstanding shares. Purchase accounting is open with respect to taxes until all tax basis information can be gathered. ​ The following table summarizes the preliminary purchase price consideration to acquire Bollinger Motors: ​
​ | ​ | ​
Cash consideration | $ | 75,000,000
Cash consideration- deferred | ​ | 32,000,000
Stock consideration (book value of $41.2 million) | ​ | 41,577,647
Total Consideration | $ | 148,577,647
​ Total consideration of $148.6 million was paid or payable to Bollinger Motors and Bollinger shareholders as follows: ​
| ● | Cash consideration due to Bollinger Motors is approximately $107 million, of which $75 million was paid at closing and $32 million is to be paid in five installments through August 5, 2023. The Company deposited $32 million into an escrow account on November 29, 2022 to fulfill the five installment amount.
​
| ● | Stock consideration due to Bollinger shareholders is 63,599,876 shares of the Company’s Common Stock valued at approximately $41.6 million.
​ The Company has determined that the acquisition of Bollinger Motors constitutes a business acquisition as defined by ACS 805, Business Combinations. Accordingly, the assets acquired, and the liabilities assumed in the transaction were recorded at their acquisition date estimated fair value, while the transaction costs associated with the acquisition were expensed as incurred pursuant to the purchased method of accounting in accordance with ASC 805. The Company’s purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. Fair values are determined based on the requirements of ASC 820, Fair Measurements and Disclosure. ​ The following table summarizes the allocation of fair value of assets acquired and liabilities assumed: ​
​ | ​ | ​
Purchase Consideration | ​ | ​
Cash and debt consideration | $ | 107,000,000
Stock consideration | ​ | 41,577,647
Total consideration received for 60% of Bollinger | ​ | 148,577,647
Noncontrolling interest (40%) | ​ | 99,051,765
Consideration transferred including noncontrolling interest | $ | 247,629,412
​
​ | ​ | ​
Allocation of Purchase Consideration | ​ | ​
Cash and restricted cash | $ | 77,238,086
Other current assets | ​ | 867,112
Fixed assets | ​ | 1,009,662
Goodwill | ​ | 92,479,704
Intellectual property | ​ | 58,304,612
Patents | ​ | 32,391,186
Trademarks | ​ | 1,075,048
Non-compete agreements | ​ | 745,947
Other non-current assets | ​ | 246,896
Accounts payable | ​ | (638,752)
Refundable deposits | ​ | (213,679)
Deferred tax liability | ​ | (14,882,782)
Other current liabilities | ​ | (993,628)
Estimated fair value of 100% of net assets acquired | $ | 247,629,412
​ As a result of the acquisition transaction, Mullen acquired controlling interest of Bollinger. Acquired intellectual property, patents and non-compete agreements have finite life. The finite-lived intangible assets will be amortized using the straight-line method of the respective lives of each asset. Below are the acquired intangibles with their relative useful lives and method of amortization: ​
​ | ​ | ​ | ​ | ​
Intangible Asset | ​ | Useful Life | ​ | Amortization Method
Intellectual property | ​ | 10 years | ​ | Straight-line
Patents | ​ | 10 years | ​ | Straight-line
Trademarks | ​ | 10 years | ​ | Straight-line
Non-compete agreements | ​ | 5 years | ​ | Straight-line
​ Valuation Methodology ​ The fair value of Intellectual Property was determined using the Relief from Royalty Method. This method was applied to the core intellectual property of Bollinger Motors consisting of the designs, trademarks and processes. Under the MPEEM, the Company determines free cash flows for a group of assets, and then adjusts it for a contributory charge for the use of other identifiable tangible and intangible assets. The present value of the resulting excess cash flows is adjusted for any tax benefits and the resulting amount represents the fair value of the intangible asset. ​ The fair value of the Company’s patents was determined using the Relief from Royalty Method. The method considers what a purchaser could afford, or would be willing to pay, for a license of similar intellectual property rights. The royalty stream is then capitalized reflecting the risk and return relationship of investing in the asset. The Company used 5% as an initial royalty rate, gradually decreasing it to 1% over 10 years in 2031 to reflect technological obsolescence. ​ The non-compete agreement was valued using a discounted cash flow with and without method. Under this method, estimated enterprise value is calculated with non-complete clauses and compared to the enterprise value in the absence of the clauses. Estimated enterprise value is determined as present value of future cash flows. The after-tax differential of enterprise value is adjusted for the probability, reflecting specific facts and circumstances. ​ As part of application of the above methods, the annual discount rate used to determine the present value of future cash flows varied between 40% and 42%. ​ Assumptions used in forecasting cash flows and determining the fair value for each of the identified intangible asset included consideration of the following: ​
| - | Historical performance of the assets, sales and profitability
| - | Estimation of the economic life of the assets
| - | Risk profile of an individual assets
| - | Business prospects and industry expectations
| - | Amortization benefits on intangible assets
| - | Acquisition of new customers.
​ Supplemental pro forma information ​ The following supplemental pro forma information summarizes the Company’s results of operations for the current reporting period, as if the Company completed the acquisition as of the beginning of the annual reporting period. Supplemental pro forma information is as follows: ​
​ | ​ | ​ | ​ | ​
​ | ​ | Year ended September 30,
​ | ​ | 2022 | ​ | 2021
Total Revenues | ​ | — | ​ | —
Net loss | ​ | (753,916,185) | ​ | (57,647,534)
​ | ​ | ​ | ​ | ​
​

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