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NETE: Update on Mullen Technologies Transaction

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By Lisa Thompson



Despite keeping a low profile as it works through the merger steps, Net Element (NASDAQ:NETE) and Mullen continue to make progress on their plan and diligently working on completing the transaction. Both Net Element and Mullen are in process of audits and the S-4 document is being drafted. We expect to see it filed after both complete their audits and Net Element reports its fourth quarter. This would push everything into Q2. In the meantime, Mullen is moving forward.

Mullen is currently working on getting its $55,000 MX-05 mid-size, all-electric SUV to market and is set to unveil the initial concept vehicle in the coming months. Mullen has been taking pre-orders on its SUV with a refundable deposit of $100 since last year. Customers can also pre-order the imported Dragonfly K50 super sports car from Mullen.

Overview of Reverse Merger Transaction with Mullen Technologies

Net Element and Mullen have a definitive deal for a triangular reverse merger with Mullen Technologies, a private company based in California. The closing of the transaction is conditional on the satisfactory completion of due diligence, shareholder and NASDAQ approval, and the completion of a capital raise of $10 million. It is in the due diligence phase.

Net Element shareholders are expected to own between 15% and 21.7% of the surviving company. If Mullen can reach revenues of $100 million in the next 24 months, it is entitled to another 5% of the shares leaving Net Element shareholders with 10%. If revenue is less than $80 million then the Net Element shareholders will get another 5%, leaving Mullen shareholders with 80% of the fully diluted common shares of the company. NETE shareholders can end up with an additional 6.7% of the depending on the financing NETE brings to the closing.

At Net Element’s current enterprise value of $64 million (using a $11.15 stock price), this puts the entire valuation of Mullen Technologies at between $295 million and $426 million. We will get financial information on the privately held Mullen once the S-4 is filed.

Until then, we can look at the valuations of other EV companies and (taking out Nikola) they trade at an average of 10.8 times sales. If Mullen can produce and sell 5,000 MX-05 SUVs at $55,000 per car that is revenue of $275 million add to that used car sales of maybe $40 million, and 200 Dragonflys at $150,000 or another $30 million. This adds to a conservative $345 million. 10.8 times that is an enterprise value of $3.7 billion by 2023. Keep in mind the company should need at least another $400 million to get there and we expect much of that could be loans.

If Net Element ends up post merger with 50 million shares outstanding, EV per share could be $82 per share by 2023 with no further equity dilution. Discounting that for risk and dilution and time, we could easily see a current share price over $30 per share once the deal closes.

Mullen To Buy an EV Manufacturing Facility in Tunica, Mississippi

Today it announced it has found a new facility in Mississippi that instantly provides it with manufacturing capability at a lower cost than previously budgeted. While the original plan was to build out its small operation in California, the company has decided to use that only for batteries and move all car testing, the pilot plant, and manufacturing to this ready-to-use EV facility in Tunica. So far it has a purchase and sales agreement and opened escrow to purchase this facility. The plant was built in 2016, is fully turnkey, and is ready to manufacture and assemble vehicles now. It will be named Mullen's Advanced Manufacturing Engineering Center (AMEC) and Proving Grounds. Mullen will begin engineering and manufacturing efforts for testing and production validation. The assembly line is expected to begin in Q3 2021. It will employ over 50 people in the first year and may add more than 150 more in three years. Surrounded by 100 vacant acres, the plant has plenty of room for expansion. The company expects to do all of its manufacturing in the US and by US workers and will be among the very few, if not only, EV company that can claim that.

Figure 1. AMEC Facility Aerial View

Source: Mullen Technologies

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