FARADAY FUTURE INTELLIGENT ELECTRIC INC. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Item 305(e) of Regulation S-K , FF is not required to provide the information required by this Item as it is a “smaller reporting company.”. 90 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 238 ) 92 Consolidated Balance Sheets as of December 31, 202 1 and 20 20 93 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 94 Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 95 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 97 Notes to Consolidated Financial Statements 99 91 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Faraday Future Intelligent Electric Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Faraday Future Intelligent Electric Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Los Angeles, California May 13, 2022 We have served as the Company’s auditor since 2018. 92 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Balance Sheets December 31, 2021 and 2020 (in thousands, except share and per share data) 2021 2020 Assets Current assets Cash $ 505,091 $ 1,124 Restricted cash 25,386 703 Deposits 63,370 6,412 Other current assets 13,410 6,200 Total current assets 607,257 14,439 Property and equipment, net 293,135 293,933 Other non-current assets 7,040 8,010 Total assets $ 907,432 $ 316,382 Liabilities and stockholders’ equity (deficit) Current liabilities Accounts payable $ 37,773 $ 86,601 Accrued expenses and other current liabilities 90,512 52,382 Related party accrued interest 11,231 82,260 Accrued interest 8,263 36,030 Related party notes payable 13,655 332,355 Notes payable, current portion 132,372 149,199 Vendor payables in trust — 110,224 Total current liabilities 293,806 849,051 Capital leases, less current portion 7,570 36,501 Other liabilities, less current portion 3,720 1,000 Notes payable, less current portion 34,682 9,168 Total liabilities 339,778 895,720 Commitments and contingencies (Note 12) Stockholders’ equity (deficit) Class A Common Stock, $ 0.0001 par value; 750,000,000 shares authorized; 168,693,323 and 93,099,596 shares issued and outstanding as of December 31, 2021 and 2020, respectively 17 9 Class B Common Stock, $ 0.0001 par value; 75,000,000 shares authorized as of December 31, 2021 and 2020; no shares and 64,000,588 shares issued and outstanding as of December 31, 2021 and 2020, respectively — 6 Additional paid-in capital 3,482,226 1,817,760 Accumulated other comprehensive loss ( 6,945 ) ( 5,974 ) Accumulated deficit ( 2,907,644 ) ( 2,391,139 ) Total stockholders’ equity (deficit) 567,654 ( 579,338 ) Total liabilities and stockholders’ equity (deficit) $ 907,432 $ 316,382 The accompanying notes are an integral part of these consolidated financial statements. 93 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Statements of Operations and Comprehensive Loss Years Ended December 31, 2021 and 2020 (in thousands, except share and per share data) 2021 2020 Operating expenses Research and development $ 174,935 $ 20,186 Sales and marketing 17,118 3,672 General and administrative 97,905 41,071 Loss on disposal of property and equipment 64,191 10 Total operating expenses 354,149 64,939 Loss from operations ( 354,149 ) ( 64,939 ) Change in fair value measurements ( 22,700 ) ( 5,076 ) Interest expense ( 30,181 ) ( 32,173 ) Related party interest expense ( 16,663 ) ( 41,546 ) Other expense, net ( 5,668 ) ( 5,455 ) (Loss) gain at settlement of related party notes payable, notes payable, and vendor payables in trust, net ( 86,904 ) 2,107 Loss before income taxes ( 516,265 ) ( 147,082 ) Income tax provision ( 240 ) ( 3 ) Net loss $ ( 516,505 ) $ ( 147,085 ) Per share information (Note 16): Net loss per Common Stock – Class A and Class B – basic and diluted $ ( 2.21 ) $ ( 0.94 ) Weighted average Common Stock outstanding – Class A and Class B – basic and diluted 233,390,675 157,063,103 Total comprehensive loss Net loss $ ( 516,505 ) $ ( 147,085 ) Change in foreign currency translation adjustment ( 971 ) ( 2,690 ) Total comprehensive loss $ ( 517,476 ) $ ( 149,775 ) The accompanying notes are an integral part of these consolidated financial statements. 94 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Statements of Stockholders’ Equity (Deficit) Years Ended December 31, 2021 and 2020 (in thousands, except share data) Convertible Preferred Stock Ordinary Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholder’s Equity (Deficit) Redeemable Preference Class B Class A Class A Class B Shares (1) Amount Shares (1) Amount Shares (1) Amount Shares (1) Amount Shares (1) Amount Balance as of December 31, 2019, as previously reported 470,588,235 $ 724,823 600,000,000 $ 924,149 40,879,124 $ — — $ — — $ — $ 158,704 $ ( 3,284 ) $ ( 2,244,054 ) $ ( 2,088,634 ) Retroactive application of recapitalization (Note 3) ( 470,588,235 ) ( 724,823 ) ( 600,000,000 ) ( 924,149 ) ( 40,879,124 ) — 72,269,976 7 84,780,000 8 1,648,957 — — 1,648,972 Balance as of December 31, 2019, effect of reverse recapitalization — — — — — — 72,269,976 7 84,780,000 8 1,807,661 ( 3,284 ) ( 2,244,054 ) ( 439,662 ) Conversion of Class B Common Stock into Class A Common Stock (see Note 13) — — — — — — 20,779,412 2 ( 20,779,412 ) ( 2 ) — — — — Stock-based compensation — — — — — — — — 9,505 — — 9,505 Exercise of stock options — — — — 54,259 — — — 115 — — 115 Issuance of warrants — — — — — — — — — — 490 — — 490 Purchase of common stock — — — — — — ( 4,051 ) — — — ( 11 ) — — ( 11 ) Foreign currency translation — — — — — — — — — ( 2,690 ) — ( 2,690 ) Net loss — — — — — — — — — — ( 147,085 ) ( 147,085 ) Balance as of December 31, 2020, as recast — $ — — $ — — $ — 93,099,596 $ 9 64,000,588 $ 6 $ 1,817,760 $ ( 5,974 ) $ ( 2,391,139 ) $ ( 579,338 ) (1) The shares of the Company’s common stock prior to the Business Combination (as defined in Note 1) have been retrospectively recast to reflect the change in the capital structure as a result of the Business Combination as described in Note 3. The accompanying notes are an integral part of these consolidated financial statements. 95 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Statements of Stockholders’ Equity (Deficit) Years Ended December 31, 2021 and 2020 (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholder’s Equity (Deficit) Class A Class B Shares (1) Amount Shares (1) Amount Balance as of December 31, 2020, as recast 93,099,596 $ 9 64,000,588 $ 6 $ 1,817,760 $ ( 5,974 ) $ ( 2,391,139 ) $ ( 579,338 ) Conversion of The9 Conditional Obligation 423,053 — — — 2,863 — — 2,863 Conversion of related party notes payable into Class A Common Stock (Note 9) 22,454,776 2 — — 294,794 — — 294,796 Conversion of notes payable into Class A Common Stock (Note 10) 7,688,153 1 — — 98,374 — — 98,375 Issuance of Class A Common Stock in the Business Combination, net of transaction costs (Note 3) 27,798,411 3 — — 170,111 — — 170,114 Conversion of assumed PSAC convertible and promissory notes payable into Class A Common Stock (Note 9) 80,000 — — — 790 — — 790 Conversion of liabilities into Class A Common Stock in the Business Combination (Note 3) 22,586,392 3 — — 311,795 — — 311,798 Conversion of liabilities into the commitment to issue Class A Common Stock in the Business Combination (Note 3) — — — — 25,877 — — 25,877 Legacy FF Ordinary Stock exchanged in the Business Combination for a commitment to issue Class A and Class B Common Stock (Note 3) ( 87,273,528 ) ( 9 ) ( 64,000,588 ) ( 6 ) 15 — — — Issuance of Class A Common Stock in the PIPE Financing, net of transaction costs (Note 3) 76,140,000 8 — — 692,397 — — 692,405 Settlement of lawsuit with issuance of vested stock options (Note 12) — — — — 8,459 — — 8,459 Settlement of accrued rent with issuance of vested stock options — — — — 951 — — 951 Vesting of restricted stock award for employee bonus 1,350,970 — — — 18,617 — — 18,617 Stock-based compensation — — — — 11,345 — — 11,345 Exercise of stock options 4,388,596 — — — 10,587 — — 10,587 Settlement of receivables through receipt of Class A Common Stock ( 43,096 ) — — — ( 105 ) — — ( 105 ) Issuance of warrants — — — — 17,596 — — 17,596 Foreign currency translation — — — — — ( 971 ) — ( 971 ) Net loss — — — — — — ( 516,505 ) ( 516,505 ) Balance as of December 31, 2021 168,693,323 $ 17 — $ — $ 3,482,226 $ ( 6,945 ) $ ( 2,907,644 ) $ 567,654 (1) The shares of the Company’s common stock prior to the Business Combination (as defined in Note 1) have been retrospectively recast to reflect the change in the capital structure as a result of the Business Combination as described in Note 3. The accompanying notes are an integral part of these consolidated financial statements. 96 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2021 and 2020 (in thousands) 2021 2020 Cash flows from operating activities Net loss $ ( 516,505 ) $ ( 147,085 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization expense 8,158 3,517 Stock-based compensation 11,345 9,505 Vesting of restricted stock awards for employee bonus 18,617 — Loss on disposal of property and equipment 64,191 10 Change in fair value measurements 22,700 5,076 Loss upon cancellation of a lease — 206 (Gain) loss on foreign exchange ( 845 ) 4,108 Gain on forgiveness of accounts payable and loss on write-off of vendor deposits, net ( 7,005 ) — Non-cash interest expense 41,014 66,020 Loss (gain) at settlement of related party notes payable, notes payable, and vendor payables in trust, net 86,904 ( 2,107 ) Gain on forgiveness of vendor payables in trust ( 1,731 ) — Reserve for unrecoverable value added taxes 6,404 — Other 842 — Changes in operating assets and liabilities Deposits ( 48,503 ) — Other current and non-current assets ( 21,717 ) ( 3,347 ) Accounts payable ( 36,625 ) 11,500 Accrued expenses and other current liabilities 31,824 11,606 Transfers between vendor payables in trust and accounts payable 1,167 ( 174 ) Net cash used in operating activities ( 339,765 ) ( 41,165 ) Cash flows from investing activities Payments for property and equipment ( 95,681 ) ( 607 ) Proceeds from payments on notes receivable — 3,600 Net cash (used in) provided by investing activities ( 95,681 ) 2,993 Cash flows from financing activities Proceeds from issuance of Class A Common Stock in the Business Combination 229,583 — Proceeds from issuance of Class A Common Stock pursuant to the PIPE Financing 761,400 — Transaction costs paid in connection with the Business Combination ( 23,148 ) — Transaction costs paid in connection with the PIPE Financing ( 61,130 ) — Proceeds from related party notes payable 200 10,556 Proceeds from notes payable, net of original issuance discount 172,031 40,595 Payments of related party notes payable ( 38,217 ) ( 3,589 ) Payments of notes payable, including liquidation premiums ( 48,210 ) ( 32 ) Payments of notes payable issuance costs ( 3,355 ) ( 4,562 ) Payment of payables in vendor payables in trust ( 27,722 ) ( 4,500 ) Transfers between vendor payables in trust and accounts payable ( 1,167 ) 174 Payments of capital lease obligations ( 3,212 ) ( 1,926 ) Proceeds from exercise of stock options 10,587 115 Payments of stock issuance costs ( 1,071 ) — Net cash provided by financing activities 966,569 36,831 Effect of exchange rate changes on cash and restricted cash ( 2,473 ) ( 186 ) Net increase (decrease) in cash and restricted cash 528,650 ( 1,527 ) Cash and restricted cash, beginning of period 1,827 3,354 Cash and restricted cash, end of period $ 530,477 $ 1,827 97 Table of Contents Faraday Future Intelligent Electric Inc. Consolidated Statements of Cash Flows — (Continued) Years Ended December 31, 2021 and 2020 (in thousands) The following table provides a reconciliation of cash and restricted cash reported within the Consolidated Balance Sheets that aggregate to the total of the same such amounts shown in the Consolidated Statements of Cash Flows: 2021 2020 Cash $ 1,124 $ 2,221 Restricted cash 703 1,133 Total cash and restricted cash, beginning of period $ 1,827 $ 3,354 Cash $ 505,091 $ 1,124 Restricted cash 25,386 703 Total cash and restricted cash, end of period $ 530,477 $ 1,827 Supplemental disclosure of noncash investing and financing activities Conversion of related party notes payable and related party accrued interest to Class A Common Stock $ 294,796 $ — Conversion of notes payable and accrued interest to Class A Common Stock 98,375 — Issuance of warrants 17,596 490 Conversion of assumed convertible and promissory notes payable to Class A Common Stock and Private Warrants 1,080 — Conversion of The9 Conditional Obligation to Class A Common Stock 2,863 — Additions of property and equipment included in accounts payable and accrued expenses 863 3,817 Conversion of related party customer deposit to related party notes payable — 11,635 Supplemental disclosure of noncash investing and financing activities related to the Business Combination Exchange of Legacy FF redeemable preference stock for a commitment to issue Class A Common Stock $ 859,182 $ — Exchange of Legacy FF convertible preferred stock for a commitment to issue Class B Common Stock 697,611 — Settlement of notes payable and accrued interest for a commitment to issue Class A Common Stock 68,541 — Settlement of related party notes payable and related party accrued interest for a commitment to issue Class A Common Stock 69,218 — Settlement of vendor payable in trust to a commitment to issue Class A Common Stock 96,186 — Reclassification of deferred transaction costs paid in prior periods against the proceeds received in the Business Combination 7,865 — Supplemental disclosure of cash flow information Cash paid for interest $ 6,317 $ 3,137 The accompanying notes are an integral part of these consolidated financial statements. 98 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, Basis of Presentation and Summary of Significant Accounting Policies Nature of Business and Organization Faraday Future Intelligent Electric Inc. (the “Company” or “FF”), formerly known as Property Solutions Acquisition Corp. (“PSAC”), a holding company incorporated in the State of Delaware on February 11, 2020, conducts its operations through the subsidiaries of FF Intelligent Mobility Global Holdings Ltd. (“Legacy FF”), founded in 2014 and is headquartered in Los Angeles, California. Legacy FF had previously changed its name from Smart King Ltd. to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020. On July 21, 2021 (the “Closing Date”), the Company consummated a business combination pursuant to an Agreement and Plan of Merger dated January 27, 2021 (as amended, the “Merger Agreement”), by and among the Company, PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and Legacy FF. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy FF surviving the merger as a wholly-owned subsidiary of the Company (the “Business Combination”). Upon the consummation of the Business Combination (the “Closing”), PSAC changed its name from “Property Solutions Acquisition Corp.” to “Faraday Future Intelligent Electric Inc.” For more information regarding the Business Combination, see Note 3, Business Combination . The Company operates in a single operating segment and designs and engineers next-generation, intelligent, connected, electric vehicles. The Company expects to manufacture vehicles at its production facility in Hanford, California and has additional engineering, sales, and operations capabilities in China. The Company has created innovations in technology, products, and a user-centered business model that are being incorporated into its planned electric vehicle platform. The Company intends to commercially launch the FF 91 series in the third quarter of 2022. Principles of Consolidation and Basis of Presentation The Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company, its wholly-owned subsidiaries and joint ventures for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated upon consolidation. Foreign Currency The Company determines the functional and reporting currency of each of its international subsidiaries based on the primary currency in which they operate. The functional currency of the Company’s foreign subsidiaries in China is their local currency, Chinese Yuan (“CYN”). For foreign subsidiaries where the functional currency is their local currency, assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date, stockholders’ equity (deficit) is translated at the applicable historical exchange rate, and expenses are translated using the average exchange rates during the period. The effect of exchange rate changes resulting from the translation of the foreign subsidiary financial statements is accounted for as a component of accumulated other comprehensive loss on the Consolidated Balance Sheets and currency translation adjustments have been immaterial for the years ended December 31, 2021 and 2020. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions which affect the reported amounts in the Consolidated Financial Statements. Estimates are based on historical experience, where applicable, and other assumptions which management believes are reasonable under the circumstances. On an ongoing basis management evaluates its estimates, including those related to the: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities; (iii) recognition and disclosure of contingent liabilities, including litigation reserves; (iv) fair value of related party notes payable and notes payable; (v) estimated useful lives and impairment of long-lived assets; (vi) fair value of options granted to employees and non-employees; and (vii) fair value of warrants. Such estimates often require the selection of appropriate valuation methodologies and financial models 99 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances. Given the global economic climate, unpredictable nature and unknown duration of the COVID-19 pandemic, estimates are subject to additional volatility. As of the date the Company’s Consolidated Financial Statements were issued, the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or to revise the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s Consolidated Financial Statements in future periods. While the Company considered the effects of COVID-19 on its estimates and assumptions, due to the level of uncertainty regarding the economic and operational impacts of COVID-19 on the Company’s business, there may be other judgments and assumptions that the Company has not considered. Such judgments and assumptions could result in a material impact on the Company’s financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Consolidated Financial Statements. Summary of Significant Accounting Policies Cash and Cash Equivalents The Company considers all highly liquid instruments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Fair Value Measurements The Company applies the provisions of ASC 820, Fair Value Measurement , which defines a single authoritative definition of fair value, sets out a framework for measuring fair value, and expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which the Company would transact and assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s 100 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: Level 1 Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. Level 2 Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. government and agency debt securities, and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds. Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial or nonfinancial asset or liability. ASC 825-10, Financial Instruments , allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company has elected to apply the fair value option to certain related party notes payable and notes payable with conversion features as discussed in Note 8, Fair Value of Financial Instruments . Concentration of Risk Financial instruments, which subject the Company to concentrations of credit risk, consist primarily of cash, restricted cash, notes receivables, and deposits. Substantially all of the Company’s cash and restricted cash is held at financial institutions located in the United States of America and in the People’s Republic of China. The Company maintains its cash and restricted cash with major financial institutions. At times, cash and restricted cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits ($ 250 per depositor per institution) and China Deposit Insurance Regulations limits (CNY 500 per depositor per institution). Management believes the financial institutions that hold the Company’s cash and restricted cash are financially sound and, accordingly, minimal credit risk exists with respect to cash and restricted cash. Cash and restricted cash held by the Company’s non-U.S. subsidiaries is subject to foreign currency fluctuations against the U.S. Dollar. If, however, the U.S. Dollar is devalued significantly against the Chinese Yuan, the Company’s cost to develop its business in China could exceed original estimates. The Company has notes receivable of $ 0 and $ 40 and deposits of $ 63,370 and $ 6,412 as of December 31, 2021 and 2020, respectively. The Company receives certain components from sole suppliers. The inability of a supplier to fulfill the Company’s supply requirements could materially impact future operating results. Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance and repairs, which do not extend the assets lives, are charged to operating expense as incurred. Upon sale or disposition, the cost and related accumulated depreciation or 101 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) amortization are removed from the Consolidated Balance Sheets and any gain or loss is included in the Consolidated Statements of Operations and Comprehensive Loss. Depreciation and amortization on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets and for leasehold improvements, over the term of the lease, if shorter. Useful Life (in years) Buildings 39 Building improvements 15 Computer hardware 5 Tooling, machinery, and equipment 5 to 10 Vehicles 5 Computer software 3 Leasehold improvements Shorter of 15 years or term of the lease Construction in progress (“CIP”) consists of the construction activities related to the Company’s Hanford, California plant and tooling, machinery and equipment being built to serve the manufacturing of production vehicles. These assets are capitalized and depreciated once put into service. The amounts capitalized in CIP that are held at vendor sites relate to the completed portion of work-in-progress of tooling, machinery and equipment built based on the Company’s specific needs. The Company may incur storage fees or interest fees related to CIP which are expensed as incurred. Construction in progress is presented within Property and Equipment, net on the Consolidated Balance Sheets. Impairment of Long-Lived Assets The Company reviews its long-lived assets, consisting primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an assets (or asset groups) may not be recoverable. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets, including any cash flows upon their eventual disposition, to the assets carrying values. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. Assets classified as held for sale are also assessed for impairment and such amounts are determined at the lower of the carrying amount or fair value, less costs to sell the asset. No impairment charges were recorded during the years ended December 31, 2021 and 2020. See Note 6, Property and Equipment, Net for a discussion of disposals of Construction in process during the year ended December 31, 2021. Accumulated Other Comprehensive Loss Accumulated other comprehensive loss encompasses all changes in equity other than those arising from transactions with stockholders. Elements of the Company’s accumulated other comprehensive loss are reported in the Consolidated Statements of Stockholders’ Equity (Deficit) and consists of equity-related foreign currency translation adjustments, which are presented in the Consolidated Statements of Operations and Comprehensive Loss. Research and Development Research and development (“R&D”) costs are expensed as incurred and are primarily comprised of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on R&D activities, other related costs, license fees, and depreciation and amortization. The Company’s R&D efforts are focused on design and development of the Company’s electric vehicles and continuing to prepare the Company’s prototype electric vehicle to achieve industry standards. Advanced payments for items and services related to R&D activities have been classified as Deposits on the 102 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) Consolidated Balance Sheets and are included in operating activities on the Company’s Consolidated Statements of Cash Flows. The Company expenses deposits as the services are provided and prototype parts are received. Sales and Marketing Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on sales and marketing, and direct costs associated with sales and marketing activities. Marketing activities include expenses to introduce the brand and the FF 91 to the market. The Company expenses advertising costs as incurred. Advertising costs were immaterial for the years ended December 31, 2021 and 2020 . Stock-Based Compensation The Company’s stock-based compensation awards consist of stock options granted to employees, directors and non-employees for the purchase of common stock. The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”) . ASC 718 requires the measurement and recognition of compensation expense for all stock-based compensation awards based on the grant date fair values of the awards. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. For options with service conditions, the value of the award is recognized as expense over the requisite service period on a straight-line basis. For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable. Determining the grant date fair value of the awards using the Black-Scholes option pricing model requires management to make assumptions and judgments, including, but not limited to the following: Expected term — The estimate of the expected term of awards was determined in accordance with the simplified method, which estimates the term based on an averaging of the vesting period and contractual term of the option grant for employee awards. The Company uses the contractual term for non-employee awards. Expected volatility — The Company determines the expected volatility based on the historical average volatilities of publicly traded industry peers. The Company intends to continue to consistently apply this methodology using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own common stock price becomes available, unless circumstances change such that the identified companies are no longer similar to the Company, in which case more suitable companies whose stock prices are publicly available would be utilized in the calculation. Risk-free interest rate — The risk-free interest rate used to value awards is based on the United States Treasury yield in effect at the time of grant for a period consistent with the expected term of the award. Dividend yield — The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends for the foreseeable future. Forfeiture rate — Stock-based compensation expense is reduced for forfeitures, which the Company estimates based on an analysis of actual forfeitures. The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated forfeiture rate can have a significant impact on the Company’s stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the estimated forfeiture rate is changed. Fair value of common stock — Prior to the close of the Business Combination, there was no public market for Legacy FF’s Class A Ordinary Stock. Therefore, Legacy FF’s Board of Directors (“Board”) determined the fair value of Legacy FF’s Class A Ordinary Stock at the time of the grant of stock options by considering a number of objective and subjective factors. The fair value of the stock was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled, “Valuation of Privately Held Company Equity Securities Issued as Compensation” . Legacy FF’s Board of Directors granted stock options with exercise prices equal to the fair value of Legacy 103 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) FF’s Class A Ordinary Stock on the date of grant. After the Closing of the Business Combination, the closing price of the Company’s Class A Common Stock on the NASDAQ is used as the fair value of the common stock. Income Taxes The Company accounts for its income taxes using the asset and liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the basis used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize those tax assets through future operations. The carrying value of deferred tax assets reflects an amount that is more likely than not to be realized. As of December 31, 2021 and 2020, the Company had recorded a full valuation allowance on net deferred tax assets because the Company expects it is more likely than not that the net deferred tax assets will not be realized. The Company utilizes the guidance in ASC 740-10, Income Taxes , to account for uncertain tax positions. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the positions will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more likely than not of being realized and effectively settled. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes. The Company recognizes interest and penalties on unrecognized tax benefits as a component of income tax expense. There were no interest or penalties for the years ended December 31, 2021 and 2020. Segments Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Substantially all of the Company’s consolidated operating activities, including its long-lived assets, are located within the United States of America. Given the Company’s pre-revenue operating stage, it currently has no concentration exposure to products, services or customers. Recently Adopted Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The amendments in this update were effective for fiscal periods beginning after December 15, 2020. The Company adopted ASU 2018-15 as of January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This amendment was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intra-period allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The Company early adopted the standard as of January 1, 2021. The adoption did not have a material effect on the Company’s financial position, results of operations, or cash flows. 104 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 1. Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.) Recently Issued Accounting Pronouncements Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“Topic 842”), which outlines a comprehensive lease accounting model that supersedes the current lease guidance. The guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements , which provides the option of an additional transition method that allows entities to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) - Effective Dates for Certain Entities , that delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021 for private companies. It also changed the definition of a lease and expands the disclosure requirements of lease arrangements. The Company plans to adopt the standard on January 1, 2022 using the modified retrospective transition method, according to the adoption date afforded to emerging growth companies by Section 102(b)(1) of the JOBS Act. The Company will adopt Topic 842 using the Package of Practical Expedients as well as the practical expedients relating to combining lease and non-lease components and not recording short-term leases. At the adoption date, the Company had three capital leases, one in Hanford, California for its main production facility and two equipment leases, and multiple operating leases, the main one in Gardena, California, for its corporate headquarters, which would be subject to the evaluation of the impact of the adoption of Topic 842. The effects of the adoption on the Company’s financial statements is expected to be immaterial. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt — Debt with Conversion and Other Options , for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments to the earnings per share guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for the diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted for all entities other than public business entities that are SEC filers and are not eligible to be smaller reporting companies. Adoption of the ASU can either be on a modified retrospective or full retrospective basis. The Company plans to adopt the standard on January 1, 2022 using the modified retrospective method. As discussed in Note 10, Notes Payable (2) , the Company’s Optional Notes entitle their holders to conversion rights that are required to be evaluated as part of the adoption impact of this standard. As discussed in Note 8, Fair Value of Financial Instruments , the Company’s obligation to issue registered shares failed to qualify for equity treatment prescribed in ASC 815-40-25-10 and 25-14 based on their registration rights, and is required to be evaluated as part of the adoption impact of this standard. The effects of the adoption on the Company’s financial statements is expected to affect the classification of the obligation to issue registered shares of Class A Common Stock from a liability to mezzanine equity upon adoption. In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options . The ASU clarifies issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU specifies the cost of a modification or exchange of these written call options is the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it was modified or exchanged. This cost shall be recognized based on the substance of the transaction; as equity issuance cost if a financing transaction to raise equity, as debt issuance cost if a financing transaction to raise debt, or other modifications not related to financing or compensation shall be recognized as a dividend. This ASU is effective for fiscal years beginning after December 15, 2021 and is applied prospectively to modifications or exchanges occurring after the effective date. The effects of the adoption of this standard on the Company’s financial statements is expected to be immaterial. 105 Table of Contents FF Intelligent Mobility Global Holdings Ltd. Notes to Consolidated Financial Statements December 31, 2020 and 2019 (in thousands, except share and per share data) 2. Liquidity and Capital Resources and Going Concern The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued. Based on its recurring losses from operations since inception and continued cash outflows from operating activities (all as described below), the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these Consolidated Financial Statements were issued. The Company’s business plan contemplates that it will launch the FF 91 for delivery to customers beginning in Q3 2022, with testing, validation, and certification complete in Q3 2022. Since its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering, design, and development of its electric vehicle platform, development of initial electric vehicle models, and capital raising. Since inception, the Company has incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $ 2,907,644 as of December 31, 2021. After the closing of the Business Combination and the PIPE Financing on July 21, 2021, the Company received gross proceeds aggregating $ 990,983 , which it used to pay $ 84,278 in transaction costs and $ 139,557 to settle certain liabilities. The Company expects to use the remaining net proceeds of $ 767,148 to finance the ongoing operations of the business. The Company has funded its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related party notes payable and notes payable (see Note 9, Related Party Notes Payable and Note 10, Notes Payable ), the sale of Preferred and Common Stock (see Note 13, Stockholders' Equity (Deficit) ), and the net proceeds received from the Business Combination and the PIPE Financing (see Note 3, Business Combination ) . The Company’s ongoing liquidity needs will depend on the extent to which the Company’s actual costs vary from the Company’s estimates and the Company’s ability to control these costs, as well as the Company’s ability to raise additional funds. The Company is exploring various funding and financing alternatives to fund its ongoing operations, including equipment leasing, construction financing of the Hanford, California manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time. The timely achievement of the Company’s operating plan as well as its ability to maintain an adequate level of liquidity are subject to various risks associated with the Company’s ability to continue to successfully close additional sources of funding, control and effectively manage its costs, as well as factors outside of the Company’s control, including those related to global supply chain disruptions, the rising prices of materials and potential impact of the COVID-19 pandemic. Refer to the section titled, “Risk Factors” in this Form 10-K for a full discussion of the risks associated with the COVID-19 pandemic. The Company’s forecasts and projections of working capital reflect significant judgment and estimates for which there are inherent risks and uncertainties. The Company expects to continue to generate significant operating losses for the foreseeable future. The plans are dependent on the Company being able to continue to raise significant amounts of capital through the issuance of additional notes payable and equity securities. There can be no assurance that the Company will be successful in achieving its strategic plans, that the Company’s future funding raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all. If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures. Any such events would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives. 106 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 2. Liquidity and Capital Resources and Going Concern (cont.) As of December 31, 2021, the Company was in default on a related party note payable with a principal amount of $ 9,411 . Subsequent to the balance sheet date, in January 2022, the Company defaulted on the Optional Notes (see Note 10, Notes Payable ). The holders of the Optional Notes have waived the default. The Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the Consolidated Financial Statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. COVID-19 Pandemic The World Health Organization declared a global emergency on March 11, 2020, with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties regarding the current global COVID-19 pandemic. The Company is closely monitoring the impact of the pandemic on all aspects of its business, including the impact on its employees, suppliers, vendors, and business partners. 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. For example, the Company’s employees based in California have been subject to stay-at-home orders from state and local governments. While the stay-at-home orders were lifted on June 15, 2021, the Company continues to operate under various return-to-work protocols and must continue to follow certain safety and COVID-19 protocols. These measures may adversely impact the Company’s employees and operations and the operations of suppliers and business partners and could negatively impact the construction schedule of the Company’s manufacturing facility and the production schedule of the FF 91 electric vehicle. In addition, various aspects of the Company’s business and manufacturing facility cannot be conducted remotely. The extent of the continuing impact of the COVID-19 pandemic on the Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution, and effectiveness of vaccines; the imposition of protective public safety measures; and the impact of the pandemic on the global economy, including the Company’s supply chain, and on the demand for consumer products. Future measures taken by government authorities in response the COVID-19 pandemic could adversely affect the Company’s construction and manufacturing plans, sales and marketing activities, and business operations. 3. Business Combination On July 21, 2021, the Company consummated the Business Combination. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy FF surviving the merger as a wholly-owned subsidiary of the Company. Upon the consummation of the Business Combination, the Company changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent Electric Inc. On the Closing Date, and in accordance with the terms and conditions of the Merger Agreement, all issued and outstanding Legacy FF Ordinary Stock and Convertible Preferred Stock were cancelled and converted into the holder’s right to receive shares of the Company’s Common Stock at the exchange ratio of 0.14130 (“Exchange Ratio”). Gross proceeds from the PSAC trust account were $ 229,583 , out of which the Company received $ 206,435 in cash, after netting PSAC’s transaction costs related to the Business Combination, and redemptions of $ 206 . Each non-redeemed outstanding share of Common Stock of PSAC was converted into one share of Class A Common Stock of the Company. The shares of Legacy FF held by Legacy FF shareholders were converted into the right to receive 127,949,403 shares of the Company’s Class A Common Stock and 64,000,588 shares of the Company’s Class B Common Stock. The conversion of the right to receive shares in the Company into Class A Common Stock or Class B Common Stock is subject to the shareholders executing and delivering certain customary documents to the Company’s transfer agent (see Note 13, Stockholders Equity (Deficit) ). Commitment to Issue Class A and Class B Common Stock As part of the Closing of the Business Combination, former stockholders and noteholders of Legacy FF are required to submit a signed Company share letter of transmittal or converting debt letter of transmittal along with a lock-up agreement to the Company’s transfer agent in order for shares of the Company to be issued in their name in exchange for their shares in, notes from, vendor trust or other supplier agreements with, Legacy FF. As of December 31, 2021, the Company’s transfer agent 107 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 3. Business Combination (cont.) issued 167,280,677 legally outstanding shares of Class A Common Stock out of 320,433,395 shares of Class A and Class B Common Stock the Company is obligated to issue as part of the Business Combination, including the conversion of certain notes payable, related party notes payable and Vendor Trust obligations which the Company determined were legally settled upon the Closing pursuant to the terms of the agreements executed with those parties. Until the holder of the right to receive shares of the Company’s Class A and Class B Common Stock is issued shares, that holder does not have any of the rights of a stockholder. The Company determined that the obligation to issue shares of Class A and Class B Common Stock is indexed to the Company’s own equity, within the meaning in ASC 815-10-15-74 and met the scope exception to not be subject to derivative accounting under ASC 815-40-25. As such, the Company classified the obligation to issue shares of Class A and Class B Common Stock in equity. For purposes of presentation of shares outstanding in the Company’s financial statements, the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity (Deficit) present legally issued and outstanding shares. For purposes of presentation of basic and diluted net loss per share in the Consolidated Statements of Operations and Comprehensive Loss, the Company includes shares to be issued in the denominator in accordance with ASC 710-10-54-4 and ASC 260-10-45-48 as if they had been issued on the date of the merger, as such shares are non-contingent and are issuable for no consideration. Earnout Shares Legacy FF shareholders, as of the Closing Date of the Business Combination until its fifth anniversary, are entitled to contingent consideration of up to 25,000,000 additional shares of Class A Common Stock in the aggregate in two equal tranches upon the occurrence of each earnout triggering event (“Earnout Shares”). The earnout triggering events and related Earnout Shares as defined in the Merger Agreement are: • The minimum earnout of 12,500,000 additional shares is triggered if the Class A Common Stock volume weighted average price (“VWAP”), as defined in the Merger Agreement, is greater than $ 13.50 per share for any period of twenty ( 20 ) trading days out of thirty ( 30 ) consecutive trading days (“Minimum Target Shares”); • The maximum earnout of an additional 12,500,000 additional shares is triggered if the Class A Common Stock VWAP is greater than $ 15.50 per share for any period of twenty ( 20 ) trading days out of thirty ( 30 ) consecutive trading days, plus the Minimum Target Shares, if not previously issued. The Company recognized the Earnout Shares at fair value upon the closing of the Business Combination and classified them in Stockholders’ Equity (Deficit) since the Earnout Shares were determined to be indexed to the Company’s own stock and meet the requirements for equity classification in accordance with ASC 815-40. The Company treated the issuance of the Earnout Shares as a deemed dividend as the Business Combination was accounted for as a reverse recapitalization. Since it had a deficit of retained earnings, the Company recorded the issuance of the Earnout Shares in additional paid-in capital (“APIC”), where it had a net-nil impact on the APIC balance. The Company determined that the fair value of the Earnout Shares at the Closing Date was $ 293,853 based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility. Public and Private Warrants In connection with the Business Combination, the Company assumed 22,977,568 public warrants (“Public Warrants”) and 594,551 private warrants (“Private Warrants”) previously issued by PSAC, each with an exercise price of $ 11.50 per share. The Public Warrants and the Private Warrants are exercisable into Class A Common Stock within a period of five years from the Closing Date. The Company determined that the Public Warrants were indexed to its own stock and met the requirements for equity classification in accordance with ASC 815-40. The Company determined that the Private Warrants failed to meet the equity scope exception because the settlement provisions vary based on the holder of the warrant, which is not an input into a fixed-for-fixed option pricing model. The Company recorded the Private Warrants as a derivative liability measured at fair value within Other Liabilities, less Current Portion on the Consolidated Balance Sheets. The fair value of the Private Warrants was $ 2,152 and $ 642 upon the Closing of the Business Combination and as of December 31, 2021, respectively. 108 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 3. Business Combination (cont.) Reverse Recapitalization While the legal acquirer in the Business Combination was PSAC, for accounting and financial reporting purposes under GAAP, Legacy FF was determined to be the accounting acquirer and the Business Combination was accounted for as a “reverse recapitalization” based on the facts and circumstances, including the following: • Legacy FF’s former shareholders hold a majority ownership interest in the combined company; • Legacy FF’s existing senior management team comprise senior management of the combined company; • Legacy FF is the larger of the companies based on historical operating activity and employee base; and • Legacy FF’s operations comprise the ongoing operations of the combined company. A reverse recapitalization does not result in a new basis of accounting and the financial statements of the combined entity represent the continuation of the financial statements of Legacy FF. Under this method of accounting, PSAC was treated as the “acquired” entity. Accordingly, the consolidated assets, liabilities, and results of operations of Legacy FF became the historical financial statements of the Company, and PSAC’s assets and liabilities were consolidated with Legacy FF’s on July 21, 2021. Operations of Legacy FF prior to the Business Combination will be presented as those of the Company in future reports. The net assets of PSAC, as well as assumed transaction costs related to the Business Combination, were recognized at their carrying value immediately prior to the Closing Date with no goodwill or other intangible assets recorded and were as follows, net of transaction costs: PSAC Balances as of July 21, 2021 Cash in the PSAC trust account at the Closing of the Business Combination $ 229,583 Other current assets 36 Accounts payable, accrued expenses, and other current liabilities ( 225 ) Accrued transaction costs ( 5,108 ) PSAC transaction costs assumed as part of the Business Combination ( 18,040 ) Related party notes payable ( 1,080 ) Private Warrants liability ( 2,152 ) Obligation to issue registered shares of Class A Common Stock assumed as part of the Business Combination ( 32,900 ) Net assets acquired $ 170,114 Pursuant to the terms of the Merger Agreement, immediately prior to the Closing, all of the issued and outstanding Class B Convertible Preferred Stock held by FF Top Holding LLC (“FF Top”) converted into Legacy FF Class B Ordinary Stock at a ratio of 1 :1. Upon the consummation of the merger, these shares were cancelled and converted into the holder’s right to receive 64,000,588 shares of Class B Common Stock using the Exchange Ratio. Similarly, immediately prior to the Closing, all other outstanding shares of Legacy FF converted into Legacy FF Class A Ordinary Stock at a ratio of 1 :1. Upon the consummation of the merger, these shares were cancelled and converted into the holder’s right to receive 127,949,403 shares of Class A Common Stock using the Exchange Ratio. Each of the Company’s options that were outstanding immediately prior to the closing of the Business Combination remained outstanding and converted into the right to purchase Class A Common Stock equal to the number of original Legacy FF’s Ordinary Stock, subject to such options, multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio for aggregate outstanding options of 42,193,512 under the EI Plan and the STI Plan (defined under Note 14, Stock-Based Compensation ) as of the Closing. The outstanding warrants issued to a US-based investment firm were adjusted to increase the shares allowed to be purchased to 2,687,083 shares of Class A Common Stock at an exercise price of $ 10.00 per share, in accordance with a down-round provision included in the warrant agreements (see Note 10, Notes Payable ). The aggregate amount of shares of Class A Common Stock issuable upon exercise of these outstanding options and warrants is 44,880,595 . PIPE Financing Concurrently with the execution of the Merger Agreement, the Company entered into separate Subscription Agreements with a number of investors (“PIPE Investors”) pursuant to which, on the Closing Date, the PIPE Investors purchased, and the 109 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 3. Business Combination (cont.) Company issued, an aggregate of 76,140,000 shares of Class A Common Stock, for a purchase price of $ 10.00 per share with an aggregate purchase price of $ 761,400 (“PIPE Financing”). Shares sold and issued in the PIPE Financing included registration rights. The closing of the Private Placement occurred immediately prior to the Closing Date. Settlement of Liabilities and Commitment to Issue Shares In conjunction with the closing of the Business Combination, the Company paid $ 139,557 in cash and committed to issue 24,464,994 shares of Class A Common Stock at a value of $ 10.00 per share to settle liabilities of the Company and to compensate current and former employees, including: (i) notes payable principal amounts of $ 85,202 and accrued interest of $ 7,436 ; (ii) related party notes payable principal amounts of $ 91,420 and accrued interest of $ 13,581 ; (iii) interests in the Vendor Trust of $ 124,671 , including payables of $ 102,950 and purchase orders in the amount of $ 8,380 related to goods and services yet to be received, and accrued interest thereon of $ 13,341 ; (iv) $ 19,791 of amounts due to vendors; and (v) $ 9,592 to current and former employees as a bonus. In addition, the Company issued 1,350,970 restricted stock awards, net of forfeitures, to current employees as a bonus (see Note 14, Stock-Based Compensation). In connection with the Business Combination, the Company converted certain related party notes payable, notes payable, and beneficial interests in the Vendor Trust into the right to receive Class A Common Stock at $ 10.00 per share which was below the fair value of the Class A Common Stock on the date of conversion. The conversion resulted in the Company recording a loss upon settlement of the related party notes payable, notes payables, Vendor Trust, and amounts due to vendors (including accrued interest thereon) of $ 94,727 in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. The number of shares of Common Stock the Company committed to issue upon the Closing of the Business Combination were as follows: Number of shares Class A and B Ordinary Stock outstanding on July 1, 2021 30,276,958 Class A Ordinary Stock issued through option exercises between July 1, 2021 and July 21, 2021, net of share repurchases 1,035,399 Ordinary Stock outstanding prior to the Business Combination 31,312,357 Conversion of Redeemable Preference Stock and Class B, Class A-1, Class A-2, and Class A-3 Convertible Preferred Stock into Class A and B Common Stock 160,637,633 Issuance of Class A Common Stock in the Business Combination 27,798,411 Conversion of assumed convertible notes into Class A Common Stock 80,000 Total note conversion and share issuance pursuant to the reverse recapitalization* 188,516,044 Conversion of liabilities into Class A Common Stock in the Business Combination** 24,464,994 Shares attributable to reverse recapitalization 244,293,395 Issuance of Class A Common Stock attributable to PIPE Financing 76,140,000 Total shares of Class A and Class B Common Stock as of the closing of the Business Combination and related transactions 320,433,395 * The corresponding adjustment to APIC relates to the reverse recapitalization. The adjustment is comprised of (i) $ 170,114 which represents the fair value of the consideration transferred in the Business Combination, less the excess of the fair value of the shares issued over the value of the net monetary assets of PSAC, net of transaction costs related to the business combination (ii) $ 1,815,637 which represents the conversion of the Redeemable Preference Stock and Convertible Preferred Stock into Ordinary Stock and, (iii) $ 800 to settle an aggregate principal amount of related party convertible notes of PSAC into Class A Common Stock. ** The Company committed to issue 6,921,814 shares of Class A Common Stock to convert related party notes payable (see Note 9, Related Party Notes Payable ), 6,854,013 shares of Class A Common Stock to convert notes payable (see Note 10, Notes Payable ), 9,618,542 shares of Class A Common Stock to convert liabilities in the Vendor Trust (see Note 11, Vendor Payables in Trust ), 838,040 shares of Class A Common Stock to convert Future Work, and 232,585 shares of Class A Common Stock to settle other vendor liabilities. 110 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 3. Business Combination (cont.) Subsequent to the closing of the Business Combination, the Company issued 80,000 shares of Class A Common Stock and 80,000 Private Warrants to settle related party notes of PSAC with an aggregate principal amount of $ 800 (see Note 9, Related Party Notes Payable ). Reconciliation of transaction costs Total direct and incremental transaction costs aggregated to $ 125,943 , of which $ 900 were expensed and the remaining $ 125,043 were recorded as a reduction to APIC as equity transaction costs. Below is a reconciliation of the transaction costs related to the Business Combination and the PIPE Financing that were recorded as a reduction to APIC as equity transaction costs: Reconciliation at the Closing Date Consolidated Statements of Stockholders’ Equity (Deficit) Proceeds from issuance of Class A Common Stock in the Business Combination $ 229,583 Transaction costs paid in connection with the Business Combination ( 23,148 ) Net proceeds from issuance of Class A Common Stock in the Business Combination 206,435 Net assets acquired and liabilities assumed in the Business Combination, exclusive of cash and accrued transaction costs ( 3,421 ) Obligation to issue registered shares of Class A Common Stock for transaction services ( 32,900 ) Net assets and liabilities acquired in the Business Combination $ 170,114 Proceeds from issuance of Class A Common Stock in the PIPE Financing $ 761,400 Transaction costs paid in connection with the issuance of Class A Common Stock in the PIPE Financing ( 61,130 ) Reclassification of deferred transaction costs paid in prior periods against proceeds received in the Business Combination ( 7,865 ) Net proceeds from issuance of Class A Common Stock in the PIPE Financing $ 692,405 Transaction costs paid in connection with the Business Combination $ ( 23,148 ) Transaction costs paid in connection with the PIPE Financing ( 61,130 ) Reclassification of deferred transaction costs paid in prior periods against proceeds received in the Business Combination ( 7,865 ) Obligation to issue registered shares of Class A Common Stock for transaction services ( 32,900 ) Total transaction costs in connection with the Business Combination and the PIPE Financing $ ( 125,043 ) Retroactive Application of Reverse Recapitalization As discussed above, the Business Combination is accounted for as a reverse recapitalization of the Company’s equity structure. Pursuant to GAAP, the Company recast its Consolidated Statements of Stockholders’ Equity (Deficit) from December 31, 2019, to the Closing Date, the total stockholders’ equity (deficit) within the Company’s Consolidated Balance Sheet as of December 31, 2020, and the weighted average Common Stock outstanding, and Class A and Class B, basic and diluted earnings per share for the year ended December 31, 2020, by applying the recapitalization retroactively. The classes of capital stock; authorized, issued, and outstanding amounts of stock; exercise prices of stock options and warrants; and conversion rates of related party notes payable and notes payable are presented as recast throughout the Consolidated Financial Statements. Retroactive Application of Reverse Recapitalization to the Consolidated Statements of Stockholders’ Equity (Deficit) Pursuant to the terms of the Merger Agreement, as part of the closing of the Business Combination, all of the issued and outstanding shares of Class B Convertible Preferred Stock of Legacy FF and all other issued and outstanding shares of Legacy 111 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 3. Business Combination (cont.) FF Redeemable Preference Stock and Class A-1, Class A-2, and Class A-3 Convertible Preferred Stock and Class A and Class B Ordinary Stock converted into either Legacy FF Class B Ordinary Stock or Legacy FF Class A Ordinary Stock in an amount calculated by dividing them by the Exchange Ratio into a commitment to issue 64,000,588 shares of Class B Common Stock and a commitment to issue 127,949,403 shares of Class A Common Stock. Legacy FF Capital Structure New Capital Structure Outstanding Shares The Commitment to issue the Company’s Common Stock Immediately Before Conversion on Closing Date Exchange Ratio Class A Class B Redeemable Preference Stock 470,588,235 0.14130 66,494,117 Class B Convertible Preferred Stock 452,941,177 0.14130 64,000,588 Class A-1 Convertible Preferred Stock 73,306,184 0.14130 10,358,162 Class A-2 Convertible Preferred Stock 138,737,629 0.14130 19,603,624 Class A-3 Convertible Preferred Stock (1) 1,281,976 0.14130 181,143 Class A Ordinary Stock 71,551,672 0.14130 10,109,892 Class B Ordinary Stock 150,052,834 0.14130 21,202,465 1,358,459,707 127,949,403 64,000,588 (1) The Company issued Convertible Preferred Stock Class A-3 immediately prior to the Closing of the Business Combination to settle certain notes payable (see Note 10, Notes Payable ). These shares converted into a commitment to issue Class A Common Stock upon the Closing. Retroactive Application of Reverse Recapitalization to the Consolidated Statements of Operations and Comprehensive Loss Based on the retroactive application of the reverse recapitalization to the Company’s Consolidated Statements of Stockholders’ Equity (Deficit), the Company recalculated the weighted average shares for the years ended December 31, 2021 and 2020. The redeemable preference stock and convertible preferred stock was converted to Legacy FF Ordinary Stock as of December 31, 2019, and combined with the basic and diluted weighted-average Legacy FF Ordinary Stock which was retroactively converted to the Company’s Class A Common Stock using the Exchange Ratio to conform to the recast Consolidated Statements of Stockholders’ Equity (Deficit) (see Note 16, Net Loss per Share ). Retroactive Application of Reverse Recapitalization to the Consolidated Balance Sheets To conform to the retroactive application of recapitalization of the Company’s Consolidated Statements of Stockholders’ Equity (Deficit), the Company reclassified $ 724,823 of Legacy FF Redeemable Preference Stock and $ 697,643 of Legacy FF Class B Convertible Preferred Stock to APIC, less amounts attributable to the par value of the common stock, as recast, as of December 31, 2020. Pursuant to the terms of the Merger Agreement, as part of the closing of the Business Combination, the Company reclassified Convertible Preferred Stock Classes A-1, A-2, and A-3 in the amounts of $ 119,047 , $ 271,925 and $ 2,199 , respectively, to APIC less amounts attributable to the par value of Class A Common Stock. 4. Variable Interest Entities and Joint Ventures The LeSEE Arrangement In November 2017, as part of a broader corporate reorganization and to facilitate third-party investment, the Company incorporated its holding company, Smart King, Ltd., in the Cayman Islands to enable effective control over the Company’s Chinese operating entity, FF Hong Kong Holding Ltd., and its subsidiaries without direct equity ownership. The Company 112 Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 4. Variable Interest Entities and Joint Ventures (cont.) entered into a series of contractual arrangements (“VIE contractual arrangements”) with LeSEE and LeSEE Zhile Technology Co., Ltd. (“LeSEE Zhile”), a related party of the Company, to enable the Company to exercise effective control over LeSEE and its subsidiaries, to receive substantially all of the economic benefits of such entities, and to have an exclusive option to purchase all or part of the equity interests in LeSEE. On August 5, 2020, an equity transfer agreement (the “Equity Transfer Agreement”) was entered into between the Company and LeSEE Zhile, pursuant to which, LeSEE Zhile transferred 48 % equity of LeSEE to the Company for no consideration. After the transfer, LeSEE Zhile owned 1 % of LeSEE and the Company owned 99 % of LeSEE, making LeSEE a majority-owned subsidiary of the Company and no longer a VIE, since LeSEE is consolidated through majority voting and equity interests. As such, LeSEE is consolidated by the Company within the Consolidated Financial Statements. The9 Arrangement On March 24, 2019, the Company entered into a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”). Pursuant to the JVA, the Company and The9 agreed to establish an equity joint venture in Hong Kong, which would in turn establish a wholly-owned subsidiary in China, intended to engage in the business of manufacturing, marketing, selling and distributing the planned Faraday Future Icon V9 model electric vehicle in China. The Company and The9 would each be 50 % owners of the joint venture. The9 made a $ 5,000 non-refundable initial deposit (“The9 Conditional Obligation”) to the Company to participate in the joint venture. The9 had the right to convert the initial deposit into various classes of stock in the Company. For accounting purposes, the deposit is a financial instrument that embodies a conditional obligation that the issuer may settle by issuing a variable number of shares. The9 Conditional Obligation was measured at fair value, was remeasured at each reporting period, and represented a Level 3 financial instrument under the fair value hierarchy (see Note 8, Fair Value of Financial Instruments) . The fair value of The9 Conditional Obligation was $ 1,128 as of December 31, 2020 and was recorded in Current Liabilities on the Consolidated Balance Sheets. On November 22, 2020, the parties entered into an agreement to convert the initial deposit into 423,053 shares of Class A Common Stock of the Company, which were issued on February 23, 2021. Neither the Company nor The9 have made contributions to the joint venture as of December 31, 2021, and it has yet to commence business activities. The Geely Arrangement In December 2020, the Company entered into a non-binding memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), which was also a subscriber in the PIPE Financing, pursuant to which the parties contemplate strategic cooperation in various areas including engineering, technology, supply chain, and contract manufacturing (“Geely JV”). In January 2021, the Company and Geely Holding entered into a cooperation framework agreement and a license agreement (“Geely License”) that set forth the major commercial understanding of the proposed cooperation among the parties in the areas of potential investment into the Geely JV, engineering, technology, and contract manufacturing support. The foregoing framework agreement and the Geely License may be terminated if the parties fail to enter into the joint venture definitive agreement. On September 7, 2021, the Company paid Liankong Technologies Co., Ltd. (“Liankong”), a subsidiary of Geely Holding, which was also a subscriber in the PIPE Financing, in accordance with the Intellectual Property License Agreement dated January 11, 2021, as supplemented on September 7, 2021, a one-time amount of $ 50,000 for a non-exclusive, perpetual, irrevocable, and sublicensable license to use a platform, the Geely License. The Geely platform is an electric automotive chassis that the Company plans to use in the development of future electric vehicle models. As the Company intends to use the license in the design, construction, and testing of pre-production prototypes and models of future electric vehicles and the license has no alternative future use, the total cost to acquire the license has been expensed as incurred as research and development within operating expenses in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. 113 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 5. Deposits and Other Current Assets Deposits and other current assets consists of the following as of December 31: 2021 2020 Deposits Deposits for research and development, prototype parts and other $ 54,990 $ 6,412 Deposits for Future Work 8,380 — Total deposits $ 63,370 $ 6,412 Other current assets Prepaid expenses $ 11,119 $ 762 Other current assets 2,291 3,364 Notes receivable — 40 Due from affiliate — 2,034 Total other current assets $ 13,410 $ 6,200 During the years ended December 31, 2021 and 2020, the Company made deposits for R&D services, prototype parts, and other with its vendors, which support the Company’s ongoing R&D efforts and operations. The Company expenses deposits as the services are provided and prototype parts are received. The deposits also include $ 8,380 as of December 31, 2021 related to goods and services yet to be received (“Future Work”) from the settlement of interests in the Vendor Trust. No goods and services were received against Future Work as of December 31, 2021 and 2020 ( see Note 11, Vendor Payables in Trust ). During year ended December 31, 2021, the Company entered into a hosting arrangement with Palantir Technologies Inc. (“Palantir”), which was also a subscriber in the PIPE Financing. Unamortized hosting costs prepaid to Palantir are included in prepaid expenses as of December 31, 2021. Amortization expense related to the Palantir hosting arrangement and other prepaid software subscriptions totaled $ 4,597 and $ 745 for the years ended December 31, 2021 and 2020, respectively. 114 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 6. Property and Equipment, Net Property and equipment, net, consists of the following as of December 31: 2021 2020 Land $ — $ 13,043 Buildings 14,180 21,899 Building improvements — 8,940 Computer hardware 3,051 4,058 Tooling, machinery and equipment 8,868 5,451 Vehicles 337 583 Computer software 1,032 7,095 Leasehold improvements 297 298 Construction in process 275,048 251,633 Less: Accumulated depreciation ( 9,678 ) ( 19,067 ) Total property and equipment, net $ 293,135 $ 293,933 The Company’s construction in process (“CIP”) is primarily related to the construction of tooling, machinery and equipment for the Company’s production facility in Hanford, California. Tooling, machinery, and equipment are either held at Company facilities, primarily the Hanford plant, or at the vendor’s location until the tooling, machinery and equipment is completed. Of the $ 275,048 and $ 251,633 of CIP, $ 43,496 and $ 42,734 is held at Company facilities and $ 231,552 and $ 208,899 is held at vendor locations as of December 31, 2021 and 2020, respectively. Depreciation and amortization expense totaled $ 8,158 and $ 3,517 for the years ended December 31, 2021 and 2020, respectively. On February 4, 2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the Company’s headquarters (“HQ”) with Atlas Capital Investors V, LP (“Atlas”) for a sale price of $ 29,000 . In March 2019, the Company entered into an agreement to lease its headquarters back from Atlas for a term of three years , with an option to repurchase the property at any time prior to the expiration of the lease for a purchase price equal to the greater of $ 44,029 or the fair market value of the HQ, as determined in accordance with the lease agreement. Due to the inclusion of the purchase option in the lease agreement, the Company was considered to have continuing involvement and, thus, accounted for the transaction as a failed sale leaseback, with the HQ assets subject to the sale leaseback remaining on the balance sheet and the sale proceeds recorded as a liability in accordance with the financing method. The Company recognized a $ 29,000 financing obligation recorded in Accrued expenses and other current liabilities and Capital leases, less current portion on the Consolidated Balance Sheets as of December 31, 2020. No gain or loss was record on the failed sale-leaseback. The Company continued to capitalize and depreciate the HQ asset. The ongoing lease payments to Atlas were recorded as reductions to the finance obligation and Interest Expense in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020. The Company recorded interest expense of $ 1,464 and $ 1,760 and during the years ended December 31, 2021 and 2020, respectively. On October 29, 2021, the purchase option for the Gardena headquarters expired. Accordingly, the Company removed from its Consolidated Balance Sheets the HQ asset, net and finance obligation in the amounts of $ 25,381 and $ 28,880 , respectively, resulting in a gain of $ 3,499 . The Company recognized the gain using the installment method, deferring the gain and recognizing it over the remaining lease term of five years by applying the percentage of profit inherent in the transaction to the remaining lease payments. Capital leases of $ 14,180 and $ 43,882 have been capitalized within property and equipment as of December 31, 2021 and 2020, respectively. The Company has three capital leases, one in Gardena, California for its headquarters and two equipment leases. 115 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) Due to the build out of the Company’s manufacturing facility in Hanford, California, the Company established an asset retirement obligation (“ARO”) of $ 2,974 during the year ended December 31, 2021 . The Company recorded an ARO liability and a corresponding ARO asset, within tooling, machinery, and equipment. The ARO asset is depreciated to operating expense over the remaining term of the lease through December 2027. During 2021, the Company disposed of $ 72,055 of CIP relating to the abandonment of certain FF 91 program assets, primarily vendor tooling, machinery and equipment, due to the redesign of the related FF 91 components and implementation of the Company’s cost reduction program. Disposals of CIP of $ 64,191 were charged to operating expenses in the Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2021. In addition, there were disposals of CIP of $ 7,864 , which reduced Accounts Payable in the Consolidated Balance Sheets as of December 31, 2021 . 7. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following as of December 31: 2021 2020 Accrued expenses and other current liabilities Accrued payroll and benefits $ 21,752 $ 19,180 Accrued legal contingencies 16,881 5,025 Capital lease, current portion 2,574 4,396 Tooling, machinery, and equipment received not invoiced 7,243 509 Engineering, design, and testing services received not invoiced 6,620 — Deposits from customers 4,354 3,523 Due to affiliates 6,673 5,123 Obligation to issue registered shares of Class A Common Stock 12,635 — Other current liabilities 11,780 14,626 Total accrued expenses and other current liabilities $ 90,512 $ 52,382 8. Fair Value of Financial Instruments Cash Equivalents The fair value of the Company’s money market funds is based on the closing price of these assets as of the reporting date, which are included in cash equivalents. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets. The Company had no cash equivalents at December 31,2021 and 2020. Related Party Notes Payable and Notes Payable at Fair Value The Company has elected to measure certain related party notes payable and notes payable at fair value issued under the Notes Purchase Agreement, as amended (“NPA”) as they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 9, Related Party Notes Payable and Note 10, Notes Payable ). Except for notes payable issued on June 9, 2021, and August 10, 2021, the Company employed the yield method to value the related party notes payable and notes payable. This valuation method uses a discounted cash flow analysis, estimating the expected cash flows for the debt instrument in different scenarios and then discounting them at the market yield. The significant unobservable input used in the fair value measurement is the market yield. The market yield is determined using external market yield data, including yields exhibited by publicly traded bonds by S&P credit rating as well as the borrowing rates of guideline public companies. The yield is affected by the market movements in credit spreads and bond yields. In general, increases in the yield would decrease the fair value of the liability, and conversely, decreases in the yield would increase the fair value of the liability. The Company used a binomial lattice model to value the notes payable issued on June 9, 2021, and August 10, 2021 to a US- 116 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 8. Fair Value of Financial Instruments (cont.) based investment firm as described under Note 10, Notes Payable . A binomial lattice model is widely used for valuing convertible notes. The significant assumptions used in the binomial lattice model include the risk-free rate, annual dividend yield, expected life, and volatility of the Company's stock. Fair value measurements associated with related party notes payable and notes payable represent Level 3 valuations under the fair value hierarchy. The fair value adjustments related to related party notes payables and notes payables were recorded in Change in Fair Value Measurements on the Consolidated Statements of Operations and Comprehensive Loss. Warrants In conjunction with notes payable agreements entered into with Ares Capital Corporation (“Ares”) on March 1, 2021 (see Note 10, Notes Payable (1) ), the Company agreed to issue warrants to purchase a variable number of the Company’s shares (“Ares Warrants”). The commitment to issue the Ares Warrants initially met the definition of a derivative and did not meet the equity scope exception in ASC 815-40 as the warrants were not considered indexed to the entity’s own equity given the variable number of underlying shares and exercise prices, and the fair value was recorded as a liability. The Company determined the commitment to issue warrants was a liability as of March 1, 2021, and estimated the fair value of the warrants to be $ 5,000 . Upon issuance of the Ares Warrants on August 5, 2021, the number of shares underlying the Ares Warrants and exercise price were fixed at 670,092 and $ 10.00 per share, respectively, and the Ares Warrants met all other requirements of the equity scope exception under ASC 815-40. The issuance of the warrants satisfied the commitment to issue warrants. As such, the Ares Warrants were determined to be equity classified and were recorded in APIC. The Company determined that the fair value of the Ares Warrants as of August 5, 2021 was $ 2,507 . The Company used the Black-Scholes option pricing model to value the Ares Warrants. The Black-Scholes model requires the use of several assumptions including, the exercise price of the warrant, the term over which the warrants can be exercised, the risk-free rate, the underlying stock price, and the volatility of the underlying stock price. In conjunction with notes payable issued under the NPA (see Note 10, Notes Payable (10) ), on various dates in September 2020, January 2021 and March 2021, the Company issued warrants to a US-based investment firm to purchase an aggregate of 1,187,083 shares of Class A Common Stock with exercise price of $ 10.00 per share and expiration dates 7 years from the dates of issuance, which were adjusted for down-round provisions in the original warrant agreements. The fair value of the warrants was recorded in APIC because the warrants met the derivative accounting scope exception in ASC 815-40 for certain contracts involving an entity’s own stock. The Company estimated the fair value of warrants issued in January 2021 and March 2021 to be $ 1,988 and the fair value of the warrants issued in September 2020 to be $ 490 , which are included in APIC on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. The Company utilized the Black-Scholes valuation model to value the September 2020, January 2021, and March 2021 warrants. The Black-Scholes model requires the use of several assumptions including the warrant exercise price, the term of the warrants, the risk-free rate, the underlying stock price, and the volatility of the underlying stock price. On August 10, 2021, these warrants were replaced with the issuance of warrants with the rights to purchase 1,187,083 shares of Class A Common Stock at an exercise price of $ 10.00 per share and with the same expiration dates as the previous warrants. The number of shares and exercise prices were adjusted for down-round provisions in the original warrant agreements. In conjunction with the issuance of additional notes payable to the same US-based investment firm on June 9, 2021 (see Note 10, Notes Payable ), the Company issued warrants to purchase up to 1,500,000 of Class A Common Stock with an exercise price of $ 10.00 per share and an expiration date 7 years from the date of issuance, which were adjusted for down-round provisions in the original warrant agreements. The Company determined the warrants are indexed to the Company’s own stock and, as such, meet the scope exception in accordance with ASC 815-40. Upon their issuance, the Company estimated the fair value of the warrants to be $ 5,125 , which is recorded in APIC on the Consolidated Balance Sheets as of December 31, 2021. The Company utilized the Black-Scholes valuation model to value the warrants. In conjunction with the issuance of the Optional Notes on August 10, 2021 (see Note 10, Notes Payable, (2)), the Company issued warrants to purchase up to 1,187,083 shares of Class A Common Stock with an exercise price of $ 10.00 per share and an expiration date of August 10, 2028. The fair value of the warrants was recorded in equity because the warrants meet the derivative accounting scope exception in ASC 815-40 for certain contracts involving an entity’s own stock. The Company estimated the fair value of the warrants to be $ 7,976 , which is included in APIC on the Consolidated Balance Sheets as of December 31, 2021. The Company utilized a Black-Scholes valuation model to value the August 10, 2021 warrants. The 117 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 8. Fair Value of Financial Instruments (cont.) Black-Scholes model requires the use of several assumptions including the warrant exercise price, the term of the warrants, the risk-free rate, the underlying stock price, and the volatility of the underlying stock price. Upon the Closing of the Business Combination, the Company assumed 22,977,568 Public Warrants and 594,551 Private Warrants from PSAC. The Company also issued 80,000 Private Warrants to settle related party notes of PSAC (see Note 3, Business Combination ). The Public Warrants are indexed to the Company’s own stock and, as such, meet the scope exception in accordance with ASC 815-40 to be classified in equity. The Private Warrants are classified as liabilities and the fair value is included in Other Liabilities, Less Current Portion on the Consolidated Balance Sheets. The Company valued the Private Warrants using a binomial lattice model. Inherent in a binomial lattice model are assumptions related to risk free rate, annual dividend yield, expected warrant life, and volatility of the Company's stock. The Company estimated the fair value of the Private Warrants to be $ 2,152 upon their assumption from PSAC on July 21, 2021 and $ 642 as of December 31, 2021. Changes in the fair value of the Private Warrants are recorded in Change in Fair Value Measurements in the Company’s Consolidated Statements of Operations and Comprehensive Loss. Fair value measurements associated with the Private Warrants liabilities represent Level 3 valuations under the fair value hierarchy. Obligation to Issue Registered Shares of Class A Common Stock PSAC entered into a transaction services agreement, dated as of October 13, 2020 (and amended on October 28, 2020), pursuant to which Riverside Management Group (“RMG”) provided consulting and advisory services in connection with the Business Combination in exchange for (i) $ 10,000 in cash from PSAC at the closing of the Business Combination, (ii) 1,697,500 unregistered shares of Class A Common Stock with an equal amount of shares of common stock in PSAC being forfeited by the PSAC Sponsor for no consideration immediately prior to the Closing, and (iii) 690,000 unregistered shares of Class A Common Stock issued by the Company in conjunction with the closing of the Business Combination having a value equal to $ 6,900 and an attributed value of $ 10.00 per share. On July 18, 2021, the Company entered into an omnibus transaction services fee agreement and acknowledgement (“Agreement and Acknowledgement”) with RMG. Pursuant to the Agreement and Acknowledgement, the Company will issue 2,387,500 registered shares of Class A Common Stock to the parties upon effectiveness of the registration statement covering these shares. As of December 31, 2021, the Company’s registration statement is not effective. As the Agreement and Acknowledgement specified that delivery of these shares will occur upon effectiveness of a registration statement covering the shares, which is considered to be outside of the control of the Company, this obligation failed to qualify for equity treatment under ASC 815-40-25-10 and 25-14, and net cash settlement is assumed. As a result, in conjunction with recording the assets and liabilities of PSAC on the closing of the Business Combination, the Company recorded a liability of $ 32,900 to issue registered shares of Class A Common Stock, with a corresponding amount recorded in APIC as transaction costs in the Consolidated Balance Sheets. As of December 31, 2021, the fair value of the liability was $ 12,635 resulting in a gain of $ 20,265 recorded in the Change in Fair Value Measurements in the Consolidated Statements of Operations and Comprehensive Loss (see Note 13, Stockholders' Equity (Deficit) ). The Company used the probability-weighted expected return method (“PWERM”) to determine the fair value of the obligation to issue registered shares. The PWERM framework is a scenario-based methodology that estimates the fair value of the obligation based upon an analysis of future values of the settlement of the obligation to issue shares, assuming various outcomes. The probability weightings assigned to certain potential scenarios were based on management’s assessment of the probability of settlement of the liability in cash or shares and an assessment of the timing of settlement. In the equity settlement scenario, the obligation valuation was based on the Company’s share price as of each valuation date. In the cash settlement scenario, the obligation valuation was based the cash payment that equates to the share price times total shares to be issued, discounted to each valuation date. Fair value measurements associated with the obligation to issue shares represent Level 3 valuations under the fair value hierarchy. 118 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 8. Fair Value of Financial Instruments (cont.) Recurring Fair Value Measurements Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables present financial assets and liabilities remeasured on a recurring basis by level within the fair value hierarchy: December 31, 2021 Level 1 Level 2 Level 3 Liabilities: Notes payable $ — $ — $ 161,282 Private Warrants — — 642 Obligation to issue registered shares of Class A Common Stock — — 12,635 December 31, 2020 Level 1 Level 2 Level 3 Liabilities: Related party notes payable $ — $ — $ 32,949 Notes payable — — 59,742 The9 Conditional Obligation — — 1,128 The carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, and accounts payable approximate fair value because of their short-term nature or contractually defined value. The following table summarizes financial instruments carried at fair value: Related Party Notes Payable at Fair Value Notes Payable at Fair Value The9 Conditional Obligation Private Warrants Obligation to issue Registered Shares of Class A Common Stock Balance as of December 31, 2019 $ 31,418 $ 22,326 $ 5,000 $ — $ — Proceeds — 30,000 — — — Changes in fair value 1,531 7,416 ( 3,872 ) — — Balance as of December 31, 2020 $ 32,949 $ 59,742 $ 1,128 $ — $ — Proceeds, net or original issuance discount — 171,929 — — — Original issue discount (1) — 11,860 — — — Proceeds allocated to equity classified warrants — ( 17,596 ) — — — Issuance of warrant liabilities — — — 290 — Transaction costs and consent fees charged to interest expense — 5,022 — — — Private warrant liability and obligation to issue registered shares assumed in Business Combination — — — 2,152 32,900 Repayment of principal and liquidation premium ( 27,593 ) ( 48,210 ) — — — Conversion to equity ( 5,519 ) ( 52,473 ) ( 2,863 ) — — Changes in fair value measurements 163 31,008 1,735 ( 1,800 ) ( 20,265 ) Balance as of December 31, 2021 $ — $ 161,282 $ — $ 642 $ 12,635 (1) Original issue discount represents the amount withheld by the note payable holder upon issuance of the note which will be paid, in addition to the full note payable principal, to the lender upon maturity of the notes payable. The original issue discount is included in Change in Fair Value Measurements on the Consolidated Statements of Operations and Comprehensive Loss. 119 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable The Company has been significantly funded by notes payable from related parties. These related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by the Company’s founder and former CEO. In connection with the findings of the Special Committee Investigation (see Note 17, Subsequent Events ), the Company found misclassifications in its Consolidated Financial Statements as of and for the year ended December 31, 2020, resulting in an understatement of related party notes payable and overstatement of notes payable by $ 32,952 , an overstatement of accrued interest and understatement of related party accrued interest of $ 3,677 , and an overstatement of interest expense and understatement of related party interest expense of $ 2,552 . This also resulted in an understatement of payments of related party notes payable and overstatement of payments of notes payable of $ 1,652 , an understatement of proceeds from related party notes payable and overstatement of proceeds from notes payable of $ 300 within financing cash flows for the year ended December 31, 2020, and an inappropriate caption of the line item Conversion of customer deposit to notes payable that should have been referred to as Conversion of related party customer deposit to related party notes payable in the supplemental disclosure of non-cash financing activities for the same period. The effects of the misstatement also resulted in the understatement of the disclosure of the changes in fair value of related party notes payable and overstatement of change in fair value of notes payable of $ 1,425 in Note 8, Fair Value of Financial Instruments . The misstatements did not affect any subtotals or totals on the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive Loss and Cash Flows for the year ended December 31, 2020. The Company concluded that such misstatements were not material to the previously issued financial statements, however, the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive Loss and Cash Flows for the year ended December 31, 2020 have been revised to correct for these misstatements Related party notes payable consists of the following as of December 31, 2021: December 31, 2021 Note Name Contractual Maturity Date Contractual Interest Rates Unpaid Balance Net Carrying Value at 12/31/21 Related party notes - China (1) Due on Demand 18.00 % $ 9,411 $ 9,411 Related party notes - China various other (2) Due on Demand 0.00 % 4,244 4,244 Total related party notes payable $ 13,655 $ 13,655 120 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) Related party notes payable consists of the following as of December 31, 2020: December 31, 2020 Note Name Contractual Maturity Date Contractual Interest Rates Unpaid Balance Fair Value Measurement Adjustments 0 % Coupon Discount Loss (Gain) on Extinguishments Net Carrying Value at 12/31/2020 Related party note (3) June 30, 2021 12.00 % $ 240,543 $ — $ ( 861 ) $ 204 $ 239,886 Related party note (4) Due on Demand 15.00 % 10,000 — — — 10,000 Related party notes – NPA tranche (5) October 6, 2021 10.00 % 27,593 5,356 — — 32,949 Related party notes – China (1) Due on Demand 18.00 % 9,196 — — — 9,196 Related party notes – China various other (2)(6) Due on Demand 0 % coupon, 10.00 % imputed 6,548 — ( 190 ) ( 22 ) 6,336 Related party notes – China various other (6) Due on Demand 8.99 % 1,410 — — ( 3 ) 1,407 Related party notes – Other (7) Due on Demand 0.00 % 424 — — — 424 Related party notes – Other (8) June 30, 2021 6.99 % 4,160 — — ( 50 ) 4,110 Related party notes – Other (9) June 30, 2021 8.00 % 6,452 — — ( 35 ) 6,417 Related party notes - Other (10) June 30, 2021 1.52 %, 8.99 %, 8.00 %, 2.86 % 8,440 — — ( 137 ) 8,303 Related party notes – Other (11) Due on Demand, June 30, 2021 8.99 %, 6.99 % 1,760 — — ( 11 ) 1,749 Related party notes – Other (12) June 30, 2021 8.00 % 11,635 — — ( 57 ) 11,578 Total related party notes payable $ 328,161 $ 5,356 $ ( 1,051 ) $ ( 111 ) $ 332,355 (1) In April 2017, the Company executed two separate note payable agreements with Chongqing Leshi Small Loan Co., Ltd. (“Chongqing”), for total principal of $ 8,742 . Chongqing was previously controlled by the Company’s founder and former CEO and is a small banking institution. The notes payable matured on April 16, 2018, have no covenants, and are unsecured. The notes bore interest during the note term at 12.00 % per annum. As the notes are in default as of December 31, 2021 and 2020, the outstanding balance is subject to an 18.00 % compounding interest rate per annum. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 9,411 $ 9,196 Accrued interest 11,231 7,646 Interest expense 3,369 2,641 Foreign exchange (gain) loss on principal 810 595 Foreign exchange (gain) loss on accrued interest 679 463 (2) The Company issued the following notes with various related parties in China. In 2018, the Company entered into a $ 700 note payable with an employee. The note was payable on demand and bears interest at 0 % per year. The note had no covenants and was unsecured. The note payable was in default as of December 31, 2020. Due to the note payable having an interest rate below market rates, the Company imputed interest upon entering into the note payable resulting in a debt discount and a capital contribution due to the related party nature of the arrangement. During the years ended December 31, 2021 and 2020, the Company recognized interest expense of $ 16 and $ 34 , respectively, related to the accretion of the debt discount. As of December 31, 2020, the unamortized debt discount was $ 16 . The Company reclassified the $ 730 carrying value of this loan from related party notes payable to notes payable during the year ended December 31, 2021 when the employee left the employment of the Company. 121 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 737 Interest expense 16 34 Foreign exchange (gain) loss on principal 30 48 Reclassification to notes payable 730 — The Company has various other unsecured related party borrowings totaling $ 4,244 at December 31, 2021. These borrowings do not have stated terms or a stated maturity date. Due to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting in a debt discount and a capital contribution due to the related party nature of the arrangements. During the years ended December 31, 2021 and 2020, the Company recognized interest expense of $ 141 and $ 310 , respectively, related to the accretion of the debt discount. The unamortized debt discount was immaterial for the years ended December 31, 2021 and 2020. The Company made principal payments of $ 900 during the year ended December 31, 2021. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 4,244 $ 5,045 Interest expense 141 310 Foreign exchange (gain) loss on principal 99 326 Principal payments in cash 900 — 122 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) The Company settled select related party notes payable during the year ended December 31, 2021 through the conversion of related party notes payable and accrued interest into Class A Common Stock just prior to the Business Combination and with a combination of cash payments and commitment to issue Class A Common Stock in settlement of outstanding principal plus accrued interest and conversion premiums pursuant to the Closing of the Business Combination, as follows: December 31, 2021 Note Name Contractual Maturity Date Contractual Interest Rates Net Carrying Value at 12/31/2020 Amortization of Discounts & Fair Value Adjustments Accrued Interest at Settlement Borrowing Cash Payments of Principal and Interest Equity Settlements of Principal and Interest Net Carrying Value at 12/31/2021 Loss (Gain) at Settlement Settlement prior to the Business Combination: Related party note (3) June 30, 2021 12.00 % $ 220,690 $ 657 $ 73,448 $ — $ — $ ( 294,795 ) $ — $ — Settlement in the Business Combination: Related party note (3) June 30, 2021 12.00 % 19,196 — — — — ( 19,196 ) 7,256 Related party note (4) Due on Demand 15.00 % 10,000 — 3,708 — ( 13,708 ) — — — Related party notes – NPA tranche (5) October 9, 2021 10.00 % 32,949 163 5,728 — ( 27,593 ) ( 11,247 ) — 4,257 Related party notes – China various other (6) Due on Demand 0 % coupon, 10.00 % imputed 774 — — — — ( 774 ) — 292 Related party notes – China other (6) Due on Demand 8.99 % 1,407 3 44 — — ( 1,454 ) — 550 Related party notes – Other (7) Due on Demand 0.00 % 424 — — 200 ( 624 ) — — — Related party notes – Other (8) June 30, 2021 6.99 % 4,110 50 — — — ( 4,160 ) — 1,572 Related party notes – Other (9) June 30, 2021 8.00 % 6,417 35 1,195 — — ( 7,647 ) — 2,891 Related party notes – Other (10) June 30, 2021 1.52 %, 8.99 %, 8.00 %, 2.86 % 8,303 137 819 — — ( 9,259 ) — 3,500 Related party notes – Other (11) Due on Demand, June 30, 2021 8.99 %, 6.99 % 1,749 11 378 — — ( 2,138 ) — 808 Related party notes – Other (12) June 30, 2021 8.00 % 11,578 57 1,693 — — ( 13,328 ) — 5,038 Subtotal settlements in the Business Combination 96,907 456 13,565 200 ( 41,925 ) ( 69,203 ) — 26,164 Total $ 317,597 $ 1,113 $ 87,013 $ 200 $ ( 41,925 ) $ ( 363,998 ) $ — $ 26,164 Closing of the Business Combination As described in Note 3, Business Combination, in conjunction with the Closing of the Business Combination, the Company pai d $ 41,925 in cash and a commitment to issue 6,921,814 sh ares of Class A Common Stock to settle related party notes payable principal amounts of $ 91,420 , net carrying amounts of $ 96,907 and accrued interest of $ 13,565 . Where the Company converted related party notes payable into Class A Common Stock, the Company recorded a loss at settlement of the related party notes payable of $ 26,164 in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021 due to converting the related party notes payable at $ 10.00 per share which was below the fair value of the stock on the date of conversion. (3) During 2016, Faraday & Future (HK) Limited (“F&F HK”) and Leview Mobile (HK) Ltd. (“Leview”) provided the Company with cash contributions for a total of $ 278,866 . F&F HK was previously controlled by the Company’s founder and former CEO and Leview is controlled by the Company’s founder and former CEO. On March 30, 2018, the cash funding was restructured via an agreement in the form of notes payable bearing an annual interest rate of 12.00 % and maturing on December 31, 2020. The notes payable are unsecured and there are no covenants associated with these notes payable. Faraday & Future (HK) Limited F&F HK provided an aggregate principal loan in the total sum of $ 212,007 to the Company as part of the agreement on March 30, 2018. On June 27, 2019, the Company entered into a note payable cancellation agreement for a portion of the note payable with F&F HK effective January 1, 2019 and simultaneously the note payable was assumed by a third-party lender. The agreement cancelled 123 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) $ 48,374 of principle and $ 5,805 of unpaid interest due to F&F HK. There was no loss or gain on the extinguishment of note payable due to the net carrying amount of the note payable extinguished being equivalent to the reacquisition price of the new note payable. Leview Mobile (HK) Ltd Leview provided an aggregate principal loan in the total sum of $ 66,859 to the Company as part of the agreement on March 30, 2018. Beijing Bairui Culture Media, Co. Ltd Between December 2017 and July 2018, the Company executed several notes payable agreements with Beijing Bairui Culture Media Co., Ltd. (“Bairui”) for total principal of $ 27,329 . Bairui was previously controlled by the Company’s founder and former CEO. Each note payable originally matured one year after its issuance. The notes payable originally bore interest of 0 % per annum. The notes payable were unsecured and there were no covenants associated with these notes payable. During the year ended December 31, 2019, Bairui forgave $ 2,487 of the outstanding notes payable. Due to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting in a notes payable discount and a capital contribution due to the related party nature of the arrangements. On January 1, 2020, the Company executed an amendment to consolidate the notes payable into one note for the same amount, extend the maturity date of this note payable to December 31, 2020, and increase the interest rate from 0 % to 12 %. Since the cash flows of the modified note payable exceeded the cash flows of the original notes payable by more than 10 %, the modification was accounted for as an extinguishment with a loss on extinguishment of $ 314 recorded in (Loss) Gain at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in Trust, Net in the Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2020. The net carrying value of the original note payable of $ 20,842 was replaced with a note payable with a fair value of $ 21,156 . Additionally, accretion of $ 657 and $ 2,586 was recorded in Interest Expense during the years ended December 31, 2021 and 2020, respectively, related to the unamortized discount. CYM Tech Holdings LLC On August 28, 2020, the related party notes payable with F&F HK, Leview, and Bairui were restructured to consolidate the lenders and extend the maturity date through June 30, 2021, transferring both the principal and accrued interest to the new lender, CYM Tech Holdings LLC, wholly-owned subsidiary of members of management. The related party notes payable that were restructured were the following: Before Restructuring Lender Principal Faraday & Future (HK) Limited $ 149,081 Leview Mobile (HK) Ltd 66,859 Beijing Bairui Culture Media, Co. Ltd 24,603 Total $ 240,543 After Restructuring Lender Principal CYM Tech Holdings LLC $ 240,543 The restructuring was accounted for as a troubled debt restructuring because the Company was experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured note payable exceed the net carrying value of the original notes payable due to the maturity date extension, the restructuring is accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss. The Company concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. On April 9, 2021, the Company executed agreements with CYM Tech Holdings LLC to convert their notes with principal amounts of $ 194,810 and accrued interest of $ 71,764 into the commitment to issue Class A Common Stock. Under the agreements, the notes ceased to accrue interest on March 31, 2021. On May 13, 2021, principal amounts of $ 90,869 and accrued interest of $ 43,490 were converted into shares of Legacy FF convertible preferred stock and on July 21, 2021, were converted into Class A Common Stock upon the closing of the Business Combination. 124 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) Prior to Closing of the Business Combination, the Company converted principal amounts of $ 130,479 and accrued interest of $ 29,958 into Class A Common Stock. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the remaining principal of $ 19,196 . As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 240,543 Accrued interest — 64,827 Interest expense 8,801 10,134 Principal settled with equity 240,543 — Interest settled with equity 73,448 — (4) In 2019, the Company borrowed $ 10,000 from Evergrande Health Industry Group Limited (“China Evergrande”). China Evergrande is an affiliate of a significant shareholder of the Company. The note payable matured on June 30, 2019. The note payable bore interest at an annual rate of 10.00 % if repaid through June 30, 2019 and increased to 15.00 % per annum thereafter. The note payable was unsecured and there were no covenants associated with this note payable. In conjunction with the Closing of the Business Combination, the Company paid cash to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 10,000 Accrued interest — 2,839 Interest expense 869 1,611 Principal payments in cash 10,000 — Interest payments in cash 3,708 — (5) The Company issued 10 % interest notes with various related parties through the Note Purchase Agreements (“NPA”). On April 29, 2019, the Company executed the NPA with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA was $ 200,000 . All obligations due under the NPA bore interest of 10 % per annum and are collateralized by a first lien, with second payment priority, on virtually all tangible and intangible assets of the Company. On October 9, 2020, the Company entered into the Second Amended Restated NPA (“Second A&R NPA”) with Birch Lake and the lenders which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified Special Purpose Acquisition Company Merger (“Qualified SPAC Merger”), (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default, as defined in the NPA, as amended. In May 2019, the Company executed a joinder agreement to the NPA with an employee for a convertible note payable with total principal of $ 1,650 . The note payable matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00 % premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for this note payable. See Note 8, Fair Value of Financial Instruments . The fair value of the note payable was $ 1,970 as of December 31, 2020. In July 2019, the Company executed a joinder agreement to the NPA with a company owned by an employee for a convertible note payable with total principal of $ 16,462 . The note payable originally matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the note payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00 % premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for this note payable. See Note 8, Fair Value of Financial Instruments . The fair value of the note payable was $ 19,657 as of December 31, 2020. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. 125 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 18,112 Accrued interest — 2,635 Interest expense 1,064 1,840 Principal and conversion premium settled with equity 3,622 — Interest settled with equity 3,638 — Principal payments in cash 18,112 — Interest payments in cash 62 62 In April 2019, the Company executed a joinder agreement to the NPA with a U.S. based investment firm for a convertible note payable with total principal of $ 8,581 . The convertible note payable originally matured on May 31, 2020. The interest rate, collateral, and covenants were the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20 % premium. The Company elected the fair value option for these notes payable. The note payable is collateralized by virtually all tangible and intangible assets of the Company. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 8,581 Accrued interest — 1,418 Interest expense 496 861 Principal conversion premium settled with equity 1,716 — Interest payments settled with equity 1,914 — Principal payments in cash 8,581 — In May 2019, the Company borrowed $ 900 through a note payable from a U.S. based investment firm under the NPA. The note payable originally matured on March 6, 2020 and bore interest of 10 % per annum. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 900 Accrued interest — 143 Interest expense 50 90 Principal conversion premium settled with equity 180 — Interest payments settled with equity 193 — Principal payments in cash 900 — (6) The Company issued the following notes with various related parties in China. In April 2017, the Company entered into a $ 728 note payable with an employee. The note originally matured on October 2, 2017 and bore interest at 0 % per year. The note had no covenants and was unsecured. Due to the note payable having an interest rate below market rates, the Company imputed interest upon executing the note payable resulting in a note payable discount and a capital contribution due to the related party nature of the arrangement. On September 25, 2020, the notes payable was modified to extend the maturity to June 30, 2021 and add a conversion feature to allow conversion of the note payable into a variable number of SPAC shares if a Qualified SPAC Merger occurs. Since the conversion feature is substantive as it is reasonably possible to be exercised, this modification was accounted for as an extinguishment. The conversion feature does not require bifurcation because it is clearly and closely related to the debt host since the conversion does not involve a substantial premium or discount. The modification agreement and the accounting conclusions are collectively referred to as 126 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) the September 2020 Modification. The Company recorded an immaterial gain on extinguishment and immaterial accretion of discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 766 Accrued interest — — Interest expense 55 72 Principal settled with equity 774 — Foreign exchange (gain) loss on principal 46 49 In February 2020, the Company borrowed $ 1,410 through a note payable from an employee. The note originally matured on August 14, 2020, bore interest at 8.99 % per annum, had no covenants and was unsecured. As a result of the September 2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of that discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 1,410 Accrued interest — 69 Interest expense 41 111 Principal settled with equity 1,410 — Interest settled with equity 44 — Interest payments in cash 63 42 Proceeds — 1,410 (7) In December 2020, the Company entered into two notes payable for a total of $ 424 . The notes payable did not have a stated maturity or bear interest. The notes had no covenants and were unsecured. In March 2021, the Company received a $ 200 bridge loan. The two notes payable totaling $ 424 and the $ 200 bridge loan were repaid in cash during the year ended December 31, 2021. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 424 Principal payments in cash 624 — Proceeds 200 424 (8) In November 2019 and December 2019, the Company executed three notes payable with an affiliated company for total principal of $ 4,160 . The notes payable originally matured on December 31, 2020 and bore interest at 6.99 %. As a result of the September 2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. 127 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 4,160 Accrued interest — 313 Interest expense 211 293 Principal settled with equity 4,160 — Interest settled with equity 474 — (9) Between January 2020 and August 2020, the Company executed nine notes payable with an affiliated company for a total of $ 8,422 . The notes payable matured on December 31, 2020 and bear interest at 8 %, besides one note for $ 500 which matured on June 30, 2020 and bore interest at 8 %. The notes had no covenants and were unsecured. As a result of the September 2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 6,452 Accrued interest — 435 Interest expense 321 435 Principal settled with equity 6,452 — Interest settled with equity 721 — Principal payments in cash — 1,969 Proceeds — 8,422 (10) The Company issued the following notes with a related party. In July 2017, the Company borrowed $ 22,400 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally matured on December 31, 2019, bore interest at 1.52 % per annum, had no covenants, and was unsecured. During 2017 and 2018, there were a total of $ 18,000 of principal payments. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 4,400 Accrued interest — 314 Interest expense 37 84 Principal settled with equity 4,400 — Interest settled with equity 351 — In December 2020, the Company borrowed an additional $ 2,240 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally matured on July 1, 2020, bore interest at 8.99 % per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. 128 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 2,240 Accrued interest — 202 Interest expense 111 185 Principal settled with equity 2,240 — Interest settled with equity 313 — In January 2020, the Company borrowed an additional $ 300 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally matured on June 30, 2020, bore interest at 8 % per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 300 Accrued interest — 23 Interest expense 13 23 Principal settled with equity 300 — Interest settled with equity 36 — Proceeds — 300 In October 2018, the Company borrowed $ 1,500 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally matured on December 31, 2019, bore interest at 2.86 % per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 1,500 Accrued interest — 95 Interest expense 24 43 Principal settled with equity 1,500 — Interest settled with equity 119 — As a result of the September 2020 Modification of notes with principal amounts of $ 4,400 , $ 2,240 , $ 300 , and $ 1,500 , the Company recorded an immaterial gain on extinguishment and immaterial accretion of debt discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. (11) The Company issued the following notes with a related party. In March 2019, the Company borrowed $ 1,500 through a note payable from a related party. The note originally matured on March 6, 2020, bore interest at 8.99 % per annum, had no covenants and was unsecured. Principal repayments of $ 1,000 were made in 2019 and $ 120 in 2020. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. 129 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 380 Accrued interest — 99 Interest expense 21 45 Principal settled with equity 380 — Interest settled with equity 118 — Principal payments in cash — 120 In June 2019, the Company borrowed $ 3,600 through a note payable from a related party, which was repaid in 2019. The note matured on July 5, 2019, bore interest at 2.99 % per annum, had no covenants and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Accrued interest — 4 Interest settled with equity 4 — In September 2019, the Company borrowed $ 180 through a note payable from a related party. The note originally matured December 1, 2019, bore interest at 6.99 % per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 180 Accrued interest — 10 Interest expense 8 6 Principal settled with equity 180 — Interest settled with equity 17 — In November 2019, the Company borrowed $ 2,700 through a note payable from a U.S. based investment firm. The note originally matured on June 3, 2020, bore interest at 6.99 % per annum, had no covenants, and was unsecured. Principal payments of $ 1,500 were made in 2020. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 1,200 Accrued interest — 192 Interest expense 55 171 Principal settled with equity 1,200 — Interest settled with equity 239 — Principal payments in cash — 1,500 Interest payments in cash — 5 As a result of the September 2020 Modification of the $ 380 notes, the $ 180 notes and the $ 1,200 notes, the Company recorded an immaterial gain on extinguishment and immaterial accretion of the debt discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. (12) The Company issued the following notes with a related party. During 2019, a U.S. corporation controlled by a related party of the Company made deposits of $ 11,635 with the Company as a right of first refusal to lease FF 91 vehicles. On February 1, 2020, due to production delays the Company entered into a deposit conversion 130 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 9. Related Party Notes Payable (cont.) agreement with this corporation to convert the deposit amounts previously paid into a note payable. Upon conversion, the Company reclassified the deposit recorded in other current liabilities as of December 31, 2019 to related party notes payable as of December 31, 2020. The note matured on December 31, 2020, bore interest at 8.0 % per annum, had no covenants, and was unsecured. As a result of the September 2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of debt discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 11,635 Accrued interest — 1,177 Interest expense 515 933 Principal settled with equity 11,635 — Interest settled with equity 1,692 — Assumed Related Party Notes Payable in the Business Combination As part of the Business Combination, the Company assumed related party promissory notes of $ 500 and related party convertible notes of $ 300 , which PSAC issued to certain related parties during 2021. The promissory note was non-interest bearing and due on the date on which the Company consummates a Business Combination and was unsecured . The convertible note was non-interest bearing and due on the date on which the Company consummates a Business Combination and was unsecured. The convertible related party notes were fair valued at $ 580 at the Closing Date. As part of the Closing of the Business Combination, the Company issued Class A Common Stock and 80,000 Private Warrants to settle related party notes of PSAC with an aggregate principal amount of $ 800 . Fair Value of Related Party Notes Payable Not Carried at Fair Value The estimated fair value of the Company’s related party notes payable not carried at fair value using inputs from Level 3 under the fair value hierarchy is $ 13,337 and $ 287,183 as of December 31, 2021 and 2020, respectively. Schedule of Principal Maturities of Related Party Notes Payable The future scheduled principal maturities of related party notes payable as of December 31, 2021 were as follows: Years ended December 31, Due on demand $ 13,655 131 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable Notes payable consists of the following as of December 31, 2021: December 31, 2021 Note Name Contractual Maturity Date Contractual Interest Rates Unpaid Balance Fair Value Measurement Adjustments Original issue discount and proceeds allocated to warrants Net Carrying Value March 1, 2021 Notes (1) March 1, 2022 14.00 % $ 55,000 $ 7,692 $ ( 5,997 ) $ 56,695 August 26, 2021 Notes (1) March 1, 2022 14.00 % 30,000 1,011 ( 87 ) 30,924 June 9, 2021 Note 1 and Note 2 (2) December 9, 2022 — % 40,000 8,503 ( 9,522 ) 38,981 August 10, 2021 Optional Notes (2) February 10, 2023 15.00 % 33,917 12,283 ( 11,518 ) 34,682 Notes payable - China various other (3) Due on demand — % 5,458 — — 5,458 Notes payable (4) April 17, 2022 1.00 % 193 — — 193 Auto loans Various Various 121 — — 121 $ 164,689 $ 29,489 $ ( 27,124 ) $ 167,054 Notes payable consists of the following as of December 31, 2020: December 31, 2020 Note Name Contractual Maturity Date Contractual Interest Rates Unpaid Balance Fair Value Measurement Adjustments Loss(Gain) on Extinguish-ments Net Carrying Value Note payable (5) Contingent 12.00 % $ 57,293 $ — $ — $ 57,293 Notes payable – NPA tranche (6) October 6, 2021 10.00 % 17,637 3,422 — 21,059 Notes payable (7) June 30, 2021 12.00 % 19,100 — — 19,100 Notes payable – China various other (8) Due on Demand 9.00 % 3,677 — ( 18 ) 3,659 Notes payable – China various other (8) Various Dates 2021 6.00 % 4,869 — ( 62 ) 4,807 Notes payable – China various other (3) Due on Demand — % 4,597 — — 4,597 Note payable (9) March 9, 2021 — % 15,000 2,712 — 17,712 Note payable (10) October 6, 2021 12.75 % 15,000 5,972 — 20,972 Notes payable (4) April 17, 2022 1.00 % 9,168 — — 9,168 $ 146,341 $ 12,106 $ ( 80 ) $ 158,367 (1) On March 1, 2021, the Company amended the NPA to permit the issuance of additional notes payable with principal amounts up to $ 85,000 . On the same day, the Company entered into notes payable agreements with Ares for an aggregate principal of $ 55,000 , receiving net proceeds of $ 51,510 , inclusive of a 4.00 % original issue discount and $ 90 of debt issuance costs paid directly by the lender. The notes payable are collateralized by a first lien on virtually all tangible and intangible assets of the Company and bear interest at 14 % per annum. The notes payable mature on March 1, 2022. In addition, in conjunction with the issuance of the notes payable, the Company committed to issue the Ares Warrants to the lender to purchase the Company’s Class A Common Stock no later than August 11, 2021, or if earlier, 15 days after consummation of the Business Combination. The warrants have a term of six years , be equal to 0.20 % of the fully diluted capitalization of FFIE’s Class A Common Stock and have an exercise price of $ 10.00 per share. The commitment to issue the warrants meets the definition of a derivative, was accounted for as a liability, and will be marked to fair value at the end of each reporting period with changes in fair market value recorded in the Consolidated Statements of Operations and Comprehensive Loss. The Company determined the commitment to issue warrants was a liability as of March 1, 2021, and estimated the fair value of the warrants to be $ 5,000 using the Black-Scholes option-pricing model (see Note 8, Fair Value of Financial Instruments ). On August 5, 2021, the Company issued Ares warrants to purchase 670,092 shares of Class A Common Stock at an exercise price of $ 10.00 per share. The warrants are exercisable at any time within 6 years of the issuance date. Upon their issuance, the warrants met 132 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) all requirements for equity classification under the equity scope exception in ASC 815-40 as the number of shares underlying the warrants and their exercise price were fixed. Accordingly, the Company determined the fair value of the Ares Warrants to be $ 2,507 on August 5, 2021 and recorded the value as a discount to the Notes Payable and an increase in APIC in the Consolidated Balance Sheets as of December 31, 2021. On August 26, 2021, the Compan y exercised its option under the March 1, 2021 notes payable agreement with Ares to draw an additional principal amount of $ 30,000 , receiving net proceeds of $ 29,913 , inclusive of $ 87 of deb t issuance costs paid directly by the lender. The notes payable are collateralized by a first lien on virtually all tangible and intangible assets of the Company and bear interest at 14 % per annum and mature on March 1, 2022. As the August 26, 2021 Notes mature in less than one year, according to the terms of the amended NPA, the Company expects to repay them with a payment premium of 14 % (“Payment Premium”). The Company has elected the fair value option to value the notes as the notes include features, such as a con tingently exercisable put option, which meet the definition of an embedded derivative. Upon the Closing of the Business Combination, the cash requirement prescribed in the NPA increased from $ 5,000 to $ 25,000 . The Company has classified $ 25,000 as Restricted Cash on its Consolidated Balance S heet as of December 31, 2021. On February 25, 2022, the Company paid $ 96,921 in cash to settle the March 1, 2021 Notes and the August 26, 2021 Notes with principal amount of $ 85,000 , accrued interest of $ 9,856 and Payment Premium of $ 2,065 . March 1, 2021 Notes As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 55,000 $ — Accrued interest 6,455 — Interest expense 6,455 — Original issue discount 3,490 — Proceeds 51,510 — August 26, 2021 Notes As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 30,000 $ — Accrued interest 1,473 — Interest expense 1,473 — Original issue discount 87 — Proceeds 29,913 — (2) On June 9, 2021, the Company amended the NPA to permit the issuance of two not es payable, each with a principal value of $ 20,000 (“June 2021 Notes”), to a US-based investment firm. The Company received net proceeds of $ 35,603 as part of the June 2021 Notes inclusive of $ 4,200 of original issuance discount and $ 197 of debt issuance costs paid by the lender. The June 2021 Notes are subordinate to the notes payable issued to Ares on March 1, 2021 and August 26, 2021 (see (1) above) and senior in priority to the notes payable issued under the NPA prior to September 9, 2020. The June 2021 Notes mature on December 9, 2022, and do not bear interest unless extended beyond its maturity date by the US-based investment firm, in which case, the June 2021 Notes will bear interest at 10 % per annum starting upon their original maturity. Each of the June 2021 Notes are subject to an original issue discount of 8 % and 13 %, respectively. One of the June 2021 Notes with a principal amount of $ 20,000 contains a conversion premium that, within a year of a Qualified SPAC Merger, the then outstanding principal and accrued interest of the notes playable plus a 30 % premium may convert into Class A Common Stock of the Company, at the election of the US-based investment firm. In conjunction with the issuance of the June 2021 Notes, the Company issued warrants to the US-based investment firm to purchase up to 1,500,000 shares of the Company’s Class A Common Stock for $ 10.00 per share and an expiration date of June 9, 2028, which were adjusted for down-round provisions in the original warrant agreements. The fair value of the warrants of $ 5,125 upon issuance was recorded in APIC (see Note 8, Fair Value of Financial Instruments ). As part of the amendment to the NPA from June 9, 2021, on or prior to the 12 -month anniversary of the Qualified SPAC Merger, the US-based investment firm has the option to purchase additional notes for up to $ 40,000 and if drawn, would be subject to similar original issue discounts, warrant provisions, and conversion premiums as the June 2021 Notes. The warrants issued with the June 2021 Notes and the Optional Notes, along with the notes previously issued to the same lender, are provided with anti-dilution protection. The US-based investment firm has not elected to convert the Optional Notes to Class A Common Stock and they are outstanding as of December 31, 2021. 133 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) On August 10, 2021, in accordance with the NPA, the US-based investment firm exercised its option to purchase optional notes (“Optional Notes”) with principal of $ 33,917 , whose option was in conjunction with the original September 9, 2020, January 13, 2021 and March 12, 2021 notes payable. The Company received net proceeds of $ 30,375 , which is the total principal amount of $ 33,917 net of 8 % original issue discount and $ 828 of issuance costs. The Optional Notes bear interest at 15 % beginning December 2021, and have a maturity date of February 10, 2023. The Optional Notes are convertible at the option of the holder with a conversion price of $ 10.00 per share. The Optional Notes contain a conversion premium, effective until August 10, 2022, according to which the outstanding principal and accrued interest of the notes payable at the time of liquidation plus a 30 % premium are convertible into shares of Class A Common Stock. The Company elected the fair value option to measure the Optional Notes (see Note 8, Fair Value of Financial Instruments ). In conjunction with the issuance of the Optional Notes, the Company issued the US-based investment firm warrants to purchase up to 1,187,083 shares of Class A Common Stock with an exercise price of $ 10.00 per share. The warrants are exercisable within seven years of their original issuance dates. The fair value of the warrants of $ 7,976 upon issuance was recorded in APIC (see Note 8, Fair Value of Financial Instruments ). Subsequent to the balance sheet date, in January 2022, the Company defaulted on the June 2021 Notes and the Optional Notes. The holders of the Optional Notes have waived the default. June 9, 2021 Note 1 As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 20,000 $ — Original issue discount and debt issuance costs 1,797 — Proceeds 18,203 — June 9, 2021 Note 2 As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 20,000 $ — Original issue discount and debt issuance costs 2,600 — Proceeds 17,400 — August 10, 2021 Optional Notes As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 33,917 $ — Accrued interest 183 — Interest expense 183 — Original issue discount and debt issuance costs 3,542 — Proceeds 30,375 — (3) The Company issued notes with various third parties through its operations in China. In 2017 and 2018, the Company borrowed $ 4,371 through notes payable from various Chinese lenders. As a result of the September 2020 Modification of the notes payable, the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In 2019, the Company entered into a $ 700 note payable with an employee. The Company reclassified the $ 730 carrying value of this loan from related party notes payable to notes payable when the employee left the employment of the Company. The notes payable are payable on demand by the lenders, do not have a stated interest rate, have no covenants, and are unsecured. The notes payable remain outstanding at December 31, 2021. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 5,458 $ 4,597 Foreign exchange (gain) loss on principal 133 297 Reclassification from related party notes payable 730 — (4) On April 17, 2020, the Company received loan proceeds from East West Bank of $ 9,168 under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and provided for 134 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) loans to qualifying businesses. The loans and accrued interest are forgivable so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent, and utilities, as described in the CARES Act. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1 %, with a deferral of payments for the later of the first six months or when the amount of the loan forgiveness is determined. The Company used the proceeds for purposes consistent with the PPP requirements. The note matured on April 17, 2022, had no covenants, and was unsecured. The Company was notified by East West Bank that a principal amount of $ 8,975 as well as accrued interest of $ 155 relating to the PPP Loan had been forgiven by the Small Business Administration as of December 31, 2021. The Company recorded the forgiveness of the principal and interest in (Loss) Gain at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in trust, net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. The Company paid the remaining principal and accrued interest in an aggregate amount of $ 195 in April 2022. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ 193 $ 9,168 Accrued interest 2 65 Interest expense 92 65 Payroll Protection Program principal forgiveness 8,975 — Payroll Protection Program interest forgiveness 155 — Proceeds — 9,168 The Company settled select notes payable through the conversion of notes payable into Class A Common Stock just prior to the Business Combination and a combination of cash payments and the commitment to issue Class A Common Stock in settlement of outstanding principal plus accrued interest and conversion premiums pursuant to the Closing of the Business Combination, as follows: Year ending December 31, 2021 Note Name Net Carrying Value at 12/31/2020 Borrowings, net of OID Fair Value Measurement Adjustments Accrued Interest at Settlement FX and Other Cash Payment Equity Settlement Net Carrying Value at 12/31/2021 Loss (Gain) at Settlement Settlement prior to the Business Combination: Note payable (5) $ 57,293 $ — $ — $ 17,177 $ ( 1,293 ) $ — $ ( 73,177 ) $ — $ — Notes payable (7) 19,100 — — 6,098 — — ( 25,198 ) — — Subtotal settlements prior to the Business Combination 76,393 — — 23,275 ( 1,293 ) — ( 98,375 ) — — Settlements in the Business Combination: Notes payable – NPA (6) 21,059 — 104 3,614 — ( 17,636 ) ( 7,141 ) — 2,699 Notes payable – China (8) 3,659 — — 2,713 56 — ( 6,428 ) — 2,430 Notes payable – China (8) 4,807 — — 757 110 — ( 5,674 ) — 2,145 Note payable (9) 17,712 — 1,988 — 667 — ( 20,367 ) — 7,698 January 13 and March 12, 2021 Notes (9) — 16,790 6,935 — — — ( 23,725 ) — 8,968 Note payable (10) 20,972 — 138 270 667 ( 18,992 ) ( 3,055 ) — 1,155 January 13 and March 8, 2021 Notes (10) — 8,750 4,901 82 — ( 11,582 ) ( 2,151 ) — 813 Subtotal settlements in the Business Combination 68,209 25,540 14,066 7,436 1,500 ( 48,210 ) ( 68,541 ) — 25,908 Notes payable (4) 9,168 — — — ( 8,975 ) — — 193 ( 8,975 ) Total $ 153,770 $ 25,540 $ 14,066 $ 30,711 $ ( 8,768 ) $ ( 48,210 ) $ ( 166,916 ) $ 193 $ 16,933 Conversion of Notes Payable Just prior to the Business Combination, the Company converted notes payable with an aggregate principal balance of $ 75,100 and accrued interest of $ 23,275 into 7,688,153 shares of Class A Common Stock. 135 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) Closing of the Business Combination As described in Note 3, Business Combination , in conjunction with the closing of the Business Combination, the Company paid $ 48,210 in cash and a commitment to issue 6,854,013 shares of Class A Common Stock to settle notes payable principal amounts of $ 85,202 , net carrying amount of $ 93,749 , and accrued interest of $ 7,436 . Where the Company converted notes payable into Class A Common Stock, the Company recorded a loss at settlement of the notes payable of $ 25,908 in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. (5) In January 2019, upon extinguishment of a portion of the Faraday and Future (HK) Limited related party notes payable, the Company borrowed $ 54,179 through notes payable from a Chinese lender. The notes payable originally matured on December 31, 2020, bore interest of 12.00 % per annum, had no covenants, and were unsecured. On December 31, 2020, the notes payable were modified to extend the maturity date to June 30, 2021 and add a conversion feature. The conversion feature, which was contingent upon the closing of a Qualified SPAC Merger, requires the Company to issue Class A ordinary shares to the lender based on a fixed conversion ratios immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding note payable before being exchanged for Qualified SPAC Merger shares at the closing date. The modification was accounted for as a troubled debt restructuring because the Company was experiencing financial difficulty and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring. Since the future undiscounted cash flows of the restructured notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss. The Company concluded that the conversion feature does not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 57,293 Accrued interest — 13,769 Interest expense 3,408 7,387 Foreign exchange (gain) loss on principal ( 1,293 ) 4,108 Principal settled with equity 56,000 — Interest settled with equity 17,177 — (6) The Company issued 10 % interest notes with various third parties through the NPA. Notes payable issued under the NPA are collateralized by virtually all tangible and intangible assets of the Company. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the notes payable may elect to convert all of the outstanding principal and accrued interest of the notes payable plus a 20 % premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value option for these notes payable. See Note 8, Fair Value of Financial Instruments . On October 9, 2020, the Company entered into the Second A&R NPA with Birch Lake and the lender, which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default, as defined in the NPA, as amended. Between June 2019 and August 2019, the Company borrowed $ 17,637 through notes payable under the NPA. The notes originally matured on May 31, 2020 and bore interest of 10 % per annum. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the notes payable. 136 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 17,637 Accrued interest — 2,637 Interest expense 976 1,768 Principal conversion premium settled with equity 3,527 — Interest settled with equity 3,613 — Principal payments in cash 17,637 — (7) The Company issued the following notes with an interest rate of 12.00 % per annum. On various dates in 2016, the Company borrowed amounts aggregating of $ 31,500 through notes payable issued by a U.S. based investment firm. The notes had no covenants and were unsecured. In September and November, 2020, the notes payable were modified to extend the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger, required the Company to issue Class A ordinary Stock to the lender based on a fixed conversion ratio immediately prior to the closing of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the Qualified SPAC Merger closing date. The modification was accounted for as a troubled debt restructuring. The modification was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss. The Company concluded that the conversion features did not require bifurcation. In December 2016, the Company borrowed $ 10,000 through notes payable issued by a U.S. based investment firm. The notes have no covenants and are unsecured. During 2019, the Company converted $ 600 of accrued interest into the principal balance of the notes payable. Just prior to the Business Combination, the Company converted the outstanding principal balance and accrued interest into Class A Common Stock to settle the note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 10,600 Accrued interest — 2,547 Interest expense 704 1,275 Principal settled with equity 10,600 — Interest settled with equity 3,251 — In December 2016, the Company borrowed $ 1,500 through a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, had no covenants, and was unsecured. Just prior to the Business Combination, the Company converted the outstanding principal balance and accrued interest into Class A Common Stock to settle the note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 1,500 Accrued interest — 587 Interest expense 112 203 Principal settled with equity 1,500 — Interest settled with equity 699 — In June 2016, the Company borrowed $ 20,000 through a note payable from a U.S. based investment firm. The note originally matured on October 15, 2019, had no covenants, and was unsecured. The Company made principal payments of $ 13,000 in 2018. Just prior to the Business Combination, the Company converted the outstanding principal balance, conversion premium and accrued interest into Class A Common Stock to settle the note payable. 137 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 7,000 Accrued interest — 1,682 Interest expense 465 842 Principal and conversion premium settled with equity 10,375 — Interest settled with equity 2,147 — (8) The Company issued notes with various third parties through its operations in China. As a result of the September 2020 Modification the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020. In April 2017, the Company borrowed $ 3,496 through a note payable from a Chinese lender. The note originally matured on October 20, 2017, bore interest at 9.00 % per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 3,677 Accrued interest — 2,314 Interest expense 374 637 Principal settled with equity 3,715 — Interest settled with equity 2,713 — Foreign exchange (gain) loss on principal 219 237 Foreign exchange (gain) loss on accrued interest 167 142 Between January 2019 and December 2019, the Company borrowed $ 11,515 through notes payable from a Chinese lender. The notes payable matured on January 16, 2020 and December 6, 2020, bore interest at 6 % per annum, had no covenants, and were unsecured. During 2019, the Company made principal payments of $ 8,155 . In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the notes payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 4,140 Accrued interest — 569 Interest expense 139 235 Principal settled with equity 4,181 — Interest settled with equity 713 — Foreign exchange (gain) loss on principal 260 219 Foreign exchange (gain) loss on accrued interest 44 35 Proceeds — 766 Between June and September 2020, the Company borrowed $ 761 through notes payable from a Chinese lender. The notes payable were payable on demand by the lender, bore interest at 6 % per annum, had no covenants, and were unsecured. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable. 138 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 729 Accrued interest — 19 Interest expense 24 19 Principal settled with equity 736 — Interest settled with equity 44 — Principal payments — 32 Foreign exchange (gain) loss on principal ( 25 ) — Foreign exchange (gain) loss on accrued interest 1 — Proceeds — 761 (9) On September 9, 2020, the Company issued $ 15,000 of secured convertible promissory notes to a US-based investment firm by entering into a joinder to the NPA, received net proceeds of $ 13,800 , inclusive of an 8 % original issue discount. The senior convertible promissory notes bore interest at 0 %. The NPA notes mature on the earliest of (i) March 9, 2022, (ii) the Vendor Trust maturity date (See Note 11, Vendor Payables in Trust ), as amended, (iii) the maturity of any First Out NPA Notes, which include the notes with Birch Lake and FF Ventures (“First Out Notes”), or (iv) the acceleration of the NPA notes payable pursuant to an event of default. In the event the Company consummates a Qualified SPAC Merger, an amount equal to 130 % of all outstanding principal, accrued and unpaid interest, and accrued original issue discount through the date of consummation of the Qualified SPAC Merger will automatically convert into Class A ordinary stock of the SPAC in connection with the Qualified SPAC Merger and the notes payable and interest thereon shall no longer be outstanding and shall be deemed satisfied in full and terminated. The Company determined that the feature to settle the notes payable with shares upon the occurrence of a Qualified SPAC Merger was a contingent share-settled redemption option and represents an embedded derivative. Additionally, the feature to redeem the notes payable upon a default event is a contingently exercisable put option and represents an embedded derivative. The Company elected the fair value option for this note payable. See Note 8, Fair Value of Financial Instruments . The fair value of the note payable was $ 17,712 as of December 31, 2020. In addition, the notes payable included a warrant to purchase ordinary stock. The holder of the warrant has the ability to exercise their right to acquire up to 525,000 shares of Class A Common Stock, as adjusted for certain down-round provisions, for a period of up to seven years , or September 9, 2027. The exercise price of the warrant is $ 10.00 each. The warrants are accounted for in equity based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity. The Company estimated the fair value of the warrants to be $ 490 using the Black-Scholes option-pricing model (see Note 8, Fair Value of Financial Instruments) . Determining the fair value of these warrants requires subjective assumptions, including the fair value of the underlying stock, risk-free interest rate, expected volatility of the underlying stock, and the expected dividend yield. These estimates involve inherent uncertainties and the application of management’s judgment. On January 13, 2021, the Company amended the NPA to increase the principal amount of its $ 15,000 note payable by $ 667 as a consent fee permitting the issuance of additional notes payable. The Company recorded the consent fee in Interest Expense in the Consolidated Statements of Operations and Comprehensive Loss for year ended December 31, 2021. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 15,000 Principal and conversion premium settled with equity 20,367 — Proceeds — 13,800 On January 13, 2021, the Company entered into a notes payable agreement under the NPA, (“January 13 Notes”) with a US-based investment firm for total principal of $ 11,250 , receiving net proceeds of $ 9,870 , net of an 8 % original issue discount and $ 480 of debt issuance costs paid directly by the lender. The note payable is collateralized by a first lien on virtually all tangible and intangible assets of the Company and bears interest at 0 % per annum. On March 12, 2021, the Company and the US-based investment firm entered into a notes payable agreement (“March 12 Notes”) for an aggregate principal amount of $ 7,000 , receiving net proceeds of $ 6,440 , net of an 8 % original issue discount. The terms of this note payable were the same as the note payable issued on January 13, 2021. The 139 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) Company elected the fair value option for these note payable because the inclusion of a conversion feature that allowed the lenders to convert the notes payable into Class A Common Stock after the closing of the Business Combination. In conjunction with the issuance of the January 13 Notes and March 12 Notes, the Company issued warrants to purchase 662,083 shares of the Class A Common Stock with an exercise price of $ 10.00 per share, as adjusted for certain down-round provisions. The warrants were issued with a term of seven years . The Company recorded the fair value of the warrants in APIC in accordance with the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own stock. The Company estimated the fair value of the warrants to be $ 1,988 using the Black-Scholes option-pricing model (see Note 8, Fair Value of Financial Instruments ). In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable. January 13 and March 12, 2021 Notes As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ — Original issue discount and debt issuance costs 1,940 — Principal and conversion premium settled with equity 23,725 — Proceeds 16,310 — (10) On October 9, 2020, the Company entered into a Second A&R NPA with Birch Lake borrowing $ 15,000 in secured convertible notes payable (“BL Notes”). The BL Notes accrued interest at 12.75 % per annum through January 31, 2021 and at 15.75 % per annum thereafter. The BL Notes mature on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations pursuant to an event of default. Additionally, the BL Notes contain a liquidation premium that ranges from 35 % to 45 % depending on the timing of settlement with 50 % of this premium convertible into equity and the lender is able to demand repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option for this note payable. See Note 8, Fair Value of Financial Instruments . The fair value of the note payable was $ 20,972 as of December 31, 2020. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the notes payable. As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ 15,000 Interest expense 1,334 366 Principal conversion premium settled with equity 2,785 — Interest and adjustment fee settled with equity 270 — Principal and conversion premium payments in cash 18,992 — Interest payments in cash 1,197 366 Proceeds — 15,000 On January 13, 2021, the Company amended the NPA to permit the issuance of additional secured convertible notes payable and issued $ 3,750 of notes payable to Birch Lake (“BL Notes”), receiving net proceeds of $ 3,285 , net of a 6.50 % original issue discount and $ 225 of debt issuance costs paid directly by the lender. The BL Notes accrued interest at 8 % per annum. The BL Notes contained a liquidation premium that ranges from 35 % to 45 % depending on the timing of settlement, with 50 % of this premium convertible into equity. The Company determined that the feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger was a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option to measure this note payable (see Note 8, Fair Value of Financial Instruments ). On March 8, 2021, the Company entered into a notes payable agreement under the NPA with Birch Lake for total principal of $ 5,600 , receiving net proceeds of $ 5,240 , inclusive of a 6.50 % original issue discount and $ 307 of debt issuance costs paid directly by the lender. The notes payable accrued interest at 15.75 % per annum. The notes payable contained a liquidation premium that ranges from 42 % to 52 % depending on timing of settlement, with 50 % of the premium convertible into equity. The Company determined that the feature to settle the notes payable at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger was a contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option to measure these notes payable (see Note 8, Fair Value of Financial Instruments ). 140 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 10. Notes Payable (cont) In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the notes payable. January 13 and March 8, 2021 Notes As of and for the Year Ended December 31, 2021 2020 Outstanding principal $ — $ — Original issue discount and debt issuance costs 1,132 — Interest expense 632 — Principal conversion premium settled with equity 2,069 — Interest settled with equity 82 — Principal and conversion premium payments in cash 11,582 — Interest payments in cash 550 — Proceeds 8,218 — Fair Value of Notes Payable Not Carried at Fair Value The estimated fair value of the Company’s notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, was $ 5,350 and $ 105,610 as of December 31, 2021 and 2020, respectively. Schedule of Principal Maturities of Notes Payable The future scheduled principal maturities of notes payable as of December 31, 2021 are as follows: Years ended December 31, 2022 130,772 2023 33,917 $ 164,689 11. Vendor Payables in Trust On April 29, 2019, Legacy FF established the Faraday Vendor Trust (“Vendor Trust”), with the intention to stabilize its supplier base by providing suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the trust interests was governed by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment Agreement”). All interests in the Vendor Trust were collateralized by a first lien, with third payment priority, in agreement with applicable intercreditor arrangements, on virtually all tangible and intangible assets of Legacy FF. The applicable interest rate for the vendor trust principal balance was 6.00 %, calculated daily from the date of contribution and was non-compounding. Management determined that the economic substance of the obligations under the Vendor Trust was an in-substance financing. A total of $ 0 and $ 111,574 of Legacy FF’s trade payables have been included in the Vendor Trust with accrued interest of $ 0 and $ 11,840 as of December 31, 2021 and 2020, respectively. During the year ended December 31, 2020, the Company made aggregate payments of $ 4,500 on the Vendor Trust. The Vendor Trust also included approximately $ 8,380 of purchase orders as of the Closing Date related to goods and services yet to be received (“Future Work”). These vendors did not contribute any receivables into the Vendor Trust related to the Future Work, as the goods and services are to be received at a future date. As such, the Company may cancel the vendor’s interest in the Vendor Trust related to these purchase orders until such time that the vendors begin to fulfil the requested goods and services. On October 30, 2020, the agreement governing the Vendor Trust (the “Vendor Trust Agreement”) was modified to add a conversion feature to allow the secured interests in the Vendor Trust to convert into PSAC shares if a Qualified SPAC Merger (as defined in the Vendor Trust Agreement) occurs. Management accounted for this modification as an extinguishment because the conversion feature was considered substantive, as the conversion feature was considered to be reasonably possible to be exercised. The conversion feature did not require bifurcation because it is clearly and closely related to the host instrument, since the conversion did not involve a substantial premium or discount. As a result, the Company recorded a discount of $ 1,812 against the carrying value of the Vendor Payables in Trust. The Company recorded accretion of $ 1,350 and $ 462 in Interest 141 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 11. Vendor Payables in Trust (cont) Expense during the years ended December 31, 2021 and 2020, respectively, related to the discount created from the gain on extinguishment in the Consolidated Statements of Operations and Comprehensive Loss. These adjustments resulted in the Vendor Trust having a net carrying value of $ 110,224 as of December 31, 2020. On March 1, 2021, the maturity date of the secured trust interests in the Vendor Trust was extended to the Closing of the Business Combination. Termination of Interests in the Vendor Trust On June 4, 2021, the Company entered into an agreement with a vendor with an interest in the Vendor Trust for future services. The Company and the vendor agreed to forgive $ 14,166 relating to a portion of the total Future Work outstanding instead of converting these interests to equity upon the close of the Business Combination. In addition, it was agreed to terminate and forgive $ 1,901 of the vendor’s interest for work performed, resulting in a gain of $ 1,731 . On June 7, 2021, the Company entered into agreements with two vendors a nd settled in cash part of their interest in the Vendor Trust totaling $ 5,367 . The vendors’ remaining interests were settled along with the outstanding interests in the Vendor Trust as part of the close of the Business Combination. On July 12, 2021, the Company entered into an agreement with a vendor to cancel the vendor’s interests in the Vendor Trust totaling $ 1,167 and instead transferring them to accounts payable to be repaid in cash as part of the ordinary course of business. At the Closing Date of the Business Combination, the Company settled the outstanding payables in the Vendor Trust and accrued interest, by paying $ 22,355 in cash and the commitment to issue 9,618,542 shares of Class A Common Stock. The Company recorded a loss at settlement of the Vendor Trust, and accrued interest thereon, of $ 41,776 in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021 due to the payment of an exit fee of $ 2,250 , as required by the Vendor Trust Agreement, and converting the beneficial interests in the Vendor Trust at $ 10.00 per share which was below the fair value of the stock on the date of conversion. The Company committed to issue 838,040 shares of Class A Common Stock to settle Future Work, which were recorded as deposits in the amount of $ 8,380 as of the Closing Date of the Business Combination. Through the payments and issuances of shares for outstanding payables, accrued interest and Future Work, the Company settled the outstanding interests in the Vendor Trust and no amount remains outstanding as of December 31, 2021. 12. Commitments and Contingencies Purchase obligations Purchase obligations represent legally binding commitments to purchase inventory, tooling, machinery and equipment as well as items to be used in research and development activities. Although open purchase orders are generally considered enforceable and legally binding, some of the Company’s purchase orders give the Company the option to cancel, reschedule and/or adjust its requirements based on its business needs prior to the delivery of goods or performance of services and to inspect and reject products, for example, if they do not comply with its specifications. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year . As of December 31, 2021, the Company had binding purchase obligations and other commitments of $ 388,672 . The Palantir License In July 2021, the Company and Palantir entered into a master agreement that sets forth the terms of the Palantir’s platform hosting arrangement which is expected to be used as a central operating system for data and analytics. Subsequent to entering into this arrangement, Palantir invested $ 25,000 in the Company through the PIPE Financing and became a shareholder of the Company. Under the platform hosting agreement, the Company committed to pay a total of $ 47,000 of hosting fees over a six-year term, $ 5,333 of which was paid during the year ended December 31, 2021. The software is cloud hosted for the entirety of the subscription term and the Company cannot take possession of the software. Accordingly, the 142 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 12. Commitments and Contingencies (cont) Company determined that the subscription agreement represents a hosting arrangement that is a service contract. The Company amortizes the hosting costs on a straight-line basis over the agreement term. Facility Leases The Company’s lease agreements include leasehold improvement incentives as well as escalation clauses. The Company records rent expense on a straight-line basis over the lease term. The Company has several noncancelable operating leases, primarily for office space, with various expiration dates through April 2027. These leases generally contain renewal options for periods ranging from three to five years and require the Company to pay all executory costs such as maintenance and insurance. The Company recorded rent expense of $ 2,665 and $ 2,452 for the years ended December 31, 2021 and 2020, respectively. The minimum aggregate future obligations under noncancelable operating leases as of December 31, 2021 were as follows: Year ended December 31, 2022 $ 2,384 2023 2,695 2024 2,775 2025 2,859 2026 2,944 Thereafter 991 $ 14,648 The Company has three capital leases, one in Hanford, California for its main production facility, and two equipment leases. The minimum aggregate future minimum lease payments under capital leases as of December 31, 2021 were as follows: Years ended December 31, 2022 $ 2,574 2023 2,166 2024 1,757 2025 1,792 2026 1,840 Thereafter 1,864 $ 11,993 Legal Matters The Company is, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, the outcome of any such claims and disputes cannot be predicted with certainty. On December 23, 2021, a putative class action lawsuit alleging violations of the Securities Exchange Act of 1934 was filed in the United States District Court, Central District of California, against the Company and its current Chief Executive Officer, its current Chief Financial Officer, its current Chief Product and User Ecosystem Officer, as well as the CFO of Legacy FF, and the Co-CEOs of PSAC. On March 7, 2022, the court appointed co-lead plaintiffs and Co-Lead Counsel. Co-lead Plaintiffs filed an amended complaint on May 6, 2022. Defendants’ currently scheduled deadline to respond to the amended complaint is July 5, 2022. Thereafter, the defendants will have the opportunity to answer or file a motion to dismiss the lawsuit. 143 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 12. Commitments and Contingencies (cont) The Company believes the suit is without merit and therefore intends to vigorously defend the suit. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claims. On March 8 and March 21, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims were filed in the United States District Court, Central District of California. Additionally, on April 11 and 25, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims were filed in the United States District Court, District of Delaware. These lawsuits purport to assert claims on behalf of the Company against numerous current and former officers and directors of the Company. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claims. As of December 31, 2021 and 2020, the Company had accrued contingent liabilities of $ 16,881 related to six legal matters and $ 6,025 related to four legal matters, respectively, for potential financial exposure primarily related to breach of contracts and employment matters which are deemed both probable of loss and reasonably estimable. As of December 31, 2021 and 2020, contingent liabilities of $ 16,881 and $ 5,025 , respectively, were recorded in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets. As of December 31, 2020, non-current contingent liabilities of $ 1,000 were recorded in Other Liabilities, Less Current Portion on the Company’s Consolidated Balance Sheets. In July 2021, the Company settled a legal matter with a former employee for $ 2,850 in cash and issued stock options to purchase 847,800 shares of Class A Common Stock at an exercise price of $ 2.55 per share (“Settlement Options”) and a grant date fair value of $ 8,459 . The Settlement Options vested 21 days after the Closing Date of the Business Combination. As part of the settlement agreement, no party admitted or acknowledged the existence of any liability or wrongdoing and all claims, including damages, were voluntarily dismissed. The Company accrued $ 5,000 related to this matter as of December 31, 2020 and upon reaching the settlement in June 2021, recorded an incremental loss of $ 6,309 in general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021. During year ended December 31, 2021, the Company recorded: (i) $ 7,584 related to an outstanding legal dispute for breach of a loan contract with the plaintiff seeking damages; (ii) $ 5,400 related to a legal dispute for breach of lease under which the Company was named a co-defendant in a civil action case with the plaintiff seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes related to the lease, which was settled in January 2022, pursuant to which the Company agreed to pay $ 1,800 in cash in January 2022 and an additional $ 3,400 plus 5 % interest in October 2022; (iii) $ 1,672 related to an outstanding legal dispute for breach of service contract with the plaintiff seeking damages including late payments; and (iv) $ 1,200 related to an outstanding legal dispute for software infringement. During the year ended December 31, 2020, the Company settled $ 2,500 of legal claims in cash. In addition, during the year ended December 31, 2020, the Company resolved a legal matter associated with a United States Department of Labor investigation without any additional fines or penalties, resulting in the reversal of accrued expenses of $ 2,255 , which was recorded in general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2020. During the year ended December 31, 2020, the Company received a judicial decision relating to a dispute for unpaid vendor payments. The judicial decision obligated the Company to pay $ 6,082 to certain vendors. The Company recorded $ 6,082 in general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2020 and recorded in accrued expenses and other current liabilities on the Consolidated Balance Sheet as of December 31, 2020. 144 Table of Contents FF Intelligent Mobility Global Holdings Ltd. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 13. Stockholders’ Equity (Deficit) The number of authorized, issued and outstanding stock, as recast, were as follows: December 31, 2021 Authorized Shares Shares Issued Shares to be Issued Total Issued and to be Issued Shares Preferred Stock 10,000,000 — — — Class A Common Stock 750,000,000 168,693,323 89,152,130 257,845,453 Class B Common Stock 75,000,000 — 64,000,588 64,000,588 835,000,000 168,693,323 153,152,718 321,846,041 December 31, 2020 Authorized Shares Issued Shares Shares to be Issued Total Issued and to be Issued Shares Preferred Stock, as recast 10,000,000 — — — Class A Common Stock, as recast 750,000,000 93,099,596 — 93,099,596 Class B Common Stock, as recast 75,000,000 64,000,588 — 64,000,588 835,000,000 157,100,184 — 157,100,184 Commitment to Issue Class A and Class B Common Stock Former stockholders and noteholders of Legacy FF are required to submit a signed company share letter of transmittal or converting debt letter of transmittal along with a lock-up agreement to the Company’s transfer agent in order for shares of the Company to be issued in their name in exchange for their shares in, notes from, vendor trust or other supplier agreements with Legacy FF. As of December 31, 2021, the Company’s transfer agent has issued 168,693,323 legally outstanding shares. Until the holder of the right to receive shares of the Company’s Class A Common Stock is issued shares, that holder does not have any of the rights of a stockholder. Since December 31, 2021 and through the issuance of these Consolidated Financial Statements, the Company issued 68,742,020 shares of Class A Common Stock and 64,000,588 shares of Class B Common Stock related to the commitment to issue shares. Amendment to the Company’s Certificate of Incorporation On the Closing Date of the Business Combination, the Company’s shareholders adopted the Company’s Second Amended and Restated Certificate of Incorporation. The amendment set forth the rights, privileges, and preferences of the Company’s Class A Common Stock and Class B Common Stock ( collectively “Common Stock”). The amendment authorizes the issuance of 10,000,000 shares of Preferred Stock with such designations, rights and preferences as may be determined from time to time by the Company’s Board of Directors. The Company’s Board of Directors are empowered, without stockholder approval, to issue the Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock; provided that any issuance of Preferred Stock with more than one vote per share will require the prior approval of the holders of a majority of the outstanding shares of Class B Common Stock. Voting The holders of Class A Common Stock and Class B Common Stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders until the occurrence of a Qualifying Equity Market Capitalization, following which holders of Class B Common Stock shall be entitled to ten votes per share and shall continue to be entitled to ten votes per share regardless of whether the Qualifying Equity Market Capitalization shall continue to exist or not thereafter. 145 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 13. Stockholder’s Equity (Deficit) (cont) A “Qualifying Equity Market Capitalization” is defined as at the end of any 20 consecutive trading days, the Company has a volume weighted average total equity market capitalization of at least $ 20,000,000 as determined by multiplying the average closing sale price per share of Class A Common Stock on the NASDAQ at the time of determination by the then total number of issued shares of Class A Common Stock, Class B Common Stock and other shares of the Company. Conversion Shares of Class B Common Stock have the right to convert into shares of Class A Common Stock at any time at the rate of one share of Class A Common Stock for each share of Class B Common Stock. Class A Common Stock does not have the right to convert into Class B Common Stock. Liquidation In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of the shares of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. Conversion of Related Party Notes Payable and Notes Payable Prior to the Business Combination On May 13, 2021, related party notes payable with aggregate principal amounts of $ 90,869 and accrued interest of $ 43,490 were converted into shares of Legacy FF convertible preferred stock and on July 21, 2021, the convertible preferred stock was converted into a commitment to issue 10,888,580 shares of Class A Common Stock upon the Closing of the Business Combination. Prior to the Business Combination, the Company converted: (i) related party notes payable with a principal amount of $ 130,479 and accrued interest of $ 29,958 into the commitment to issue 11,566,196 shares of Class A Common Stock; and (ii) notes payable with a principal balance of $ 75,100 and accrued interest o f $ 23,275 into the commitment to issue 7,823,306 shares of Class A Common Stock. Conversion of Liabilities as Part of the Business Combination In conjunction with the closing of the Business Combination, the Company paid $ 139,557 in cash and committed to issue 24,464,994 shares of Class A Common Stock to settle liabilities of the Company and to compensate active and former employees, as further described in Note 3, Business Combination. Conversion of Class B Preferred Stock During 2020, 20,779,412 shares of the Legacy FF’s Class B Preferred Stock automatically converted into 20,779,412 shares of the Company’s Class A Common Stock at a conversion rate of one for one. Automatic conversion was triggered due to the transfer of the Class B Preferred Stock to another party under certain permitted circumstances and in accordance with the Company’s certificate of incorporation effective at that time. Warrants The number of outstanding warrants to purchase the Company’s Class A Common Stock as of December 31, 2021 were as follows: Number of Warrants Exercise Price Expiration Date Public Warrants 22,977,568 $ 11.50 July 21, 2026 Private Warrants (1) 674,551 $ 11.50 July 21, 2026 Other warrants 4,544,258 $ 10.00 Various through August 10, 2028 Total 28,196,377 146 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 13. Stockholder’s Equity (Deficit) (cont) (1) The Private Warrants are recorded in Other Liabilities, less Current Portion in the Consolidated Balance Sheet as of December 31, 2021. 14. Stock-Based Compensation 2021 SI Plan In July 2021, the Company adopted the 2021 Stock Incentive Plan (“2021 SI Plan”). The 2021 SI Plan allows the Board of Directors to grant up to 49,573,570 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other stock-based awards for the Company’s Class A Common Stock to employees, directors, and non-employees. The number of shares of Class A Common Stock available under the 2021 SI Plan will increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2022, and continuing until (and including) the calendar year ending December 31, 2031. Annual increases are equal to the lesser of (i) 5 percent of the number of shares of Class A Common Stock issued and outstanding on December 31 of the immediately preceding fiscal year and (ii) an amount determined by the Board of Directors. As of the effective date of the 2021 SI Plan, no further stock awards have been or will be granted under the EI Plan or STI Plan. As of December 31, 2021, there were no awards issued under the 2021 SI Plan. As of December 31, 2021, the Company had 49,573,570 shares of Class A Common Stock available for future issuance under the 2021 SI Plan. EI Plan On February 1, 2018, the Board of Directors adopted the Equity Incentive Plan (“EI Plan”), under which the Board of Directors authorized the grant of up to 42,390,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, and other stock-based awards for Legacy FF’s Class A Ordinary Stock to employees, directors and non-employees. On the Closing Date and in connection with the Business Combination, each of the Legacy FF’s outstanding options under the EI Plan immediately prior to the closing of the Business Combination remained outstanding and converted into the right to purchase the Company’s Class A Common Stock based on the Exchange Ratio. A summary of the Company’s stock option activity under the EI Plan is as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding as of December 31, 2020 30,402,801 $ 2.45 8.75 $ 885 Granted 5,287,031 4.74 Exercised ( 2,757,671 ) 2.30 7,740 Expired/forfeited ( 969,240 ) 3.65 Outstanding as of December 31, 2021 31,962,921 $ 2.81 7.77 $ 86,075 Exercisable as of December 31, 2021 14,777,334 $ 2.51 6.93 $ 41,622 Vested and expected to vest as of December 31, 2021 26,660,149 $ 2.73 7.59 $ 72,705 The weighted-average assumptions used in the Black-Scholes option pricing model for awards granted during the twelve 147 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 14. Stock-Based Compensation (cont.) months ended December 31, 2021 and 2020 are as follows: 2021 2020 Risk-free interest rate: 0.79 % 0.45 % Expected term (in years): 6.05 6.13 Expected volatility: 42.10 % 37.25 % Dividend yield: 0.00 % 0.00 % The total grant date fair value of options vested during the years ended December 31, 2021 and 2020 was $ 7,016 and $ 4,953 , respectively. As of December 31, 2021, the total remaining stock-based compensation expense for unvested stock options was $ 13,679 which is expected to be recognized over a weighted average period of 3.0 years. STI Plan On May 2, 2019, the Company adopted its Special Talent Incentive Plan (“STI Plan”) under which the Board of Directors may grant up to 14,130,000 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other stock-based awards for Legacy FF’s Class A Ordinary Stock to employees, directors, and non-employees. The STI Plan does not specify a limit on the number of stock options that can be issued under the plan. Per the terms of the STI Plan the Company must reserve and keep available a sufficient number of shares to satisfy the requirements of the STI Plan. On January 27, 2021, in conjunction with entering into a service agreement with its lessor of the facility located in Hanford, California, the Company issued 399,553 fully-vested options with an exercise price of $ 2.767 per share. In the event that the intrinsic value of the option is less than the accrued outstanding rent payments of $ 947 upon close of the Business Combination, the Company will pay the lessor the difference in a single cash payment, otherwise, the accrued outstanding rent will be deemed paid. Upon close of the Business Combination, the intrinsic value of the option was more than the accrued outstanding rent payments and therefore the accrued outstanding rent was deemed paid. On the Closing Date and in connection with the Business Combination, each of the Company’s outstanding options under the STI Plan immediately prior to the closing of the Business Combination remained outstanding and converted into the right to purchase Class A Common Stock equal to the number of shares subject to such option multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio. A summary of the Company’s stock option activity under the STI Plan is as follows: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding as of December 31, 2020 6,490,208 $ 2.49 9.26 $ 1,174 Granted 5,516,399 7.82 Exercised ( 1,630,925 ) 2.54 8,807 Expired/Forfeited ( 848,955 ) 2.68 Outstanding as of December 31, 2021 9,526,727 $ 5.55 8.01 $ 13,905 Exercisable as of December 31, 2021 3,637,954 $ 2.95 6.24 $ 9,364 Vested and expected to vest as of December 31, 2021 7,608,158 $ 4.81 7.68 $ 13,896 148 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 14. Stock-Based Compensation (cont.) The Company has elected to use the contractual term of non-employee options awarded under the STI Plan as the expected term. The weighted-average assumptions used in the Black-Scholes option pricing model for awards granted during the year ended December 31, 2021 and 2020 are as follows: 2021 2020 Risk-free interest rate: 1.39 % 0.59 % Expected term (in years): 9.06 10 Expected volatility: 35.86 % 38.42 % Dividend yield: 0.00 % 0.00 % The total grant date fair value of options vested during the years ended December 31, 2021 and 2020 was $ 3,106 and $ 6,860 , respectively. As of December 31, 2021, the total remaining stock-based compensation expense for unvested stock options was $ 7,600 , which is expected to be recognized over a weighted average period of approximately 3.9 years. Common Units of FF Global Partners LLC During 2020, certain executives and employees of the Company were granted the opportunity to subscribe to 24,000,000 common units of FF Global Partners LLC (“FF Global Partners”). The subscription price of $ 0.50 per common unit, payable by the executives and employees of the Company, was financed through non-recourse loans issued by FF Global Partners payable in equal annual installments over ten years . The common units to be purchased with a non-recourse loan are required to be treated for accounting purposes as stock options granted by FF Global Partners to executives and employees of the Legacy FF. The awards were valued using the Black-Scholes option pricing model. The grant date fair value of the units purchased through non-recourse loans was immaterial for the year ended December 31, 2021 and 2020. The following table presents stock-based compensation expense for all of the Company’s SI Plan, EI Plan, STI Plan and Common Units of FF Global Partners LLC included in each respective expense category in the Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31: 2021 2020 Research and development $ 4,001 $ 941 Sales and marketing 1,185 387 General and administrative 6,159 8,177 $ 11,345 $ 9,505 On July 21, 2021, in connection with the Closing of the Business Combination, the Company issued 1,404,459 restricted stock awards with a grant date fair value of $ 13.78 per share as a bonus to employees and other service providers. The restricted stock awards vest 90 days from the grant date. As of December 31, 2021, 53,489 of these restricted stock awards had been forfeited. The following table presents stock-based compensation expense included in each respective expense category in the Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31: Restricted stock awards for employee bonus, net 2021 2020 Research and development $ 7,613 $ — Sales and marketing 2,310 — General and administrative 8,694 — $ 18,617 $ — 149 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 15. Income Taxes The provision for income tax consisted of the following: 2021 2020 Current: Federal $ — $ — State 3 3 Foreign 237 — Total current 240 3 Deferred: Federal ( 48,017 ) ( 11,456 ) State ( 49,894 ) — Foreign ( 9,956 ) ( 2,044 ) Valuation allowance 107,867 13,500 Total deferred — — Total provision $ 240 $ 3 The components of losses before income taxes, by taxing jurisdiction, were as follows for the years ended December 31: 2021 2020 U.S. $ ( 408,520 ) $ ( 79,605 ) Foreign ( 107,745 ) ( 67,480 ) Total $ ( 516,265 ) $ (147,085) The provision for income taxes for the years ended December 31, differs from the amount computed by applying the statutory federal corporate income tax rate of 21% to losses before income taxes as a result of the following: 2021 2020 Federal income tax expense 21.0 % 21.0 % State income taxes (net of federal benefit) 3.8 % 0.0 % Permanent differences ( 0.1 ) % ( 1.3 ) % Fair value debt adjustments ( 4.5 ) % ( 0.6 ) % Disallowed interest ( 0.4 ) % ( 2.7 ) % Foreign tax rate difference ( 0.2 ) % ( 6.7 ) % Return-to-provision adjustment ( 3.1 %) 0.4 % Uncertain tax benefit ( 0.4 ) % — Expiration of tax attributes ( 1.7 ) % ( 1.0 ) % State tax rate change on deferred taxes 6.4 % — Valuation allowance ( 20.8 ) % ( 9.1 ) % Effective tax rate 0.0 % 0.0 % The main changes in permanent differences related to fair value adjustments on convertible related party notes payable and notes payable and disallowed interest expense due to embedded features. The main changes in foreign tax rate difference and valuation allowance related to higher foreign losses incurred in 2021. 150 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 15. Income Taxes (cont.) The tax effects of temporary differences for the years ended December 31, that give rise to significant portions of the deferred tax assets and deferred tax liabilities are provided below: 2021 2020 Deferred Tax Assets: Net operating losses (“NOL”) $ 225,339 $ 123,633 Research and development credits 4,240 7,921 Accrued liabilities 16,258 7,564 Construction in progress — 3,061 Excess interest expense under section 163(j) 5,018 3,670 Capital losses 3,420 2,407 Amortization 12,176 — Stock-based compensation 187 428 Other 1,714 296 Gross deferred tax assets 268,352 148,980 Valuation allowance ( 256,413 ) ( 148,546 ) Deferred tax assets, net of valuation allowance 11,939 434 Deferred Tax Liabilities: Depreciation ( 573 ) 454 State taxes ( 11,366 ) ( 888 ) Total deferred tax liabilities ( 11,939 ) ( 434 ) Total net deferred tax assets (liabilities) $ — $ — The Company has recognized a full valuation allowance as of December 31, 2021 and 2020 since, in the judgment of management given the Company’s history of losses, the realization of these deferred tax assets was not considered more likely than not. The valuation allowance was $ 256,413 and $ 148,546 as of December 31, 2021 and 2020, respectively, with increases attributable to the current year’s provision. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. During 2021 and 2020, the Company evaluated the realizability of its net deferred tax assets based on available positive and negative evidence and concluded that the likelihood of realization of the benefits associated with its net deferred tax assets does not reach the level of more likely than not due to the Company’s history of cumulative pre-tax losses and risks associated with the generation of future income given the current stage of the Company’s business. As of December 31, 2021, the Company has U.S. federal and foreign net operating loss carryforwards of $ 718,798 and $ 113,019 , respectively, which will begin to expire in 2034 and 2022, respectively. The U.S. federal net operating loss carryforwards of $ 638,270 generated post the Tax Cuts and Jobs Act may be carried forward indefinitely, subject to the 80% taxable income limitation on the utilization of the carryforwards. The U.S. federal net operating loss carryforwards of $ 80,528 generated prior to December 31, 2018 may be carried forward for twenty years. As of December 31, 2021, the Company has California net operating loss carryforwards of $ 518,073 , which will begin to expire in 2034. The Company has no U.S. federal R&D tax credit carryforwards and a state R&D tax credit carryforward of $ 4,230 as of December 31, 2021. The U.S. state tax credits do not expire and can be carried forward indefinitely. 151 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 15. Income Taxes (cont.) In accordance with Internal Revenue Code Section 382 (“Section 382”) and Section 383 (“Section 383”), a corporation that undergoes an “ownership change” (generally defined as a cumulative change (by value) of more than 50% in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset post-change taxable income and post-change tax liabilities, respectively. The Company’s existing NOLs and R&D credits may be subject to limitations arising from previous ownership changes, and the ability to utilize NOLs could be further limited by Section 382 and Section 383 of the Code. In addition, future changes in the Company’s stock ownership, some of which may be outside of the Company’s control, could result in an ownership change under Section 382 and Section 383 of the Code. The Company’s intention is to indefinitely reinvest earnings in all jurisdictions outside the United States. As of December 31, 2021 and 2020, there was no material cumulative earnings outside the United States due to net operating losses and the Company has no earnings and profits in any jurisdiction, that if distributed, would give rise to a material unrecorded liability. The Company is subject to taxation and files income tax returns with the U.S. federal government, California and China. As of December 31, 2021, the 2017 through 2021 federal returns and 2017 through 2021 state returns are open to exam. The Company’s 2017 and 2018 federal returns are currently under audit by the Internal Revenue Service (“IRS”). The Company is not under any tax audits on its China tax returns. All of the prior year tax returns, from 2016 through 2021, are open under China tax law. Uncertain Income Tax Position The aggregate change in the balance of unrecognized tax benefits for the years ended December 31, is as follows: 2021 2020 Beginning balance $ 2,666 $ 2,598 Increase related to current year tax positions 2,331 68 Ending balance $ 4,997 $ 2,666 In accordance with ASC 740-10, Income Taxes — Overall , the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. No interest and penalties related to the Company’s unrecognized tax benefits was accrued as of December 31, 2021 and 2020, as the uncertain tax benefit only reduced the net operating losses. The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months. As of December 31, 2021 and 2020, the realization of uncertain tax positions were not expected to impact the effective rate due to a full valuation allowance on federal and state deferred taxes. The following table summarizes the valuation allowance: 2021 2020 Beginning balance $ 148,546 $ 135,046 Increase related to current year tax positions 107,867 13,500 Ending balance $ 256,413 $ 148,546 152 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 16. Net Loss per Share Net Loss Per Share Attributable to Common Stockholders Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares issued and shares to be issued under the commitment to issue shares, as these shares are issuable for no consideration. Diluted net loss per share attributable to common stockholders adjusts the basic net loss per share attributable to common stockholders and the weighted-average number of shares issued and shares to be issued under the commitment to issue shares for potentially dilutive instruments. For purposes of presentation of basic and diluted net loss per share, the Company includes shares to be issued in the denominator in accordance with ASC 710-10-54-4 and ASC 260-10-45-48 as if they had been issued on the date of the merger, as such shares are non-contingent and are issuable for no consideration (see Note 3 , Business Combination) . The net loss per common share was the same for the Class A and Class B Common Stock because they are entitled to the same liquidation and dividend rights and are therefore combined on the Consolidated Statements of Operations and Comprehensive Loss. Because the Company reported net losses for all periods presented, all potentially dilutive Common Stock equivalents were determined to be antidilutive for those periods and have been excluded from the calculation of net loss per share. The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of December 31: 2021 2020 Stock-based compensation awards – EI Plan 31,962,921 30,402,801 Stock-based compensation awards – STI Plan 9,526,727 6,490,208 Public Warrants 22,977,568 — Private Warrants 674,551 — Other warrants 4,544,258 272,730 Convertible notes payable 9,009,210 — Total 78,695,235 37,165,739 17. Subsequent Events Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Consolidated Financial Statements. Special Committee Investigation As previously disclosed on November 15, 2021, the Company’s Board established a special committee of independent directors (“Special Committee”) to investigate allegations of inaccurate Company disclosures, including those made in an October 2021 short seller report and whistleblower allegations, which resulted in the Company being unable to timely file its third quarter 2021 Quarterly Report on Form 10-Q, Annual Report on Form 10-K for the year ended December 31, 2021 and amended Registration Statement on Form S-1 (File No. 333-258993). The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist with its review. On February 1, 2022, the Company announced that the Special Committee completed its review. On April 14, 2022, the Company announced the completion of additional investigative work based on the Special Committee’s findings, which were performed under the direction of the Executive Chairperson, reporting to the Audit Committee. In connection with the Special Committee’s review and subsequent investigative work, the following findings were made: 153 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 17. Subsequent Events (cont.) • In connection with the Business Combination, statements made by certain Company employees to certain investors describing the role of Yueting (“YT”) Jia, the Company’s founder and former CEO, within the Company were inaccurate, and his involvement in the management of the Company post-Business Combination was more significant than what had been represented to certain investors. • The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000 ) were unpaid indications of interest. • Consistent with the Company’s previous public disclosures regarding identified material weaknesses in its internal control over financial reporting, the Company’s internal control over financial reporting requires an upgrade in personnel and systems. • The Company’s corporate culture failed to sufficiently prioritize compliance. • Mr. Jia’s role as an intermediary in leasing certain properties which were subsequently leased to the Company was not disclosed in the Company’s corporate housing disclosures. • In preparing the Company’s related party transaction disclosures, the Company failed to investigate and identify the sources of loans received from individuals and entities associated with Company employees. In addition, certain individuals failed to fully disclose to individuals involved in the preparation of the Company’s SEC filings their relationships with certain related parties and affiliated entities in connection with, and following, the Business Combination, and failed to fully disclose relevant information, including but not limited to, information in connection with related parties and corporate governance to the Company’s independent registered public accounting firm PricewaterhouseCoopers LLP. Further, certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation. Based on the results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of inaccurate FF disclosures that it evaluated, were not supported by the evidence reviewed. Based on the results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial actions: • certain remedial actions designed to enhance oversight and corporate governance of the Company, namely the following: • the appointment of Susan Swenson, a member of the Board, to the newly created position of Executive Chairperson of FF; • Carsten Breitfield, FF’s Chief Executive Officer, reporting directly to Ms. Swenson and receiving a 25 % annual base salary reduction; • the removal of Mr. Jia as an executive officer, although continuing in his position as Chief Product & User Ecosystem Officer of the Company and reporting directly to the Executive Chairperson, receiving a 25 % annual base salary reduction, and his role limited to focusing on (a) Product and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology; • Matthias Aydt, Senior Vice President, Business Development and Product Definition and a director of the Company, being placed on probation as an executive officer for a six-month period, during which period he will remain as a non-independent member of the Board; 154 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 17. Subsequent Events (cont.) • the appointment of Jordan Vogel as Lead Independent Director; certain changes to the composition of Board committees, including Brian Krolicki stepping down from his role as Chairman of the Board and Chair of the Nominating and Corporate Governance Committee and becoming a member of the Audit and Compensation Committees of the Board; Jordan Vogel stepping down from the Nominating and Corporate Governance Committee; and Scott Vogel becoming the Chair of the Audit Committee and the Nominating and Corporate Governance Committee of the Board; and • the suspension without pay of Jiawei (“Jerry”) Wang, the Company’s former Vice President, Global Capital Markets, who subsequently notified the Board of his decision to resign from FF on April 10, 2022; • the assessment and enhancement of FF’s policies and procedures regarding financial accounting and reporting and the upgrading of FF’s internal control over financial accounting and reporting, including by hiring additional financial reporting and accounting support, in each case at the direction of the Audit Committee; • the implementation of enhanced controls around FF’s contracting and related party transactions, including regular attestations by FF’s employees with authority to bind FF to contracts and related party transactions, for purposes of enabling FF to make complete and accurate disclosures regarding related party transactions; • the hiring of a Chief Compliance Officer, who reports on a dotted line to the Chair of the Audit Committee, and assessing and enhancing FF’s compliance policies and procedures; • the implementation of a comprehensive training program for all directors and officers regarding, among other things, internal FF policies; • the separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary; and • certain other disciplinary actions and terminations of employment with respect to other FF employees (none of whom is an executive officer). SEC Investigation S ubsequent to the Company announcing the completion of the Special Committee investigation on February 1, 2022, the Company, certain members of the management team and employees of the Company received a notice of preservation and subpoena from the staff of the SEC stating that the SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation. The Company, which had previously voluntarily contacted the SEC in connection with the Special Committee investigation in October 2021, is cooperating fully with the SEC’s investigation. The outcome of such an investigation is difficult to predict. The Company has incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation. At this stage, The Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss. Settlement of the Hans litigation In January 2022, the Company settled an outstanding legal dispute for breach of lease under which the Company was named a co-defendant in a civil action case with the plaintiff seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes related to the lease. Under the terms of the agreement, the Company paid $ 1,800 in cash in January 2022 and agreed to pay an additional $ 3,400 plus 5 % interest in October 2022. Issuance of Options under the 2021 SI Plan In January 2022, the Company awarded 3,646,557 stock options to employees and nonemployees under the 2021 SI Plan with an exercise price of $ 5.32 per share. 155 Table of Contents Faraday Future Intelligent Electric Inc. Notes to Consolidated Financial Statements December 31, 2021 and 2020 (in thousands, except share and per share data) 17. Subsequent Events (cont.) Beverly Hills, California Flagship Store Lease In February 2022, the Company signed a Retail Lease Agreement with B. H. Triangle Associates, L.P., a California limited partnership (“Landlord”) for an approximately 13,000 square feet property in Beverly Hills, California for its first flagship store. The lease will commence on the earlier of the substantial completion of the Company’s leasehold improvements and June 1, 2022, and will continue for a period of 126 months thereafter. According to the agreement, rent fees will escalate over the lease term, starting from $ 1,534 during the first 12 months of the lease and increasing by 3 % each 12 months thereafter. The Company has two consecutive options to extend the lease beyond its initial term for five additional years each by giving the Landlord not less than nine months prior notice. Rent fees during extension periods will be determined according to the fair value mechanism agreed upon between the parties. The lease agreement was effective on March 16, 2022. As part of the agreement, the Company is allowed tenant improvements in the amount of $ 1,030 by the Landlord. In connection with the lease agreement, on March 4, 2022, the Company obtained an unconditional and irrevocable letter of credit from East West Bank in the amount of $ 1,500 . The letter of credit expires on March 4, 2023, and is renewed automatically for successive one-year periods, unless earlier terminated by the Company. South Korea Contract Manufacturing Agreement In February 2022, the Company entered into a definitive contract manufacturing and supply agreement with Myoung Shin Co., Ltd. (“Myoung Shin”), a South Korea-based automotive manufacturer and parts supplier, to manufacture the Company’s second vehicle, the FF 81. The agreement has an initial term of nine years from the start of production of the FF 81, which is scheduled for 2024. Pursuant to the agreement, Myoung Shin shall maintain sufficient manufacturing capabilities and capacity to supply FF 81 vehicles to the Company in accordance with the Company’s forecasts and purchase orders. The Company and Myoung Shin will each manufacture and supply certain FF 81 parts that Myoung Shin will use in the manufacture and assembly of FF 81 vehicles. 156 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None.