What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-03-09 compared with 2022-05-13 · 1162 added, 1349 removed, 962 unchanged (72% of the section changed)

5 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 339 )

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 238 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

6 unchanged sentences

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.

We have audited the accompanying consolidated balance sheet of Faraday Future Intelligent Electric Inc.

and subsidiaries (the Company) as of December 31, 2022, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the year then ended, and 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, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding 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 incurred operating losses since inception, has continued cash outflows from operating activities, and has an accumulated deficit.

These conditions raise substantial doubt about its ability to continue as a going concern.

Management’s plans regarding those matters also are 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 audit.

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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

/s/ Mazars USA LLP

We have served as the Company’s auditor since 2022.

March 9, 2023

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 consolidated balance sheet of Faraday Future Intelligent Electric Inc.

and its subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity (deficit) and of cash flows for the year 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 the results of its operations and its cash flows for the year 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

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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.

Management’s plans in regard to these matters are also described in Note 2 (not presented herein).

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

1 unchanged sentence

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.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

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.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

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.

We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Los Angeles, California

We have served as the Company’s auditor since 2018.

We served as the Company's auditor from 2018 to 2022.

Faraday Future Intelligent Electric Inc.

Consolidated Balance Sheets

December 31, 2021 and 2020

Years Ended December 31, 2022 and 2021

(in thousands, except share and per share data)

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Property and equipment, net 417,803 293,135

Operating lease right-of-use assets 19,588 —

Other non-current assets 6,492 7,040

Total assets $ 510,288 $ 907,432

Liabilities and stockholders’ equity (deficit)

Liabilities and stockholders’ equity

Current liabilities

1 unchanged sentence

Accrued expenses and other current liabilities 65,709 87,938

Bridge warrants 95,130 —

Related party accrued interest — 11,231

Accrued interest 1,864 8,263

Operating leases liabilities, current portion 2,538 —

Finance leases liabilities, current portion 1,364 2,574

Related party notes payable 8,406 13,655

Notes payable, current portion 5,097 132,372

Vendor payables in trust — 110,224

Total current liabilities 267,484 293,806

Capital leases, less current portion 7,570 36,501

Other liabilities, less current portion 3,720 1,000

Finance leases liabilities, less current portion 6,570 7,570

Operating leases liabilities, less current portion 18,044 —

Other liabilities 9,429 3,720

Notes payable, less current portion 26,008 34,682

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Commitments and contingencies (Note 13)

Stockholders’ equity (deficit)

Stockholders’ equity

Class A Common Stock, $ 0.0001 par value;

750,000,000 shares authorized;

815,000,000 and 750,000,000 shares authorized;

563,346,216 and 168,693,323 shares issued and outstanding as of December 31, 2022 and 2021, respectively

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

75,000,000 shares authorized;

64,000,588 and no shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital 3,655,771 3,482,226

Accumulated other comprehensive loss ( 6,945 ) ( 5,974 )

Accumulated other comprehensive income (loss) 3,505 ( 6,945 )

Accumulated deficit ( 3,476,585 ) ( 2,907,644 )

Total stockholders’ equity (deficit) 567,654 ( 579,338 )

Total liabilities and stockholders’ equity (deficit) $ 907,432 $ 316,382

Total stockholders’ equity 182,753 567,654

Total liabilities and stockholders’ equity $ 510,288 $ 907,432

The accompanying notes are an integral part of these consolidated financial statements.

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Other expense, net ( 12,544 ) ( 5,668 )

(Loss) gain at settlement of related party notes payable, notes payable, and vendor payables in trust, net ( 86,904 ) 2,107

Loss on settlement of related party notes payable, notes payable, and vendor payables in trust, net ( 7,690 ) ( 86,904 )

Loss before income taxes ( 552,008 ) ( 516,265 )

13 unchanged sentences

(in thousands, except share data)

Convertible Preferred Stock Ordinary Stock Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total Stockholder’s Equity (Deficit)

Preference Class B Class A Class A Class B

Amount Shares (1)

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.

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

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Class A Class B

Amount Shares (1)

Balance as of December 31, 2020, as recast

Shares Amount Shares Amount

Balance as of December 31, 2020

93,099,596 $ 9 64,000,588 $ 6 $ 1,817,760 $ ( 5,974 ) $ ( 2,391,139 ) $ ( 579,338 )

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Issuance of warrants — — — — 17,596 — — 17,596

Foreign currency translation — — — — — ( 971 ) — ( 971 )

Foreign currency translation adjustment — — — — — ( 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

The accompanying notes are an integral part of these consolidated financial statements.

Faraday Future Intelligent Electric Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

Years Ended December 31, 2022 and 2021

(in thousands, except share data)

Commitment to Issue Class A Common Stock Common Stock Additional

Capital Accumulated

Comprehensive

Gain (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit)

Class A Class B

Shares Amount Shares Amount Shares Amount

Balance as of December 31, 2021

— $ — 168,693,323 $ 17 — $ — $ 3,482,226 $ ( 6,945 ) $ ( 2,907,644 ) $ 567,654

Reclassification of obligation to issue registered shares of Class A Common Stock upon adoption of ASU 2020-06 — 32,900 — — — — — — ( 20,265 ) ( 20,265 )

Reclassification of deferred gain upon adoption of ASC 842 — — — — — — — — 3,393 3,393

Conversion of notes payable into Class A Common Stock (Note 10) — — 258,910,861 26 — — 99,455 — 99,481

Class A Common Stock to be delivered for conversion of notes payable (Note 10) — — — — — — ( 926 ) — — ( 926 )

Issuance pursuant to commitment to issue registered shares — ( 32,900 ) 2,387,500 — — — 32,900 — — 32,900

Stock-based compensation — — — — — — 17,653 — — 17,653

Chongqing related party note payable restructuring (Note 9) — — — — — — 17,399 — — 17,399

Exercise of stock options and settlement on restricted stock tax withholding — — 4,100,008 — — — 9,015 — — 9,015

Exercise of warrants — — 29,102,536 3 — — 4,226 — — 4,229

Amended exercise price of ATW NPA warrants (Note 14) — — — — — — 1,238 — — 1,238

Transfer of private warrants to unaffiliated parties — — — — — — 264 — — 264

Repurchase and retirement of Class A Common Stock — — ( 96,759 ) — — — ( 767 ) — — ( 767 )

Receipt of Class A Common Stock in consideration of exercises of options — — ( 311,878 ) — — — ( 669 ) — — ( 669 )

Issuance of shares pursuant to the commitment to issue Class A and Class B Common Stock — — 89,152,131 9 64,000,588 6 ( 15 ) — — —

Issuance of shares for restricted stock vesting — — 11,408,494 1 — — ( 1 ) — — —

Liability for insufficient authorized shares related to stock options and RSUs — — — — ( 3,977 ) — — ( 3,977 )

Liability for insufficient authorized shares related to earnout — — — — ( 2,250 ) — — ( 2,250 )

Foreign currency translation adjustment — — — — — — — 10,450 — 10,450

Net loss — — — — — — — — ( 552,069 ) ( 552,069 )

Balance as of December 31, 2022

— $ — 563,346,216 $ 56 64,000,588 $ 6 $ 3,655,771 $ 3,505 $ ( 3,476,585 ) $ 182,753

The accompanying notes are an integral part of these consolidated financial statements.

7 unchanged sentences

Depreciation and amortization expense 2,975 2,979

Amortization of operating lease right-of-use assets and intangible assets 2,520 368

Stock-based compensation 17,653 11,345

1 unchanged sentence

Loss on disposal of property and equipment 2,695 64,191

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 ) —

Change in fair value measurement of related party notes payable and notes payable ( 25,471 ) 22,700

Change in fair value measurement of warrant liability 95,130 —

Loss (gain) on foreign exchange 2,484 ( 845 )

Loss (gain) on forgiveness of accounts payable and deposits, net (see Note 5) 5,200 ( 7,005 )

Non-cash interest expense 10,078 41,014

Loss (gain) at settlement of related party notes payable, notes payable, and vendor payables in trust, net 86,904 ( 2,107 )

Loss on extinguishment of related party notes payable, notes payable and vendor payables in trust, net 7,690 86,904

Gain on forgiveness of vendor payables in trust — ( 1,731 )

Reserve for unrecoverable value added taxes — 6,404

Other 776 842

Changes in operating assets and liabilities:

2 unchanged sentences

Accounts payable 57,021 ( 36,625 )

Accrued expenses and other current liabilities 31,824 11,606

Accrued expenses and other current and non-current liabilities ( 14,947 ) 31,824

Operating lease liabilities ( 1,620 ) —

Accrued interest expense ( 12,468 ) —

Transfers between vendor payables in trust and accounts payable — 1,167

2 unchanged sentences

Payments for property and equipment ( 123,222 ) ( 95,681 )

Proceeds from payments on notes receivable — 3,600

Net cash (used in) provided by investing activities ( 95,681 ) 2,993

Net cash used in investing activities ( 123,222 ) ( 95,681 )

Cash flows from financing activities

Proceeds from notes payable, net of original issuance discount 73,800 172,031

Proceeds from exercise of stock options 9,535 10,587

Payments of notes payable issuance costs ( 3,834 ) ( 3,355 )

Payments of notes payable, including liquidation premium ( 87,279 ) ( 48,210 )

Payments of related party notes payable ( 517 ) ( 38,217 )

Proceeds from exercise of warrants 4,229 —

Repurchase and retirement of Common Stock ( 767 ) —

Payments of finance lease obligations ( 1,888 ) —

Payments of capital lease obligations — ( 3,212 )

Proceeds from issuance of Class A Common Stock in the Business Combination — 229,583

2 unchanged sentences

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 )

Payments of vendor payables in trust — ( 27,722 )

Transfers between vendor payables in trust and accounts payable — ( 1,167 )

Payments of capital lease obligations ( 3,212 ) ( 1,926 )

Proceeds from exercise of stock options 10,587 115

Proceeds from related party notes payable — 200

Payments of stock issuance costs — ( 1,071 )

Net cash provided by financing activities 966,569 36,831

Net cash (used in) provided by financing activities ( 6,721 ) 966,569

Effect of exchange rate changes on cash and restricted cash 1,038 ( 2,473 )

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

Net (decrease) increase in cash and restricted cash ( 511,963 ) 528,650

Faraday Future Intelligent Electric Inc.

2 unchanged sentences

(in thousands)

Cash and restricted cash, beginning of period 530,477 1,827

Cash and restricted cash, end of period $ 18,514 $ 530,477

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:

1 unchanged sentence

Restricted cash 1,546 25,386

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 $ 18,514 $ 530,477

Supplemental disclosure of cash flow information

Cash paid for interest $ 13,577 $ 6,317

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 —

Recognition of operating ROU assets and lease liabilities as part of the adoption of ASC 842 and for new operating leases entered into during the year ended December 31, 2022

Conversion of convertible note to equity 99,481 98,375

Issuance of warrants 9,938 17,596

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 8,041 863

Conversion of related party customer deposit to related party notes payable — 11,635

Troubled debt restructuring accounted for as a capital transaction

Liability for insufficient authorized shares related to stock options and restricted stock units 3,976 —

Liability for insufficient authorized shares related to earnout 2,250 —

Settlement of finance leases with prepaid deposit

Issuance pursuant to commitment to issue registered shares 32,900 —

Receipt of class A Common Stock in consideration of exercises of options 669 —

Class A Common Stock to be delivered for conversion of notes payable (Note 10) 926 —

Transfer of private warrants to unaffiliated parties 264 —

Conversion of related party notes payable and related party accrued interest into Class A Common Stock — 294,796

Conversion of assumed convertible and promissory notes payable into Class A Common Stock and Private Warrants — 1,080

Conversion of The9 Conditional Obligation to Class A Common Stock — 2,863

Supplemental disclosure of noncash investing and financing activities related to the Business Combination

3 unchanged sentences

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 —

Settlement of vendor payables in trust for 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.

1 unchanged sentence

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Nature of Business and Organization, Basis of Presentation and Summary of Significant Accounting Policies

1 unchanged sentence

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.

(“Company” or “FF”), 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 headquartered in Los Angeles, California.

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.

1 unchanged sentence

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 operates in a single operating segment and designs and engineers next-generation, intelligent, electric vehicles.

The Company expects to manufacture vehicles at its ieFactory California 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.

generally accepted accounting principles (“GAAP”) and include the accounts of the Company, its wholly-owned subsidiaries and all other entities in which the Company has a controlling financial interest, including the accounts of any Variable Interest Entity (“VIE”) in which the Company has a controlling financial interest and for which it is the primary beneficiary.

All intercompany transactions and balances have been eliminated upon consolidation.

4 unchanged sentences

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

6 unchanged sentences

(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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

(v) fair value of options granted to employees and non-employees;

(vi) fair value of warrants, and (vii) incremental borrowing rate used to measure operating lease liabilities.

Such estimates often require the selection of appropriate valuation methodologies and financial models 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.

As of the date the Company’s Consolidated Financial Statements were issued, the Company

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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.

2 unchanged sentences

Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Consolidated Financial Statements.

Reclassification of Presentation in the Company’s Consolidated Statements of Cash Flow

Depreciation and amortization of comparative prior period in the Company’s Consolidated Statements of Cash Flows were reclassified to conform with its current presentation of Depreciation and amortization in the Company’s Consolidated Statement of Cash Flows.

In the Consolidated Statement of Cash Flows for the year ended December 31, 2021, we have reclassified (1) $ 0.4 million of amortization of intangibles from Depreciation and amortization to Amortization of operating lease right-of-use assets and intangible assets;

and (2) $ 4.6 million of expenses recognized out of pre-paid software subscriptions related to the Company’s master agreement with Palantir ( see Note 5, Deposits and other current assets ) and $ 0.2 million of expenses recognized out of prepaid other noncurrent assets from Depreciation and amortization to Other current and non-current assets.

The total cash used in operating activities for the year ended December 31, 2021 is not changed as a result of these reclassifications.

Summary of Significant Accounting Policies

9 unchanged sentences

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

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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:

22 unchanged sentences

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.

6 unchanged sentences

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

10 unchanged sentences

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.

CIP is presented within Property and Equipment, net on the Consolidated Balance Sheets.

Impairment of Long-Lived Assets

5 unchanged sentences

No impairment charges were recorded during the years ended December 31, 2022 and 2021.

See Note 6, Property and Equipment, Net for a discussion of disposals of Construction in process during the year ended December 31, 2021.

See Note 6, Property and Equipment, Net for a discussion of disposals of Construction in process during the year ended December 31, 2022 and 2021.

Accumulated Other Comprehensive Loss

7 unchanged sentences

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

3 unchanged sentences

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, 2022 and 2021.

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’s stock-based compensation awards consist of stock options and restricted stock units (“RSUs”) 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”) .

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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.

Expected volatility — The Company determines the expected volatility by weighing the historical average volatilities of publicly traded industry peers and its own trading history.

FF 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 Class A Common Stock price becomes available, unless circumstances change such that the identified companies are no longer similar to FF, 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.

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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.

Therefore, Legacy FF’s Board of Directors 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

Legacy FF’s Board of Directors granted stock options with exercise prices equal to the fair value of Legacy FF’s Class A Ordinary

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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 stock exchange (“Nasdaq”) is used as the fair value of the Common Stock.

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.

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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.

There were no material such interest or penalties for the years ended December 31, 2022 and 2021.

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.

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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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Nature of Business and Organization, and Summary of Significant Accounting Policies (cont.)

Recent Accounting Pronouncements

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.

In December 2022, the FASB issued ASU No.

2022-06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848) (ASU 2022-06).

ASU 2022-06 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

ASU 2022-06 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024.

ASU 2022-06 is effective as of December 21, 2022 through December 31, 2024.

We continue to evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”), which outlines a comprehensive lease accounting model that supersedes the previous lease guidance.

The guidance requires lessees to recognize lease liabilities and corresponding right-of-use (“ROU”) 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.

The Company adopted the standard on

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

January 1, 2022 using the modified retrospective basis and recorded operating lease ROU assets of $ 11.2 million and operating lease liabilities of $ 11.2 million on that date.

As part of this adoption, the Company reclassified the deferred gain related to a previous sale and leaseback of $ 3.4 million to accumulated deficit.

The Company elected to apply the package of practical expedients permitted under the transition guidance within ASC 842 which does not require reassessment of initial direct costs, reassessment of the classification of leases as operating or financing, or reassessment of the definition of a lease (see Note 10 , Leases ).

Finance lease liabilities and related property and equipment assets did not change as a result of the adoption of this standard.

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.

ASU 2020-06 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.

ASU 2020-06 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.

Further, ASU 2020-06 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.

ASU 2020-06 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.

FF Intelligent Mobility Global Holdings Ltd.

Notes to Consolidated Financial Statements

December 31, 2020 and 2019

(in thousands, except share and per share data)

ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted.

Adoption of ASU 2020-06 can either be on a modified retrospective or full retrospective basis.

The Company adopted the standard on January 1, 2022 on a modified retrospective basis and reclassified the Obligation to issue registered shares of Class A Common Stock of $ 12.6 million from Accrued expenses and other current liabilities and reclassified $ 20.3 million from Accumulated deficit to Commitment to issue Class A Common Stock on the Consolidated Balance Sheets.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”).

ASU 2021-04 clarifies and reduces diversity in an 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.

ASU 2021-04 made amendments to the earnings per share guidance in Topic 260 for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options.

Further, ASU 2021-04 made amendments to the Debt — Modifications and Extinguishments guidance in Topic 470-50.

ASU 2021-04 also added references to revised guidance within Topic 505 and 718.

Additionally, ASU 2021-04 made additions to Topic 815-40 related to the issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options.

ASU 2021-04 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted.

Adoption of the amendments should be applied prospectively to modifications or exchanges occurring on or after the effective date of the amendments.

The Company adopted ASU 2021-04 as of January 1, 2022, which had an immaterial effect on the Consolidated Financial Statements.

Liquidity and Capital Resources and Going Concern

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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 ) .

Since inception, the Company has incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $ 3,476.6 million of December 31, 2022.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

(see Note 14 , Stockholders’ Equity ), and the net proceeds received from the Business Combination and the PIPE Financing (see Note 3 , Business Combination ).

The Company has received financing commitments for the funds required for the start of production of the FF 91 assuming timely receipt of funds, but might need to raise additional capital in the event such financing commitments are not received in a timely manner.

Based on certain management assumptions, including the timely receipt of approximately $ 38.4 million to $ 58.4 million of additional funding, which commitments have been secured as part of the Sixth Amendment, and approval by stockholders of the proposal to increase FFIE’s authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000 , increasing the total authorized shares from 900,000,000 to 1,775,000,000 , which approval was obtained during the special meeting of stockholders held on February 28, 2023, timely completion of key equipment installation and commissioning work at the ieFactory California in Hanford, California, suppliers meeting their commitments on program deliverables including parts, the implementation and effectiveness of certain expense reduction and payment delay measures, and timely and successful testing and certification, FF expects to start production on the FF 91 Futurist at the end of March 2023, coming off the line in early April, with deliveries to users anticipated to begin before the end of April 2023.

There is no assurance FF will be able to timely receive sufficient funding under existing financing commitments to produce and deliver the FF 91 Futurist on that timeline or at all.

If unable to receive sufficient funding, FF will be required to obtain new financing commitments, which may not be available to it under reasonable commercial terms.

Further, there cannot be any assurance that FF will be able to secure additional funding, under reasonable commercial terms of at all, develop the manufacturing capabilities and processes, secure reliable sources of component supply to meet quality, engineering, design or production standards, or to meet the required production volumes to successfully grow into a viable, cash flow positive, business.

There is also no assurance that FFIE stockholder approval of an authorized share increase will be obtained in a timely manner or at all.

The Company has continued financing discussions with multiple parties, but has experienced delays in securing additional funding commitments, which have exacerbated the supply chain pressures on FF’s business.

These factors, in addition to the continued rise in inflation and other challenging macroeconomic conditions, have led FF to take steps to preserve its current cash position, including reducing spending, extending payment cycles and implementing other similar measures.

If FF’s ongoing capital raising efforts are unsuccessful or significantly delayed, or if FF experience prolonged material adverse trends in its business, FF’s production will be delayed or decreased, and actual use of cash, production volume and revenue for 2023 will vary from the Company’s previously disclosed forecasts, and such variances may be material.

While FF is actively engaged in negotiations with potential financing sources, there is no guarantee that it will be able to raise additional capital on terms acceptable to it or at all.

In addition to the risk that FF’s assumptions and analyses may prove incorrect, the projections may underestimate the professional fees and other costs to be incurred related to the pursuit of various financing options currently being considered and ongoing legal risks.

Incremental capital needs beyond March 2023 to fund development of the Company’s remaining product portfolio will be highly dependent on the market success and profitability of the FF 91 and the Company’s ability to accurately estimate and control costs.

Apart from the FF 91 series, substantial additional capital will be required to fund operations, research, development, and design efforts for future vehicles.

As part of the SPA, as amended (as defined in Note 10, Notes Payable ), the Company has obtained commitments from several investors totaling $ 267.0 million in new convertible note financing and in committed forced warrant exercise proceeds, subject to certain conditions.

A total of $ 171.4 million under these commitments has been funded to date, through which the Company has received $ 150.4 million (net of original discount and transaction costs).

The right to force exercise of the Warrant Reserve expired upon the holders exercising their warrants during 2023.

In February 2023, Senyun and a purchaser affiliated with ATW Partners LLC exercised 20 % of their respective options to purchase additional senior secured notes and SPA Warrants of the Company under the same terms as the Incremental Notes.

The Company received aggregated gross proceeds of $ 18.0 million ($ 16.2 million net of original issuance discount and transaction costs) in exchange for such issuances.

On November 11, 2022, FF entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd.

(“Yorkville”), which is an affiliate of Yorkville Advisors.

Under terms of the SEPA, FF has the right, but not the obligation, to sell up to $ 200.0 million (which can be increased up to $ 350.0 million under FF’s option) of Class A Common Stock to an affiliate of Yorkville Advisors, subject to certain limitations, at the time of the Company choosing during the three year term of the agreement.

The Company shall not have the ability to draw funds under the SEPA until the effectiveness of its registration statement on Form S-1, initially filed with the SEC on December 8, 2022 (File No.

333- 268722), registering the resale by Yorkville of its shares of Class A Common Stock to be issued under the SEPA (including the 789,016 Commitment Shares) and the satisfaction of certain other conditions under the SEPA.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Despite the access to liquidity resulting from the SEPA when and if it shall become effective and the unfunded commitments from the SPA, the Company projects that it may require additional funds in order to continue operations and support the ramp-up of production of the FF 91 to generate revenues to put the Company on a path to cash flow break-even.

Incremental capital needs beyond March 2023 to fund operations and the development of the Company’s remaining product portfolio and to ramp up production will be highly dependent on the market success and profitability of the FF 91 and the Company’s ability to accurately estimate and control costs.

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 Company is exploring various funding and financing alternatives to fund its ongoing operations and to ramp up production after start of production, 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.

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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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

As of December 31, 2022, the Company was in default on the Bridge Notes.

Subsequent to the date of the Consolidated Financial Statements, the holders of the Bridge Notes waived the default.

The Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

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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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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;

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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 .

Gross proceeds from the PSAC trust account were $ 229.6 million, out of which the Company received $ 206.4 million in cash, after netting PSAC’s transaction costs related to the Business Combination, and redemptions of $ 0.2 million.

Each non-redeemed outstanding share of Common Stock of PSAC was converted into one share of Class A Common Stock of the Company.

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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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

As of December 31, 2021, the Company’s transfer agent 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.

During the year ended December 31, 2022, the Company issued 89,152,131 shares of Class A Common Stock and 64,000,588 shares of Class B Common Stock in full satisfaction of its commitment to issue Class A and Class B Common Stock..

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.

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Earnout Shares

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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”).

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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.

The Company determined that the fair value of the Earnout Shares at the Closing Date was $ 293.9 million 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

4 unchanged sentences

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Business Combination (cont.)

The fair value of the Private Warrants was $ 2.2 million upon the Closing of the Business Combination.

As of December 31, 2022 and 2021, The fair value of the Private Warrants was $ 0.1 million and $ 0.6 million, respectively.

Reverse Recapitalization

8 unchanged sentences

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:

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

PSAC Balances

9 unchanged sentences

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.

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 (which, as of February 2023, changed its name to FF Global Partners Investment 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.

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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 15, 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 outstanding warrants issued to a U.S.-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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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”).

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 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 $ 761.4 million (“PIPE Financing”).

Shares sold and issued in the PIPE Financing included registration rights.

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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 conjunction with the closing of the Business Combination, the Company paid $ 139.6 million 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 $ 85.2 million and accrued interest of $ 7.4 million;

(ii) related party notes payable principal amounts of $ 91.4 million and accrued interest of $ 13.6 million;

(iii) interests in the Vendor Trust of $ 124.7 million, including payables of $ 103.0 million and purchase orders in the amount of $ 8.4 million related to goods and services yet to be received, and accrued interest thereon of $ 13.3 million;

(iv) $ 19.8 million of amounts due to vendors;

and (v) $ 9.6 million 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 15, Stock-Based Compensation).

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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 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 $ 94.7 million 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:

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* 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 adjustment is comprised of (i) $ 170.1 million 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) $ 1,815.6 million which represents the conversion of the Redeemable Preference Stock and Convertible Preferred Stock into Ordinary Stock and, (iii) $ 0.8 million 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.

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 $ 0.8 million (see Note 9, Related Party Notes Payable ).

Reconciliation of transaction costs

Total direct and incremental transaction costs aggregated to $ 125.9 million, of which $ 0.9 million were expensed and the remaining $ 125.0 million were recorded as a reduction to APIC as equity transaction costs.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Business Combination (cont.)

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:

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 (dollars in thousands):

Reconciliation at the Closing Date

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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 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

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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, 2020, 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 17, 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.

To conform to the retroactive application of recapitalization of the Company’s Consolidated Statements of Stockholders’ Equity (Deficit), the Company reclassified $ 724.8 million of Legacy FF Redeemable Preference Stock and $ 697.6 million of Legacy FF Class B Convertible Preferred Stock to APIC, less amounts attributable to the par value of the Common Stock 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 $ 119.0 million, $ 271.9 million and $ 2.2 million, respectively, to APIC less amounts attributable to the par value of Class A Common Stock.

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

The The9 Arrangement

On March 24, 2019, the Company entered into a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”).

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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 made a $ 5.0 million 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Financial Instruments ).

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.

Neither the Company nor The9 have made contributions to the joint venture as of December 31, 2022 and 2021, and it has yet to commence business activities.

The Geely Arrangement

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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.

(“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 $ 50.0 million 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Deposits and Other Current Assets

Deposits and other current assets consists of the following as of December 31:

Deposits and other current assets consists of the following as of December 31 (dollars in thousands):

Deposits for research and development, prototype parts and other $ 23,617 $ 54,990

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Other current assets 6,650 2,291

Notes receivable — 40

Due from affiliate — 2,034

Total other current assets $ 21,087 $ 13,410

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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.

As a result of the settlement of interests in the Vendor Trust, certain suppliers to the Company were issued Class A Common Stock and cash for goods and services yet to be received (“Future Work”) which was recorded as part of deposits.

As a result of the suspension of projects with specific suppliers, Deposits for Future Work were expensed totaling $ 5.2 million for the year ended December 31, 2022.

No goods and services were received against Future Work as of December 31, 2022 and 2021 (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.

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.

Palantir invested $ 25.0 million in the Company through the PIPE Financing.

Under the platform hosting agreement, the Company

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

committed to pay a total of $ 47.0 million of hosting fees over a six-year term, of which $ 5.3 million was paid during the year ended December 31, 2021.

No payments were made in 2022 with respect to this agreement.

Recognized expense related to the Palantir hosting arrangement totaled $ 7.9 million and $ 4.6 million for the years ended December 31, 2022 and 2021, respectively.

Other prepaid software subscriptions totaled $ 4.1 million and $ 0.7 million for the years ended December 31, 2022 and 2021, respectively.

In July 2022, the Company entered into an annual insurance policy for its directors and officers (“D&O Policy”), which required it to make prepayments in the amounts of $ 21.7 million.

Recognized expense related to the D&O Policy totaled $ 14.5 million for the year ended December 31, 2022.

Property and Equipment, Net

Property and equipment, net, consists of the following as of December 31:

Land $ — $ 13,043

Property and equipment, net, consists of the following as of December 31 (dollars in thousands):

Buildings $ 19,395 $ 14,180

Building improvements — 8,940

Computer hardware 3,112 3,051

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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 .

Of the $ 392.9 million and $ 275.0 million of CIP, $ 195.7 million and $ 43.5 million is held at Company facilities and $ 197.2 million and $ 231.6 million is held at vendor locations as of December 31, 2022 and 2021, respectively.

Depreciation and amortization expense totaled $ 3.0 million and $ 3.0 million for the years ended December 31, 2022 and 2021, respectively.

On October 29, 2021, the purchase option for the HQ Gardena headquarters expired.

Accordingly, the Company removed from its Consolidated Balance Sheets the HQ asset, net and finance obligation in the amounts of $ 25.4 million and $ 28.9 million, respectively, resulting in a gain of $ 3.5 million.

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.

A total of $ 14.2 million has been recorded within property and equipment as of December 31, 2022 for finance leases and capital leases as of December 31, 2021, respectively.

The Company terminated two equipment leases during December 2022 resulting in a loss of $ 0.3 million.

At December 31, 2022, the Company has a finance lease for its ieFactory California production facility in Hanford.

Due to the build out of the Company’s manufacturing facility in Hanford, California, the Company has an asset retirement obligation (“ARO”) totaling $ 9.4 million and $ 3.0 million for the years ended December 31, 2022 and 2021, respectively.

The ARO is recorded to Other liability, less current portion with a corresponding ARO asset within Buildings and Tooling, machinery, and equipment.

The ARO asset is depreciated to operating expense over the remaining term of the lease through December 2027.

During 2022 and 2021, the Company disposed of $ 9.6 million and $ 72.1 million 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

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 .

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following as of December 31:

components and implementation of the Company’s cost reduction program.

Disposals of CIP of $ 3.7 million and $ 64.2 million were charged to operating expenses in the Consolidated Statements of Operations and Comprehensive Loss during the year ended December 31, 2022 and 2021, respectively.

In addition, there were disposals of CIP of $ 5.9 million and $ 7.9 million for the years ended December 31, 2022 and 2021, which reduced Accounts payable in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively .

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following as of December 31 (dollars in thousands):

Accrued payroll and benefits $ 20,502 $ 21,752

Accrued legal contingencies 18,940 16,881

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 —

Equipment, engineering, design, and testing services received not invoiced 9,443 13,863

Deposits from customers 3,573 4,354

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The Company had no cash equivalents at December 31, 2022 and 2021.

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.

Notes Payable

The Company has elected to measure certain notes payable at fair value.

Specifically, the Optional Notes and the June 2021 Notes (as defined below), issued pursuant to the Note Purchase Agreement (“NPA”), and the Bridge Notes (as defined below), issued pursuant to the SPA (as defined below), as amended as they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 10, Notes Payable ).

The Company used a binomial lattice model to value the notes payable which 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.

For notes payable issued on March 1, 2021, and August 26, 2021, and other remaining notes payable and related party notes payable, the Company employed the yield method.

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.

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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-

The fair value adjustments related to notes payables were recorded in Change in Fair Value Measurements on the Consolidated Statements of Operations and Comprehensive Loss.

Fair value measurements associated with Notes Payable liabilities represent Level 3 valuations under the fair value hierarchy.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

Bridge Warrants

The Company used a Monte Carlo simulation model to measure the fair value of the warrants, where the significant assumptions used the volatility rate, the forecasted term of the Bridge Warrants and the projected stock price of the Company’s Class A Common Stock over such term.

Fair value measurements associated with the liability-classified warrants represent Level 3 valuations under the fair value hierarchy.

Ares Warrants

In conjunction with notes payable agreements entered into with Ares Capital Corporation (“Ares”) on March 1, 2021 (see Note 10, Notes Payable ), 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 .

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 $ 5.0 million.

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.

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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 determined that the fair value of the Ares Warrants as of August 5, 2021 was $ 2.5 million.

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.

ATW NPA Warrants

In conjunction with notes payable issued under the NPA (see Note 10, Notes Payable ), 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 estimated the fair value of warrants issued in January 2021 and March 2021 to be $ 2.0 million and the fair value of the warrants issued in September 2020 to be $ 0.5 million, which were included in APIC on the Consolidated Balance Sheets.

The Company utilized the Black-Scholes valuation model to value the September 2020, January 2021, and March 2021 warrants.

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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.

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 shares 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.

Upon their issuance, the Company estimated the fair value of the warrants to be $ 5.1 million, 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.

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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 estimated the fair value of the warrants to be $ 8.0 million, 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.

1 unchanged sentence

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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 November 23, 2022, the Company issued 789,016 Commitment Shares in satisfaction of the commitment fee agreed upon in the SEPA.

During the year ended December 31, 2022 and as of the date of issuing the Consolidated Financial Statements, the Company did not direct Yorkville to buy any shares of Class A Common Stock.

The Company determined that SEPA represents a derivative financial instrument under ASC 815, Derivatives and Hedging, which should be recorded at fair value at inception and each reporting date thereafter.

The financial instrument was classified as a derivative asset with a fair value of zero at the inception of the SEPA and as of December 31, 2022.

Commitment to Issue Class A Common Stock

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) ).

As of December 31, 2021, the Company’s registration statement was not effective.

Upon the closing of the Business Combination, the Company assumed an obligation of PSAC to deliver 2,387,500 registered shares of Class A Common Stock to an entity that provided consulting and advisory services in connection with the Business Combination to PSAC for no consideration.

Prior to the adoption of ASU 2020-06 on January 1, 2022, the agreement with the service provider specified that the shares to be delivered are required to be registered, which is considered to be outside of the control of the Company, and therefore this obligation failed to qualify for equity treatment under ASC 815-40-25-10, and net cash settlement was 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 $ 32.9 million for the Obligation to issue registered shares of Class A Common Stock in the Consolidated Balance Sheets during the year ended December 31, 2021.

As of December 31, 2021, the fair value of the liability was $ 12.6 million resulting in a gain of $ 20.3 million recorded in the Change in fair value measurements in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

The Company used the probability-weighted expected return method (“PWERM”) to determine the fair value of the obligation to issue registered shares.

4 unchanged sentences

Fair value measurements associated with the obligation to issue shares represent Level 3 valuations under the fair value hierarchy.

On January 1, 2022, upon the adoption of ASU 2020-06, the requirement to consider whether settlement is required to be in registered shares is no longer required to be considered in an entity’s evaluation of net cash settlement, however ASC 480-10-S99-3a was not amended in a similar fashion and therefore the Company, as part of the adjustments due to the adoption

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Fair Value of Financial Instruments (cont.)

of ASU 2020-06, reclassified the Obligation to issue registered shares of Class A Common Stock from liabilities to the Commitment to issue Class A Common Stock within temporary equity.

On July 21, 2022, the Company amended its agreement with the service provider and delivered 2,387,500 unregistered shares of Class A Common Stock in satisfaction of its obligation.

Upon its settlement, the carrying amount of the commitment equaled its initial carrying amount, therefore the Company classified the entire commitment to issue Class A Common Stock to APIC in the amount of $ 32.9 million.

Public and Private Warrants

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 $ 2.2 million upon their assumption from PSAC on July 21, 2021 and $ 0.1 million and $ 0.6 million as of December 31, 2022 and 2021, respectively.

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.

Transfer of Private Warrants to Unaffiliated Third Parties

In the year ended December 31, 2022 PSAC Sponsor transferred a total 563,420 Private Warrants to unaffiliated third-party purchasers on the open market.

No transfers were made during the year ended December 31, 2021.

Upon such transfer, the transferred warrants became subject to identical terms to the Public Warrants underlying the units offered in the initial public offering of PSAC.

Therefore, upon their transfer the Company classified the warrants to APIC at their fair value of $ 0.6 million and $ 0.0 million, respectively for the years ending December 31, 2022 and 2021.

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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:

The following tables present financial assets and liabilities remeasured on a recurring basis by level within the fair value hierarchy (dollars in thousands):

December 31, 2022

2 unchanged sentences

Private warrants — — 52

Obligation to issue registered shares of Class A Common Stock — — 12,635

Bridge warrants — — 95,130

December 31, 2021

Level 1 Level 2 Level 3

Related party notes payable $ — $ — $ 32,949

Notes payable $ — $ — $ 161,282

The9 Conditional Obligation — — 1,128

Private warrants — — 642

Obligation to issue registered shares of Class A Common Stock — — 12,635

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:

Fair Value Notes

Fair Value The9

Obligation Private Warrants Obligation to issue Registered Shares of Class A Common Stock

The following table summarizes financial instruments carried at fair value for the year ended December 31, 2022 (dollars in thousands):

Bridge Warrants Notes Payable, Ares Notes Payable, Bridge Notes Payable, ATW NPA Private Warrants Obligation to issue Registered Shares of Class A Common Stock

Balance as of December 31, 2021 $ — $ 87,619 $ — $ 73,663 $ 642 $ 12,635

Additions (1)

9,938 — 82,000 — — —

Proceeds — 30,000 — — —

Changes in fair value 1,531 7,416 ( 3,872 ) — —

Payment of transaction costs — — ( 3,834 ) — — —

Changes in fair value measurements 85,192 ( 554 ) ( 20,874 ) ( 5,466 ) ( 326 ) —

Payments of notes payable — ( 87,065 ) — — — —

Conversions of notes to Common Stock — — ( 31,284 ) ( 68,197 ) — —

Reclassification of Private Warrants to Public Warrants — — — — ( 264 ) —

Reclassification of obligation to issue registered shares upon adoption of ASC 2020-06 — — — — ( 12,635 )

Balance as of December 31, 2022 $ 95,130 $ — $ 26,008 $ — $ 52 $ —

$ 32,949 $ 59,742 $ 1,128 $ — $ —

Proceeds, net or original issuance discount — 171,929 — — —

(1) Additions during the year ended December 31, 2022 included non-cash conversion of $ 9.9 million Bridge warrants, which was charged to Change in fair value measurements in the Consolidated Statements of Operations for the year ended December 31, 2022, and cash contribution of $ 82.0 million to note payable, which was reduced by the original issuance discount of $ 8.2 million, resulting in a net cash contribution of $ 73.8 million.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

The following table summarizes financial instruments carried at fair value (dollars in thousands) for the year ended December 31, 2021:

Related Party Notes Payable at Fair Value Notes Payable at Fair Value The9

Obligation Private Warrants Obligation to issue Registered Shares of Class A Common Stock

Balance as of December 31, 2020 $ 32,949 $ 59,742 $ 1,128 $ — $ —

Proceeds, net of original issuance discount — 171,929 — — —

Original issue discount (1)

4 unchanged sentences

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 )

Repayment of principal and liquidation premium ( 27,593 ) ( 48,210 ) — — —

Conversion of principal and liquidation premium to equity ( 5,519 ) ( 52,473 ) ( 2,863 ) — —

Reclassification of warrant liability to equity — — — — —

Balance as of December 31, 2021 $ — $ 161,282 $ — $ 642 $ 12,635

$ — $ 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

Related Party Notes

In prior years, the Company has been significantly funded by notes payable from related parties.

These related parties include employees as well as affiliates of employees, affiliates, and other companies controlled or previously controlled by the Company’s founder and Chief Product and User Ecosystem Officer.

Related party notes payable consists of the following as of December 31, 2022 and 2021 (dollars in thousands):

Note Name Contractual

Maturity Date Contractual

Interest Rates Unpaid Balance Net Carrying

Value at 12/31/21

Date Contractual

Rates Balance

as of December 31, 2022 Interest Expense for the Year Ended December 31, 2022 Interest Expense for the Year Ended December 31, 2021

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

December 31, 2023 12.0 % $ 4,651 $ 3,879 $ 3,369

Related party notes – China various other Due on Demand — % 3,755 — —

$ 8,406 $ 3,879 $ 3,369

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

Related party notes payable consists of the following as of December 31, 2020:

December 31, 2021

1 unchanged sentence

Maturity Date Contractual

Balance Fair Value

Adjustments 0 %

Loss (Gain) on

Extinguishments Net Carrying

Interest Rates Unpaid Balance Net Carrying

Value at 12/31/21

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 % $ 9,411 $ 9,411

9,196 — — — 9,196

Related party notes - China various other

Due on Demand 0 % coupon, 10.00 % imputed

6,548 — ( 190 ) ( 22 ) 6,336

Related party notes – China various other (6)

Due on Demand 0 % 4,244 4,244

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 $ 13,655 $ 13,655

(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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

As of and for the Year Ended

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

Outstanding principal $ 4,244 $ 5,045

Interest expense 141 310

Foreign exchange (gain) loss on principal 99 326

Principal payments in cash 900 —

(1) On December 27, 2022, the Company executed two separate note payable payoff settlement agreements with Chongqing Leshi Small Loan Co., Ltd.

(“Chongqing”), a related party, according to which Chongqing agreed to forgive principal and all outstanding accrued interest.

The remaining principal balance was agreed to be payable in five installment payments through December 31, 2023 and the current interest rate was set to 12 %.

The amendment was accounted for as a troubled debt restructuring under ASC 470-60, because the Company was experiencing financial difficulty and the forgiven principal and accrued interest result in a reduced effective borrowing rate, which constitutes a concession.

The Company increased additional paid in capital in the amount of $ 17.4 million with a corresponding decrease in related party notes payable and related party accrued interest of $ 3.4 million and $ 14.0 million, respectively.

As of December 31, 2021, the Company was in default on the Chongqing related party note payable, which had a principal balance of $ 9.4 million.

As of December 31, 2022 the Company was in compliance with the terms of the related party note payable.

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 $ 8.7 million and $ 13.3 million as of December 31, 2022 and 2021, respectively.

Schedule of Principal Maturities of Related Party Notes Payable

The future scheduled principal maturities of related party notes payable as of December 31, 2022 were as follows (dollars in thousands):

Due on demand $ 3,755

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 (dollars in thousands):

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

December 31, 2021

3 unchanged sentences

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

Interest Expense for the year ended December 31, 2021

Settlement prior to the Business Combination:

31 unchanged sentences

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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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.

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

As of and for the Year Ended

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.

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

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

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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

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

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

As of and for the Year Ended

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

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

As of and for the Year Ended

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

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Related Party Notes Payable (cont.)

As of and for the Year Ended

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

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

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

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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

Outstanding principal $ — $ 11,635

Accrued interest — 1,177

Interest expense 515 933

Principal settled with equity 11,635 —

Interest settled with equity 1,692 —

As described in Note 3, Business Combination, in conjunction with the Closing of the Business Combination, the Company pai d $ 41.9 million 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 $ 91.4 million, net carrying amounts of $ 96.9 million and accrued interest of $ 13.6 million.

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 $ 26.2 million 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.

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.

As part of the Business Combination, the Company assumed related party promissory notes of $ 0.5 million and related party convertible notes of $ 0.3 million, 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

The convertible related party notes were fair valued at $ 0.6 million at the Closing Date.

Rancho Palos Verdes Real Property Leases

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

FFIE leased two real properties, located in Rancho Palos Verdes, California (the “Rancho Palos Verdes Properties”), from Warm Time Inc.

(“Warm Time”), a related party, from January 1, 2018 through March 31, 2022.

Warm Time in turn leased the Rancho Palos Verdes Properties from Mr.

The Rancho Palos Verdes Properties were used by the Company to provide long-term or temporary housing to employees of the Company (including Dr.

Carsten Breitfeld, former Global CEO of the Company) and the Company paid Warm Time a monthly amount of $ 0.1 million for rent and certain services, including catering, room services and organization of meetings, external gatherings and events, for these two properties.

The aggregate amount paid by Legacy FF to Warm Time for calendar years ended December 31, 2022 and 2021 were $ 0.1 million and $ 1.7 million, respectively.

FF Top Expense Reimbursements

On July 30, 2022, the Company entered into a preliminary term sheet (the “Preliminary Term Sheet”) with FF Top, a subsidiary of FF Global Partners, setting out a summary of the preliminary terms and conditions for FF Top’s assistance in arranging a proposed convertible term loan facility to the Company.

In connection with the Preliminary Term Sheet, the Company agreed to reimburse FF Top for its reasonable and documented out-of-pocket legal and diligence fees and expenses incurred in connection with such financing efforts up to a $ 0.3 million cap (the “Original Cap”), irrespective of whether or not closing occurred, with $ 0.2 million to be payable as a deposit upon execution of the Preliminary Term Sheet.

Pursuant to the Preliminary Term Sheet, the Company paid FF Top $ 0.2 million on August 9, 2022 and $ 0.2 million on December 16, 2022.

On January 31, 2023, the Company entered into a supplemental agreement to the Preliminary Term Sheet (the “Supplemental Agreement”) with FF Top, pursuant to which the parties agreed, due to the high amount of FF Top’s out-of-pocket legal fees and expenses incurred in connection with its financing efforts, to amend the Preliminary Term Sheet to increase the Original Cap from $ 0.3 million to $ 0.7 million.

The Company agreed to pay the remaining $ 0.4 million of the fee owed to FF Top as follows:

(i) $ 0.2 million within one business day of execution of the Supplemental Agreement, and (ii) $ 0.2 million within one business day of consummation of new financing by the Company in an amount not less than $ 5.0 million or an earlier date approved by the Board.

Pursuant to the Preliminary Term Sheet, as amended by the Supplemental Agreement, the Company paid FF Top $ 0.2 million on February 1, 2023.

In early February 2023, FF Top requested from the Company legal expense reimbursement of $ 6.5 million for costs incurred related to the governance changes at the Company, which was not approved by the Board as of the date the Consolidated Financial Statements were issued.

FF Top may in the future continue to request additional expense reimbursements and indemnification from the Company.

On March 6, 2023, the Company entered into a Consulting Service Agreement with FF Global Partners, according to which the Company agreed to pay a monthly consulting fee of $ 0.2 million to FF Global Partners for the following services:

• Assistance in developing its funding strategy.

• Assistance in developing its value return and management strategy.

• Consultation on and integration of stockholder relations and stockholder resources.

• Supporting communications regarding stockholders meetings.

• Developing existing stockholder financing strategy, including with respect to retail investors and others.

• Assistance in risk management strategy.

• Assistance in capability build up and operation strategy.

Either party may terminate this Agreement upon one month prior written notice to the other party.

Upon any termination of this Agreement, the Company shall promptly pay Consultant any accrued but unpaid fees hereunder, and shall reimburse Consultant for any unreimbursed expenses that are reimbursable hereunder.

In addition, FF Global Partners is entitled for reimbursement for all reasonable and documented out-of-pocket travel, legal, and other out-of-pocket expenses incurred in connection with their services, which out-of-pocket expenses shall not exceed $ 0.1 million without the prior written consent of the Company.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Common Units of FF Global Partners LLC

During 2021, 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”), a major shareholder of the Company.

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 years ended December 31, 2022 and 2021.

Notes Payable

Notes payable consists of the following as of December 31, 2021:

The Company has existing notes payable agreements with third parties, which consists of the following as of December 31, 2022 and 2021 (dollars in thousands):

December 31, 2022

1 unchanged sentence

Maturity Date Contractual

Rates Unpaid Principal

Balance Fair Value

Adjustments Original issue discount and proceeds allocated to warrants Net

Value Interest Expense for the Twelve Months Ended December 31, 2022

Bridge Notes (3)

October 27, 2028 10 % $ 36,622 $ 264 $ ( 10,878 ) $ 26,008 $ 1,676

Notes payable – China other (4)

Due on Demand — % 4,997 — — 4,997 —

Auto loans October 26, 2026 7 % 100 — — 100 7

$ 41,719 $ 264 $ ( 10,878 ) $ 31,105 $ 1,683

December 31, 2021

Note Name Contractual

Maturity Date Contractual

Interest Rates Unpaid

9 unchanged sentences

February 10, 2023 15 % 33,917 12,283 ( 11,518 ) 34,682

Notes payable - China various other (3)

Notes payable - China other (4)

Due on demand — % 5,458 — — 5,458

Notes payable (4)

April 17, 2022 1 % 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

Auto loans October 26, 2026 7 % 121 — — 121

Total notes payable $ 164,689 $ 29,489 $ ( 27,124 ) $ 167,054

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

The Company settled certain notes payable during the year ended December 31, 2022 as follows (dollars in thousands):

Year ended December 31, 2022

Note Name Contractual

Maturity Date Contractual

Interest Rates Net carrying value at 12/31/2021

Balance Fair Value

Adjustments Loss(Gain) on

Extinguish-ments Net

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)

Adjustments Payment Premium Cash Payment Conversion into Class A Common Stock

March 1, 2021 Notes (1)

March 1, 2022 14 % $ 56,695 $ ( 1,695 ) $ — $ ( 55,000 ) $ —

Note payable (10)

August 26, 2021 Notes (1)

March 1, 2022 14 % 30,924 ( 924 ) 2,065 ( 32,065 ) —

June 2021 Notes (2)

October 31, 2026 — % 38,981 1,019 — — ( 40,000 )

Notes payable (4)

Optional Notes (2)

October 31, 2026 15 % 34,682 ( 765 ) — — ( 33,917 )

April 17, 2022 1 % 193 — — ( 193 ) —

$ 161,475 $ ( 2,365 ) $ 2,065 $ ( 87,258 ) $ ( 73,917 )

(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.

(1) On March 1, 2021, the Company amended the NPA to permit the issuance of additional notes payable with principal amounts up to $ 85.0 million.

On the same day, the Company entered into notes payable agreements with Ares for an aggregate principal of $ 55.0 million, receiving net proceeds of $ 51.5 million, inclusive of a 4.00 % original issue discount and $ 0.1 million of debt issuance costs paid directly by the lender (“March 1, 2021 Notes”).

The notes payable were collateralized by a first lien on virtually all tangible and intangible assets of the Company, bore interest at 14 % per annum and matured on March 1, 2022.

On February 25, 2022, the Company repaid the $ 55.0 million principal amount of the March 1, 2021 Notes with accrued interest of $ 7.7 million.

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.

1 unchanged sentence

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 ).

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 $ 5.0 million 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

Upon their issuance, the warrants met 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 $ 2.5 million 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 Company exercised its option under the March 1, 2021 notes payable agreement with Ares to draw an additional principal amount of $ 30.0 million which matured on March 1, 2022 (“August 26, 2021 Notes”).

As the August 26, 2021 Notes mature in less than one year, according to the terms of the amended NPA, the Company expected to repay them with payment premium of 14 % (“Payment Premium”).

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.

The August 26, 2021 Notes matured in less than one year, according to the terms of the amended NPA, and 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 contingently 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 $ 5.0 million to $ 25.0 million.

The Company has classified $ 25.0 million as Restricted Cash on its Consolidated Balance Sheet as of December 31, 2021.

In the first quarter of 2022 all restrictions on cash were resolved.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

On February 25, 2022, the Company repaid the $ 30.0 million principal amount of the August 26, 2021 Notes, with accrued interest of $ 2.1 million and Payment Premium of $ 2.1 million.

The settlement of the March 1, 2021 Notes and August 26, 2021 Notes are summarized below (dollars in thousands):

March 1, 2021 Notes December 31,

2022 December 31,

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

Interest expense for the year ended December 31, 2022 1,266 —

Principal payments 55,000 —

Interest payments 7,721 —

August 26, 2021 Notes December 31,

2022 December 31,

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.

Interest expense for the year ended December 31, 2022 662 —

Principal payments 30,000 —

Interest payments 2,135 —

Payment Premium payments 2,065 —

(2) On June 9, 2021, the Company amended the NPA to permit the issuance of two notes payable, each with a principal value of $ 20.0 million (“June 2021 Notes”), to a US-based investment firm.

The Company received net proceeds of $ 35.6 million as part of the June 2021 Notes inclusive of $ 4.2 million of original issuance discount and $ 0.2 million 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.

1 unchanged sentence

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.

One of the June 2021 Notes with a principal amount of $ 20.0 million 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 fair value of the warrants of $ 5.1 million 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 $ 40.0 million 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.

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 $ 33.9 million, 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 $ 30.4 million, which is the total principal amount of $ 33.9 million net of 8 % original issue discount and $ 0.8 million of issuance costs.

The Optional Notes bear interest at 15 % beginning December 2021, and had 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,

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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 ).

1 unchanged sentence

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.

The fair value of the warrants of $ 8.0 million upon issuance was recorded in APIC ( see Note 8, Fair Value of Financial Instruments ).

In January 2022, the Company defaulted on the June 2021 Notes and the Optional Notes.

The holders of the Optional Notes waived the default during 2022.

June 9, 2021 Note 1 As of and for the Year Ended

(dollars in thousands) 2021

Outstanding principal $ 20,000

2 unchanged sentences

June 9, 2021 Note 2 As of and for the Year Ended

(dollars in thousands) 2021

Outstanding principal $ 20,000

2 unchanged sentences

August 10, 2021 Optional Notes As of and for the Year Ended

(dollars in thousands) 2021

Outstanding principal $ 33,917

3 unchanged sentences

Proceeds 30,375

On July 26, 2022, the Company entered into an agreement (the “ATW July Amendment”) with entities affiliated with ATW Partners LLC (collectively, the “Investors”), to extend the maturity date, adjust the conversion price and otherwise amend the terms (as described further below) of the Optional Notes and the June 2021 Notes (together, “ATW NPA Notes”).

Pursuant to the ATW July Amendment:

(a) the maturity date of each of the ATW NPA Notes was extended to October 31, 2026.

This extension does not, however, defer the accrual of interest to the new maturity date.

Interest shall accrue on the Notes at 10 % per annum following February 10, 2023;

(b) the conversion price of each of the ATW NPA Notes was adjusted to equal the lesser of (x) $ 10 , (y) 95 % of the per share daily volume weighted average prices (“VWAP”) of the Company’s Class A Common Stock during the 30 trading days immediately prior to the applicable conversion date and (z) the lowest effective price per share of Class A Common Stock (or equivalents) issued or issuable by the Company in any financing of debt or equity after July 26, 2022, subject to possible adjustment as set forth therein (the “Set Price”).

However, from July 26, 2022 to December 30, 2022, the conversion price of each of the ATW NPA Notes is equal to the lesser of (i) the Set Price, and (ii) 92 % of the lowest of the VWAP during the seven ( 7 ) trading days immediately prior to the applicable conversion date;

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

(c) a “forced conversion” feature was added to each of the ATW NPA Notes that allows the Company, on or after December 31, 2022, to cause the conversion of all or part of, in the aggregate among all of the ATW NPA Notes, up to $ 35.0 million principal amount of the ATW NPA Notes less any principal amount of the ATW NPA Notes voluntarily converted by the holder thereof after July 26, 2022, subject to certain conditions as set forth in the ATW July Amendment;

(d) the date by which the Investors must exercise their option to purchase additional June 2021 Notes of up to $ 40.0 million from the Company under the terms of the NPA was extended to July 20, 2023.

The ATW July Amendment was accounted for as a troubled debt restructuring under ASC 470-60, 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 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.

Interest expense on the ATW NPA Notes is computed using the contractual interest rate.

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.

On October 10, 2022 and on October 19, 2022, the remaining ATW NPA Notes in the aggregate amount of $ 6.7 million were exchanged for 11,496,868 shares of Class A Common Stock of the Company.

The settlement of the June 2021 Notes and Optional Notes are summarized below (dollars in thousands):

Optional Notes December 31,

2022 December 31,

Outstanding principal $ — $ 33,917

Accrued interest — 183

Interest expense for the year ended December 31, 2022 2,572 —

Principal conversion into Class A Common Stock 33,917 —

Interest payments 2,756 —

June 2021 Notes December 31,

2022 December 31,

Outstanding principal $ — $ 40,000

Accrued interest — —

Interest expense for the year ended December 31, 2022 — —

Principal conversion into Class A Common Stock 40,000 —

Interest payments — —

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

(3) On August 14, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with certain entities affiliated with ATW Partners LLC and RAAJJ Trading LLC (and together with Senyun, as defined below, the “Purchasers”) to issue and sell the Company’s senior secured convertible notes (the “Bridge Notes”) in three tranches aggregating to $ 52.0 million in principal and maturing on August 14, 2026 (subsequently extended to October 27, 2028).

The Bridge Notes are subject to an original issue discount of 10 %, and are convertible, along with any interest accrued, into shares of Class A Common Stock at a conversion price equal to $ 2.69 (or $ 2.2865 for the initial tranche) (“Conversion Price”), subject to a full ratchet anti-dilution protection.

When calculating the shares issuable upon conversion, the converted amount shall be decreased by 50 % of the original issue discount pertaining to such amount.

As part of this financing round, the Purchasers funded $ 52.0 million, less total original issuance discounts of $ 5.2 million equating to net proceeds of $ 46.8 million.

The Bridge Notes bear interest of 10 % per annum payable quarterly and on each conversion and on the maturity date in cash or in shares of Class A Common Stock.

Unless earlier paid, the Bridge Notes entitle the Purchasers, at each conversion date, to an interest make-whole (“Make-Whole Amount”), in a combination of cash or Class A Common Stock at the Company’s discretion, in the amount of the interest that would have been payable if such converted amount was held to maturity based on an interest rate of 15 % per annum.

The conversion price of interest is the lesser of (a) the Conversion Price or (b) 90 % of the lowest VWAP for the five consecutive trading days.

The Bridge Notes are secured by the grant of a second lien upon substantially all of the personal and real property of the Company and its subsidiaries, as well as guarantee by substantially all of the Company’s domestic subsidiaries.

Total commitments under the SPA shall not exceed $ 300.0 million, however each Purchaser has the option within 12 months from November 12, 2022 (the “Form S-1 Effective Date”) to purchase additional senior secured convertible notes under similar terms for a total potential commitments of up to $ 300.0 million (“Tranche B Notes”).

On September 23, 2022, the SPA was amended (the “SPA Amendment”), pursuant to which the Purchasers agreed to accelerate their funding obligations, with $ 7.5 million aggregate principal amount (the “Third Bridge Notes”) being funded and issued on the same day, and the remaining $ 7.5 million aggregate principal amount (the “Fourth Bridge Notes”) being funded and issued on October 10, 2022.

The Third Bridge Notes and Fourth Bridge Notes are convertible into shares of Class A Common Stock at a conversion price of $ 1.05 per share, mature on October 27, 2028, and are otherwise subject to the same terms and conditions in the SPA as applicable to the Bridge Notes described therein.

Additionally, the SPA Amendment modified the conversion price of $ 25.0 million of principal of the Bridge Notes, which were funded on August 14, 2022, to $ 1.05 per share.

The Company evaluated the SPA Amendment in accordance with ASC 470-50, Debt , and determined that it constitutes an extinguishment because the change in the conversion price is substantial.

Accordingly, the Company recognized a loss in Loss on extinguishment or settlement of related party notes payable, notes payable and vendor payables in trust, net in the Consolidated Statements of Operations and Comprehensive for the year ended December 31, 2022 in the amount of $ 7.7 million, calculated as the cumulative change in fair value from initial recognition through to the date of amendment.

On September 25, 2022, the Company entered into a Joinder and Amendment Agreement to the SPA (the “Joinder”) with Senyun International Ltd., an affiliate of Daguan International Limited (“Senyun”), pursuant to which Senyun agreed to purchase incremental notes under the SPA in an aggregate principal amount of up to $ 60.0 million.

Senyun has all of the same rights and obligations as a Purchaser under the SPA.

Pursuant to the Joinder and following the completion of the Company’s due diligence of Senyun and its financing sources.

As of December 31, 2022, Senyun completed funding totaling $ 30.0 million, which after original issue discount resulted in the receipt of $ 27.0 million.

The Company elected the fair value option afforded by ASC 825, Financial Instruments , with respect to the Bridge Notes because the notes include features, such as a contingently exercisable put option, which meets the definition of an embedded derivative.

The Company expenses original issue discount and transaction costs to Changes in fair value measurements in the Consolidated Statement of Operations and Comprehensive Loss.

As part of the SPA, and through the year ended December 31, 2022, the Company issued the Purchasers a total of 16,392,267 warrants (“Bridge Warrants" or “SPA Warrants”).

Upon their issuance, the Bridge Warrants had an exercise price of $ 5.0 per share, subject to full ratchet anti-dilution protection and other adjustments, exercisable for seven years

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

from the date of issuance (see Note 14, Stockholders' Equity ).

The Company may repurchase the Bridge Warrants for $ 0.01 per share if and to the extent the VWAP of the Company’s Class A Common Stock during 20 out of 30 trading days prior to the repurchase is greater than $ 15.0 per share, subject to certain additional conditions.

During the year ended December 31, 2022, the Purchasers exercised 8,559,863 Bridge Warrants.

As of December 31, 2022, there were 346,453,115 Bridge Warrants outstanding.

As of December 31, 2022, the Company determined that the fair value of the Bridge Notes and Bridge Warrants was $ 26.0 million and $ 95.1 million, respectively, resulting in a respective gain and loss in Changes in fair value measurements in the Consolidated Statement of Operations and Comprehensive Loss of $ 24.7 million and $ 95.1 million for the year ended December 31, 2022.

During the year ended December 31, 2022 total Bridge Notes principal which was converted to equity totaled $ 45.4 million.

Total notes payable issuance costs incurred for the year ended December 31, 2022 totaled $ 3.8 million.

Conversions of ATW NPA Notes and Bridge Notes, as applicable, to Additional paid in capital for the years ended December 31, 2022 and 2021 totaled $ 99.5 million and $ 98.4 million, respectively.

(4) 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.

In 2017 and 2018, the Company borrowed $ 4.4 million through notes payable from various Chinese lenders.

In 2019, the Company entered into a $ 0.7 million note payable with an employee.

During the year ended December 31, 2021, the Company reclassified the $ 0.7 million 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

(dollars in thousands) 2021

Outstanding principal $ 5,458

1 unchanged sentence

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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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

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

3 unchanged sentences

Other Cash Payment Equity Settlement Net Carrying Value at 12/31/2021 Loss (Gain) at Settlement

Interest Expense for the year ended December 31, 2021

Settlement prior to the Business Combination:

Note payable (5)

$ 57,293 $ — $ — $ 17,177 $ ( 1,293 ) $ — $ ( 73,177 ) $ — $ — $ 3,408

9 unchanged sentences

4,807 — — 757 110 — ( 5,674 ) — 2,145 164

Note payable (9)

17,712 — 1,988 — 667 — ( 20,367 ) — 7,698 —

1 unchanged sentence

— 16,790 6,935 — — — ( 23,725 ) — 8,968 —

Note payable (10)

20,972 — 138 270 667 ( 18,992 ) ( 3,055 ) — 1,155 1,334

2 unchanged sentences

Subtotal settlements in the Business Combination 68,209 25,540 14,066 7,436 1,500 ( 48,210 ) ( 68,541 ) — 25,908 3,480

Notes payable (4)

9,168 — — — ( 8,975 ) — — 193 ( 8,975 ) 92

1 unchanged sentence

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Notes Payable (cont)

Just prior to the Business Combination, the Company converted notes payable with an aggregate principal balance of $ 75.1 million and accrued interest of $ 23.3 million into 7,688,153 shares of Class A Common Stock.

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.

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Notes Payable (cont)

As of and for the Year Ended

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

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

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Notes Payable (cont)

As of and for the Year Ended

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

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

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.

As described in Note 3, Business Combination , in conjunction with the closing of the Business Combination, the Company paid $ 48.2 million in cash and a commitment to issue 6,854,013 shares of Class A Common Stock to settle notes payable principal amounts of $ 85.2 million, net carrying amount of $ 93.7 million, and accrued interest of $ 7.4 million.

Where the Company converted notes payable into Class A Common Stock, the Company recorded a loss at settlement of the notes payable of $ 25.9 million in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2021.

(5) On April 17, 2020, the Company received loan proceeds from East West Bank of $ 9.2 million 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 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 Company used the proceeds for purposes consistent with the PPP requirements.

The note matured on April 17, 2022, had no covenants, and was unsecured.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Notes Payable (cont)

As of and for the Year Ended

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

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 Company was notified by East West Bank that a principal amount of $ 9.0 million as well as accrued interest of $ 0.2 million 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 on 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 $ 0.2 million in April 2022.

(6)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 $ 11.3 million, receiving net proceeds of $ 9.9 million, net of an 8 % original issue discount and $ 0.5 million 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.

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 $ 7.0 million, receiving net proceeds of $ 6.4 million, 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

The 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.

1 unchanged sentence

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.

The Company estimated the fair value of the warrants to be $ 2.0 million 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, as follows (dollars in thousands) .

January 13 and March 12, 2021 Notes As of and for the Year Ended

3 unchanged sentences

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

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.

(7)On January 13, 2021, the Company amended the NPA to permit the issuance of additional secured convertible notes payable and issued $ 3.8 million of notes payable to Birch Lake (“BL Notes”), receiving net proceeds of $ 3.3 million, net of a 6.50 % original issue discount and $ 0.2 million of debt issuance costs paid directly by the lender.

The BL Notes accrued interest at 8 % per annum.

2 unchanged sentences

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.

On March 8, 2021, the Company entered into a notes payable agreement under the NPA with Birch Lake for total principal of $ 5.6 million, receiving net proceeds of $ 5.2 million, inclusive of a 6.50 % original issue discount and $ 0.3 million of debt issuance costs paid directly by the lender.

The notes payable accrued interest at 15.75 % per annum.

4 unchanged sentences

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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 follows (dollars in thousands).

January 13 and March 8, 2021 Notes As of and for the Year Ended

7 unchanged sentences

Proceeds 8,218

Third and Fourth Amendments to the SPA

On October 24, 2022, the Company entered into a Limited Consent and Third Amendment to the SPA (the “Third Amendment”), pursuant to which the maturity date for the Bridge Notes was extended from August 14, 2026 to October 27, 2028.

In addition, pursuant to the Third Amendment, each Purchaser and the Agent waived certain defaults and events of default under the SPA, any notes issued pursuant to the SPA and other related documents.

The amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors , because the Company was experiencing financial difficulty and the extension of the maturity date following the restructuring results in a reduced effective borrowing rate for the Company.

The amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss.

On November 8, 2022, the Company entered into a Limited Consent and Amendment to the SPA (the “Fourth Amendment”), pursuant to which the parties agreed that (i) in no event will the effective conversion price of any interest or interest make-whole amount payable in shares of Class A Common Stock in respect of Bridge Notes issued or issuable under the SPA be lower than $ 0.21 per share of Class A Common Stock, and (ii) in order for the Company to make payment of any interest or interest make-whole amount in shares of Class A Common Stock, certain price and volume requirements must be met, namely that (x) the VWAP of the Class A Common Stock is not less than $ 0.21 per share on any trading day during the preceding seven trading day period, and (y) the total volume of the Class A Common Stock does not drop below $ 1.5 million on any trading day during the same period (in each case, as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions).

The amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors ,, because the Company was experiencing financial difficulty and the addition of a floor price on the conversion of the convertible notes is assessed as a concession to the Company.

The amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss.

Senyun Amendment

On December 28, 2022 the Company entered into a Letter Agreement and Amendment to the SPA (the “Senyun Amendment”) pursuant to which the conversion rate of notes totaling $ 19.0 million was lowered from $ 1.05 to $ 0.89 and future funding timeframes were renegotiated.

As the terms of this modification were determined to not be substantially different, the new debt is accounted for as a continuation of the original debt at fair value using the now lower conversion rate.

As a result of the new conversion rate the Company was obligated for the year then ended to issue additional shares to Senyun based on the lower conversion rate.

The Company accounted for this obligation by crediting Other current liabilities and debiting Additional paid in capital for an amount of $ 0.9 million.

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.

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 $ 4.9 million and $ 5.4 million as of December 31, 2022 and 2021, respectively.

These amounts relate to the Notes Payable - China other and Auto loan balances.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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,

The future scheduled principal maturities of notes payable as of December 31, 2022 are as follows (dollars in thousands):

Due on demand $ 4,997

Vendor Payables in Trust

4 unchanged sentences

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.

1 unchanged sentence

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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

As a result, the Company recorded a discount of $ 1.8 million against the carrying value of the Vendor Payables in Trust.

The Company recorded accretion of $ 1.4 million in Interest Expense during the year ended December 31, 2021, related to the discount created from the gain on extinguishment in the Consolidated Statements of Operations and Comprehensive Loss.

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

Termination of Interests in the Vendor Trust in 2021

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 Company and the vendor agreed to forgive $ 14.2 million 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 $ 1.9 million of the vendor’s interest for work performed, resulting in a gain of $ 1.7 million.

On June 7, 2021, the Company entered into agreements with two vendors and settled in cash part of their interest in the Vendor Trust totaling $ 5.4 million.

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.

On July 12, 2021, the Company entered into an agreement with a vendor to cancel the vendor’s interests in the Vendor Trust totaling $ 1.2 million 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 $ 22.4 million 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 $ 41.8 million 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 $ 2.3 million, 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 $ 8.4 million as of the Closing Date of the Business Combination.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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.

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

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

The Company determines if an arrangement is a lease at its commencement if the Company is both able to identify an asset and conclude the Company has the right to control the identified asset.

Leases are classified as finance or operating based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

An ROU asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments related to the lease.

The Company recognizes operating and finance lease ROU assets and liabilities at the commencement date based on the present value of lease payments over the lease term.

The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options.

The Company’s leases do not provide an implicit rate therefore, the Company uses its incremental borrowing rate based on information available at the commencement date to determine the present value of lease payments.

The incremental borrowing rate used is estimated based on what the Company would be required to pay for a collateralized loan for a similar asset over a similar term.

The Company’s leases do not include any material residual value guarantees, or bargain purchase options.

To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate in the measurement and classification of a lease and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time.

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recorded in operating expenses on the Consolidated Statements of Operations and Comprehensive Loss.

Amortization of ROU assets on finance leases is recorded on a straight-line basis within operating expenses in the Consolidated Statements of Operations.

Interest expense incurred on finance lease liabilities is recorded in Interest expense on the Consolidated Statements of Operations and Comprehensive Loss.

The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset.

Additionally, the Company does not separate lease and non-lease components.

Operating leases are included in ROU assets, Operating leases liabilities, current portion and Operating lease liabilities, less current portion in the Company's Consolidated Balance Sheets.

Finance leases are included in Property and equipment, net, Finance lease liabilities, current portion, and Finance lease liabilities, less current portion in the Company's Consolidated Balance Sheets.

The Company’s lease arrangements consist primarily of its ieFactory California production facility, corporate office, store, equipment (which was terminated during December 2022, see Note 6, Property and Equipment, Net ) and vehicle lease agreements.

The leases expire at various dates through 2032, some of which include options to extend the lease term for additional 5 -year periods.

ASC 842 Disclosures

On January 1, 2022, the Company adopted ASC 842.

For more information on the adoption, see the “Recently Adopted Accounting Pronouncements” section in Note 1, Nature of Business and Organization, and Summary of Significant Accounting Policies.

Lease cost includes both the fixed and variable expenses recorded for leases.

The components of lease cost for the year ended December 31, 2022 were as follows (dollars in thousands):

Finance lease cost

Amortization of right-of-use assets $ 1,990

Interest on lease liabilities 664

Total finance lease cost 2,654

Operating lease cost 4,657

Variable lease cost 159

Total lease cost $ 7,470

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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 following table summarizes future lease payments as of December 31, 2022 (dollars in thousands):

Fiscal year Operating Leases Finance Leases

2023 $ 5,517 $ 1,722

2024 5,491 1,757

2025 5,251 1,792

2026 5,210 1,828

2027 2,893 1,864

Thereafter 9,284 —

Total 33,646 8,963

Imputed Interest 13,064 1,029

Present value of net lease payments $ 20,582 $ 7,934

Lease liability, current portion $ 2,538 $ 1,364

Lease liability, net of current portion 18,044 6,570

Total lease liability $ 20,582 $ 7,934

Supplemental information and non-cash activities related to operating and finance leases are as follows (dollars in thousands):

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 4,143

Operating cash flows from finance leases 686

Financing cash flows from finance leases 1,888

Recognition of operating ROU assets and lease liabilities as part of the adoption of ASC 842 and for new leases entered into during the year ended December 31, 2022

Operating leases $ 21,865

December 31, 2022

Weighted average remaining lease term (in years)

Operating leases 6.4

Finance leases 5

Weighted average discount rate

Operating leases 15.6 %

Finance leases 5.0 %

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 $ 44.0 million or the fair market value of the HQ, as determined in accordance with the lease agreement.

The Company recognized a $ 29.0 million

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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, 2021.

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, 2022 and 2021.

The Company recorded interest expense of $ 1.4 million and $ 1.5 million during the years ended December 31, 2022 and 2021, respectively.

ASC 840 Disclosures Related to Periods Prior to Adoption of ASC 842:

Prior to January 1, 2022, the Company analyzed all leases in accordance to ASC 840.

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 recorded 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:

The Company recorded rent expense of $ 2.7 million for the year ended December 31, 2021.

The minimum aggregate future obligations under non-cancelable operating leases as of December 31, 2021 were as follows (dollars in thousands):

Year ended December 31,

Thereafter 991

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,

As of December 31, 2021, the Company had three capital leases, one in Hanford, California for its ieFactory California production facility, and two equipment leases.

The minimum aggregate future minimum lease payments under capital leases as of December 31, 2021 were as follows (dollars in thousands):

Year ended December 31,

Thereafter 1,864

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Commitments and Contingencies (cont)

The Company believes the suit is without merit and therefore intends to vigorously defend the suit.

Commitments and Contingencies

Legal Proceedings

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.

Class and Derivative Actions

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 former Chief Executive Officer and 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 (the “Putative Class Action”).

On March 7, 2022, the following individuals were appointed as Lead Plaintiffs:

Byambadorj Nomin, Hao Guojun, Peihao Wang and Shentao Ye.

On the same date, Wolf Haldenstein and Pomerantz LLP were appointed as Co-Lead Counsel.

Lead Plaintiffs filed an amended complaint on May 6, 2022.

On July 5, 2022, the defendants filed a motion to dismiss the amended complaint.

Following briefing by the parties and a hearing on the motion, on October 20, 2022, the District Court issued its decision, denying in part and granting in part the Company’s motion to dismiss.

The court found, among other things, that the plaintiffs had sufficiently pled a claim for violation of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 with respect to certain statements made in 2021 concerning Legacy FF’s receipt of 14,000 reservations for the FF 91 vehicle.

The District Court also found, however, that the plaintiffs had failed to sufficiently plead a claim with respect to statements made concerning the expected schedule for the production and delivery of the FF 91 vehicle.

The District Court’s dismissal was without prejudice and leave to amend the complaint was granted.

On January 6, 2023, the plaintiffs declined to again amend their complaint to attempt to reallege the claims dismissed by the District Court.

As a result and with the exception of the judicially dismissed claims, the amended complaint that was the subject of the motion to dismiss is the operative complaint to which the Company’s and the other defendants filed answers on February 10, 2023.

The Company continues to claim the suit is without merit and has stated its intention 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.

On May 24, 2022, those consolidated derivative actions were stayed pending resolution of the above-referenced motion to dismiss filed in the Putative Class Action.

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.

These lawsuits purport to assert claims on behalf of the Company against various current and former officers and directors of the Company.

Also, on June 14, 2022, a verified stockholder class action complaint was filed in the Court of Chancery of the State of Delaware against, among others, the Company, its former Global CEO and CFO, and its current Chief Product and User Ecosystem Officer alleging breaches of fiduciary duties (the “Yun Class Action,” discussed further in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”).

On September 19, 2022, a verified complaint was filed in the Court of Chancery of the State of Delaware against FFIE seeking to compel an annual general meeting of stockholders.

On September 21, 2022, a verified stockholder class action complaint was in the Court of Chancery of the State of Delaware against, among others, FFIE, the Co-CEOs and independent directors of PSAC, and certain third-party advisors to PSAC, alleging breaches of fiduciary duties, and aiding and abetting those alleged breaches, in connection with disclosures and stockholder voting leading up to the Business Combination (the “Cleveland Class Action”), which lawsuit was subsequently consolidated with the Yun Class Action (the “Consolidated Delaware Class Action”) .

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.

FF Intelligent Mobility Global Holdings Ltd.

Additionally, on September 19, 2022, FF Global, an indirect stockholder of FFIE, filed a lawsuit in the Chancery Court of the State of Delaware against FFIE, seeking the removal of Ms.

Susan Swenson and Mr.

Brian Krolicki from the Board.

On September 27, 2022, the case was dismissed without prejudice pursuant to an agreement between FF Global and FF Top (the “Heads of Agreement”).

Shortly following the execution of the Heads of Agreement, FF Global began making additional demands of the Company which were beyond the scope of the terms contemplated by the Heads of Agreement and pertained to, among other things, the Company’s management reporting lines and certain governance matters.

On September 30, 2022, FF Global alleged that the Company was in material breach of the spirit of the Heads of Agreement.

The Company believes it has complied with the applicable terms of the Heads of Agreement, and disputes any characterization to the contrary.

Such disputes divert management and Board resources and are costly.

There can be no assurance that this or any other dispute between the Company and FF Global will not result in litigation.

On October 3, 2022, Ms.

Swenson and Mr.

Scott Vogel, a member of the

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Stockholders’ Equity (Deficit)

The number of authorized, issued and outstanding stock, as recast, were as follows:

Board, tendered their resignation from the Board effective immediately.

On October 3, 2022, Mr.

Jordan Vogel also tendered his resignation from the Board effective on October 5, 2022 upon his receipt of a supplemental release pursuant to the Mutual Release.

On October 28, 2022, Mr.

Brian Krolicki tendered his resignation from the Board effective immediately.

Governance Matters

Following the completion of the Special Committee investigation through the date hereof, the Company and certain of its directors and officers have received numerous e-mail communications from a group of self-described “employee whistleblowers” and from various individuals and entities who represented themselves as current investors of the Company.

These communications have included various allegations (including, for example, that certain directors have conspired to push the Company into bankruptcy for their own personal gain) and requests for certain organizational and governance changes.

The Company engaged an independent law firm to conduct a thorough independent external investigation with respect to these allegations.

The independent investigation found that all such allegations have been without merit.

In September 2022, certain members of the Board received threats of physical violence and death threats, which the Company has referred to appropriate law enforcement authorities, including state and local police, the Federal Bureau of Investigation, the SEC, the DOJ and relevant international authorities.

Other Legal Matters

As of December 31, 2022 and 2021, the Company had accrued legal contingencies of $ 18.9 million and $ 16.9 million, respectively, recorded within Accrued expenses and other current liabilities for potential financial exposure related to ongoing legal matters, primarily related to breach of contracts and employment matters, which are deemed both probable of loss and reasonably estimable.

For the legal matters involving third party vendors, such as suppliers and equipment manufacturers, the Company recorded an accrual in Accounts payable in the Consolidated Balance Sheets based on the amount invoiced by such vendors, which represents the minimum amount of loss out of the range of potential outcomes in accordance with ASC 450-20-30-1.

During the year ended December 31, 2022, the Company settled a legal dispute for breach of lease under which the Company was named a co-defendant, in a civil action case filed in the Superior Court of the State of California for the County of Santa Clara by Han’s San Jose Hospitality, LLC, which was seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes related to the lease for a total of $ 6.4 million.

Pursuant to the settlement agreement, the Company agreed to pay $ 1.8 million in cash in January 2022 and an additional $ 3.4 million plus 5 % interest in October 2022 and was liable for the remainder of the settlement, in the amount of $ 1.2 million, in the event the co-defendants failed to make the payment in January 2022.

In January 2022, the Company made the initial settlement payment of $ 1.8 million and was relieved of the liability of $ 1.2 million.

The Company failed to make the $ 3.4 million and interest payments in October 2022.

On October 26, 2022, the plaintiff filed a motion to enforce the settlement agreement in the Superior Court of the State of California for the County of Santa Clara, seeking no material additional damages.

On December 22, 2022, the court granted the plaintiff’s motion to enforce the settlement.

As of December 31, 2022, the balance of $ 3.4 million was included in Accrued expense and other current liabilities on the Consolidated Balance Sheet.

On January 3, 2023, the plaintiff served the parties notice of entry of the order.

On January 19, 2023, the court issued judgment in the amount of approximately $ 3.5 million and a writ of execution.

On February 9, 2023, the Company paid $ 3.6 million consisting of payment in full for the outstanding judgment and accrued interest.

Additionally, the Company made a payment of approximately $ 0.2 million on behalf of an indemnified co-defendant in connection with money seized from such indemnified co-defendant’s bank account.

The Company expects to receive such indemnification payment returned to it upon the release of such seizure.

On January 30, 2023, Riverside Management Group, LLC (“Riverside”) filed a verified complaint seeking to enforce its alleged contractual right to the advancement of all reasonable costs and expenses, including attorneys’ fees, it has and will incur as a named defendant in the Consolidated Delaware Class Action under its October 13, 2020 Transaction Services Agreement with FFIE and Property Solutions Acquisition Sponsor, LLC (the “TSA”), pursuant to which Riverside provided PSAC with advisory services in connection with the PSAC/Legacy FF merger.

In addition to seeking the advancement of such costs and expenses, Riverside also seeks an award of its attorneys’ fees and costs incurred in enforcing its alleged advancement rights under the TSA, and has concurrently filed a Motion for Expedited Proceedings, requesting that trial of the action be conducted on a summary basis and commence within 30 days of the motion’s disposition.

The Company entered into a Stipulation and Order with Riverside under which it would conditionally advance Riverside the reasonable attorneys’ fees and costs it incurs in defense of the Consolidated Delaware Action, subject to, and in express reservation of, the Company’s right to recover all such fees and expenses following disposition of the Consolidated Delaware Class Action.

Given the early stages of the legal

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

proceedings, the Company is unable to evaluate the likelihood of an unfavorable outcome and/or the amount or range of potential loss.

Other than disclosed herein, as of the date hereof FF is not a party to any legal proceedings the outcome of which, if determined adversely to FF, would individually or in the aggregate be reasonably expected to have a material adverse effect on FF’s business, financial condition, or results of operations.

Special Committee Investigation

As previously disclosed on November 15, 2021, the 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 FFIE 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, first quarter 2022 Quarterly Report on Form 10-Q and amended Registration Statement on Form S-1 (File No.

The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist with its review.

On February 1, 2022, FFIE announced that the Special Committee completed its review.

On April 14, 2022, FFIE 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:

In connection with the Business Combination, statements made by certain Company employees to certain investors describing the role of Mr.

Yueting 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 FFIE’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.

Jia’s role as an intermediary in leasing certain properties which were subsequently leased to the Company was not disclosed in FFIE’s corporate housing disclosures.

● In preparing FFIE’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, the investigation found that certain individuals failed to fully disclose to individuals involved in the preparation of FFIE’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 FFIE’s former independent registered public accounting firm PricewaterhouseCoopers LLP.

The investigation also found that certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.

Among such individuals were non-executive officers or members of the management team of FF, and remedial action was taken with respect to such individuals based on the extent of non-cooperation and/or withholding of information.

The failure to cooperate with the investigation was taken into consideration in connection with the remedial actions outlined below with respect to Jerry Wang, and withholding of information also affected the remedial action taken with respect to Matthias Aydt.

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

the investigation did not change any of the above findings with respect to the substantive allegations of inaccurate FF disclosures, the investigation did confirm the need for remedial actions to help ensure enhanced focus on compliance and disclosure within FF.

Based on the results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial actions designed to enhance oversight and corporate governance of the Company:

● the appointment of Susan Swenson, a former member of the Board, to the then newly created position of Executive Chairperson of FF.

Carsten Breitfeld, FF’s former Global CEO, 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 FFIE.

Certain dual-reporting arrangements were eliminated with respect to Mr.

Jia, and he is required to report directly to Ms.

Swenson, a non-independent director nominated by FF Top.

Please see “ Risk Factors–Risks Related to FF’s Business and Industry–Yueting Jia and FF Global, over which Mr.

Jia exercises significant influence, have control over the Company’s management, business and operations, and may use this control in ways that are not aligned with the Company’s business or financial objectives or strategies or that are otherwise inconsistent with the Company’s interests.

Such significant influence may increase if and to the extent the current members of the Board and management are removed and replaced with individuals who are aligned with Mr.

Jia and/or FF Global.

Jia also received a 25 % annual base salary reduction, and his role was limited from a policy-making position to focusing on (a) Product and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology.

On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board approved Mr.

Yueting Jia (alongside Mr.

Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments reporting directly to Mr.

The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.

Xuefeng processes and controls to be determined by the Board after consultation with the Company’s management.

The Company’s remaining departments continue to report to Mr.

On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board the Board approved Mr.

Yueting Jia (alongside Mr.

Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments reporting directly to Mr.

The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.

Xuefeng Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.

The Company’s remaining departments continue to report to Mr.

Xuefeng Chen.

Based on the changes to his responsibilities within the Company, the Board determined that Mr.

Jia is an “officer” of the Company within the meaning of Section 16 of the Exchange Act and an “executive officer” of the Company under Rule 3b-7 under the Exchange Act;

● Matthias Aydt, then Senior Vice President, Business Development and Product Definition and a director of FFIE, and currently Senior Vice President, Product Execution and a director of FFIE, being placed on probation as an executive officer for a six-month period, during which period he remained a non-independent member of the Board, which probationary period has since ended;

● 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;

● the suspension without pay of Jiawei (“Jerry”) Wang, FFIE’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;

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

● 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;

● hiring of a Compliance Officer with the title of Deputy General Counsel (hired in March 2023), who will report on a dotted line to the Chair of the Audit committee, and a Director of Risks and Internal Controls;

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;

● certain other disciplinary actions and terminations of employment with respect to other FF employees (none of whom is an executive officer).

As of February 27, 2023, FF is continuing to implement certain of the remedial actions approved by the Board.

However, certain of these remedial actions are no longer in effect and no assurance can be provided that those remedial measures that continue to be implemented will be implemented in a timely manner or at all, or will be successful to prevent inaccurate disclosures in the future.

Please see “ Risk Factors – Risks Related to FF’s Business and Industry – FF is taking remedial measures in response to the Special Committee findings.

There can be no assurance that such remedial measures will be successful.

In addition, there can be no assurance that such remedial measures will be fully implemented in light of the recent corporate governance agreements with FF Top and FF Global and the recent assessment by the Board of FF’s management structure, including management roles, responsibilities and reporting lines.” However, pursuant to the Heads of Agreement, FF has implemented certain governance changes that impact certain of the above-discussed remedial actions.

On October 3, 2022, Ms.

Swenson tendered her resignation from her role as both Executive Chairperson and member of the Board effective immediately.

In addition, on October 3, 2022, Mr.

Scott Vogel resigned from the Board effective immediately and Mr.

Jordan Vogel resigned effective on October 5, 2022 upon his receipt of a supplemental release pursuant to the Mutual Release.

On October 28, 2022, Mr.

Brian Krolicki tendered his resignation from the Board effective immediately.

On December 15, 2022, Mr.

Lee Liu tendered his resignation from the Board, which resignation was effective on December 18, 2022.

On December 18, 2022, Mr.

Jie Sheng was appointed to the Board, effective immediately, following the resignation of Mr.

On December 25, 2022, Mr.

Edwin Goh tendered his resignation from the Board, which resignation was effective on December 26, 2022.

On December 27, 2022, Ms.

Ke Sun was appointed to the Board, effective immediately, following the resignation of Mr.

Sheng and Ms.

Sun are designees of FF Top pursuant to the Amended Shareholder Agreement.

On December 26, 2022, Dr.

Carsten Breitfeld tendered his resignation from the Board, which resignation was effective immediately.

On December 27, 2022, Mr.

Xuefeng Chen was appointed to the Board, effective immediately, following the resignation of Dr.

On January 20, 2023, Mr.

Qing Ye tendered his resignation from the Board, which resignation was effective immediately.

Ye remains a consultant of the Company as an independent contractor until November 18, 2023, at which time both parties will mutually reassess the relationship.

On January 25, 2023, Mr.

Chui Tin Mok was appointed to the Board, effective immediately, following the resignation of Mr.

See “ Management – Governance Agreement with FF Top and FF Global ” for more information.

Subsequent to FFIE announcing the completion of the Special Committee investigation on February 1, 2022, FFIE, certain members of the management team and employees of FFIE 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.

FFIE, 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.

FF 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, FF 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.

In addition, in June 2022, FF received a preliminary request for information from the DOJ in connection with the matters that were the subject of the Special Committee investigation.

FF has responded to that request and intends to fully cooperate with any future requests from the DOJ.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

FF has been involved in litigation with contractors and suppliers when FF failed to make overdue payments due to cash constraints FF faced, certain of which were settled through the Vendor Trust FF established on April 29, 2019.

In exchange for contributing accounts receivable to the Vendor Trust, the participating vendors were required to refrain from bringing legal claims regarding any overdue payment and forbear from exercising remedies on any payables tendered to and accepted by the Vendor Trust.

FF’s suppliers and contractors holding aggregate past due payables of approximately $ 116.1 million contributed payables to the Vendor Trust in exchange for interests in the Vendor Trust.

Certain FF suppliers and contractors also ultimately received interests in the Vendor Trust related to approximately $ 8.4 million of purchase orders for goods and services to be provided in the future.

During September and October 2020, FF paid an aggregate of $ 4.5 million to the Vendor Trust, thus reducing the aggregate past due principal payables and purchase orders held by the Vendor Trust to approximately $ 136.6 million.

In the fourth quarter of 2020, the Vendor Trust agreed to amend the agreement governing the satisfaction of interests in the Vendor Trust to permit the conversion of the interests in the Vendor Trust to equity interests in PSAC in connection with the Business Combination.

In June 2021, FF and the Vendor Trust further agreed to allow the holders of interests in the Vendor Trust to elect to receive up to $ 10.0 million in cash in the aggregate upon closing of the Business Combination, which would reduce on a dollar-for-dollar basis the number of equity interests to be issued to such holders in satisfaction of their interests in the Vendor Trust.

Fifty-three ( 53 ) of the holders of interests in the Vendor Trust elected to participate in the $ 10.0 million cash distribution at the closing of the Business Combination, and the remaining interests in the Vendor Trust were settled through the conversion of interests into Class A Common Stock and payment of cash at the closing of the Business Combination.

The Palantir License

Palantir invested $ 25.0 million 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 $ 47.0 million of hosting fees over a six-year term, $ 5.3 million of which was paid during the year ended December 31, 2021.

No payments were made during 2022.

The software is cloud hosted for the entirety of the subscription term and the Company cannot take possession of the software.

Accordingly, the 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.

Unconditional Contractual Obligations

An unconditional contractual obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances).

As of December 31, 2022, we estimate FFIE’s total unconditional contractual commitments, including purchases of inventory, tooling, machinery and equipment as well as items to be used in research and development activities;

lease minimum payments and other contractual commitments, totaling $ 383.6 million, which included $ 282.3 million for the year ended December 31, 2023, $ 33.8 million for the two years ended December 31, 2025, $ 21.6 million for the two years ended December 31, 2027 and $ 45.9 million thereafter.

The $ 282.3 million unconditional contractual obligations for the year ended December 31, 2023 included $ 243.8 million of open purchase orders.

Although open purchase orders are generally considered enforceable and legally binding, some of the Company’s purchase orders gives it 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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Stockholders’ Equity

The number of authorized, issued and outstanding stock, were as follows:

December 31, 2022

Shares Shares Issued Shares to be Issued Total Issued and to be Issued Shares

Shares Issued Shares

Preferred Stock 10,000,000 —

4 unchanged sentences

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

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

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.

Former stockholders and noteholders of Legacy FF were 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, 2022 and 2021, the Company’s transfer agent has issued 627,346,804 and 168,693,323 legally outstanding shares, respectively.

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

Amendments 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.

3 unchanged sentences

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.

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.

At a special meeting of the Company’s stockholders held on November 3, 2022, stockholders approved, among other things, an increase to the number of the Company’s authorized shares from 825,000,000 to 900,000,000 .

On November 22, 2022, the Company filed an amendment to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the increase.

A special meeting of the Company’s stockholders held on February 28, 2023, the Company’s stockholders approved a

further increase to the number of the Company’s authorized shares of Class A Common Stock from 815,000,000 to

1,690,000,000 , increasing the Company’s total number of authorized shares of Common Stock and preferred stock from

900,000,000 to 1,775,000,000 .

On March 1, 2023, the Company filed an amendment to its Second Amended and Restated

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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.

Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect such amendment.

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 $ 20.0 million 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.

Pursuant to the Amended Shareholder Agreement, as further described in Note 18, S ubsequent Events , FF Top informed the Company that it expects the Company will submit a proposal to the Company stockholders for approval to amend the Amended and Restated Charter to provide that (i) the voting power of the Company’s Class B Common Stock, of which FF Global owns all outstanding shares, will be 10 votes per share and (ii) the voting power of the Company’s Class B Common Stock will increase from 10 votes per share to 20 votes per share following the occurrence of a Qualifying Equity Market Capitalization, as expected to be amended.

Pursuant to the Amended Shareholder Agreement, the definition of a Qualifying Equity Market Capitalization is expected to be defined as FFIE, at the end of any 20 consecutive trading days, has a volume weighted average total equity market capitalization of at least $ 3.0 billion (which replaced the previous amount of $ 20.0 billion) as determined by multiplying the average closing sale price per share of Class A Common Stock on the Nasdaq (or such other securities exchange on which PSAC’s securities are then listed for trading) 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 FFIE.

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;

however, FF Top has agreed not to convert

its shares of Class B Common Stock into shares of Class A Common Stock in connection with the special meeting of

stockholders held on February 28, 2023, after which, FF Top may again convert the shares Class B Common Stock it holds at

Class A Common Stock does not have the right to convert into Class B Common Stock.

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.

The number of outstanding warrants to purchase the Company’s Class A Common Stock as of December 31, 2022 were as follows:

Number of Warrants Exercise Price Expiration Date

SPA Warrants (1)

346,453,115 $ 0.23 Various through September 23, 2029

ATW NPA Warrants (2)

76,804,450 $ 0.23 Various through August 10, 2028

Other warrants 29,454,593 $ 0.23 August 5, 2027

Public Warrants (3)

23,540,988 $ 11.50 July 21, 2026

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Private Warrants (4)

111,131 $ 11.50 July 21, 2026

Total 476,364,277

(1) The warrants were issued pursuant to the SPA and recorded at fair value at each issuance date and at each reporting date.

(2) The ATW NPA Warrants were exercised in full after the balance sheet date (see Note 18, Subsequent Events ).

On September 23, 2022, the Company and Purchasers of the ATW NPA Notes entered into an agreement to place a total of 31,118,718 outstanding warrants related to the Optional Notes and the June 2021 Notes (see Note 10, Notes Payable ) into a warrant reserve with an exercise price now set to $ 0.6427 per warrant (“Warrant Reserve”).

Upon the completion of certain milestones and conditions, the Company may elect a forced conversion clause settleable in cash through January 23, 2023 on the warrants, requiring the warrant holders to exercise their warrants on a cash basis in exchange for newly issued shares of the Company’s Class A Common Stock.

The aggregate exercise price of the Warrant Reserve is $ 20,000 .

The remaining outstanding warrants not in the Warrant Reserve but also issued pursuant to the Optional Notes and the June 2021 Notes totaling 29,158,364 warrants, are agreed to have their exercise price set at $ 0.50 per warrant.

As described in Note 18, Subsequent Events , the holders exercised all ATW NPA Warrants and as a result the Company’s right to force the exercise of such warrants terminated.

The amendment of the warrants issued pursuant to the Optional Notes and the June 2021 Notes, which set the exercise price to $ 0.50 per warrant, resulted in the recognition of expense of $ 1,238 in Change in fair value measurements in the unaudited Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

(3) During 2022, PSAC Sponsor transferred 563,420 Private Warrants to unaffiliated third-party purchasers on the open market.

Upon such transfer the transferred warrants became subject to identical terms to the Public Warrants underlying the units offered in the initial public offering of PSAC.

Therefore, upon their transfer the Company classified the warrants to APIC at their fair value.

(4) The Private Warrants are recorded in Other liabilities, less current portion in the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021.

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

3 unchanged sentences

Total 28,196,377

(1) The Private Warrants are recorded in Other liabilities, less current portion in the Consolidated Balance Sheet as of December 31, 2021.

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 $ 90.9 million and accrued interest of $ 43.5 million 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 $ 30.0 million into the commitment to issue 11,566,196 shares of Class A Common Stock;

and (ii) notes payable with a principal balance of $ 75.1 million and accrued interest of $ 23.3 million into the commitment to issue 7,823,306 shares of Class A Common Stock.

Conversion of Liabilities as Part of the Business Combination

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

In conjunction with the closing of the Business Combination, the Company paid $ 140.0 million 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.

Insufficient Authorized Shares

From time to time, certain of the Company’s equity-linked financial instruments may be classified as derivative liabilities under ASC 815, Derivatives and Hedging , due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares.

In such case, the Company applies a sequencing policy under ASC 815-40, Contracts in Entity’s Own Equity , whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary due to the Company’s inability to demonstrate it has sufficient authorized shares to settle the equity-linked financial instrument in shares, the Company will reclassify contracts that have overlapping settlement dates with the latest inception date as derivative instruments.

The contracts reclassified as derivative instruments are recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled or the Company has sufficient authorized, unissued shares to settle such contracts with shares.

The Company has elected to apply the same sequencing policy for share-based compensation arrangements if the Company granted share-based payment arrangements where the Company may have insufficient shares to settle the contract.

As of December 31, 2022, the Company reclassified the earnout shares from equity classification to liability classification as a result of the Company having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40.

As a result of the reclassification, the Company reclassified $ 2.25 million out of additional paid-in capital into the earnout liability, which is included in Other current liabilities on the Consolidated Balance Sheet as of December 31, 2022.

As of December 31, 2022, the Company reclassified 53,820,670 shares of outstanding share-based payment arrangements from equity classification to liability classification as a result of the Company having insufficient authorized shares to settle the share-based payment arrangements when the awards vest or is exercised.

As a result of the reclassification, the Company reclassified an amount of $ 4.0 million out of additional paid-in capital into share-based payment liability, which is included in Other current liabilities on the Consolidated Balance Sheet as of December 31, 2022.

Stock-Based Compensation

3 unchanged sentences

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.

As of the date of issuance of the Consolidated Financial Statement, the Board of Directors is evaluating the timing and extent of such increases.

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 (defined below).

As of December 31, 2022 and 2021 the Company had 25,057,455 and 49,573,570 shares of Class A Common Stock available for future issuance under the 2021 SI Plan.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Option Awards

A summary of the Company’s stock option activity under the SI Plan is as follows (dollars in thousands except weighted average exercise price):

Options Weighted

Price Weighted

Contractual Life (Years) Aggregate

Outstanding as of December 31, 2021

Granted 8,633,607 $ 3.04

Cancelled/forfeited ( 1,987,155 ) 3.96

Outstanding as of December 31, 2022

6,646,452 $ 2.76 8.97 $ —

Exercisable as of December 31, 2022

2,675,027 1.85 8.38 —

As of December 31, 2022, the total unrecognized stock-based compensation expense for stock options granted under the SI Plan was $ 2.6 million, which is expected to be recognized over a weighted average period of 2.87 years.

The weighted-average assumptions used in the Black-Scholes option pricing model for awards granted during the year ended December 31, 2022 are as follows:

Risk-free interest rate:

Expected term (in years):

Expected volatility:

Dividend yield:

Grant date fair value per share $ 3.19

The total grant date fair value of options vested during the year ended December 31, 2022 was $ 2.7 million.

Restricted Stock Units

A summary of the Company’s RSU activity under the SI Plan is as follows:

Weighted Average Fair Value

Outstanding as of December 31, 2021

29,247,487 $ 0.87

Released ( 10,015,141 ) $ 0.40

( 1,362,683 ) $ 1.30

Outstanding as of December 31, 2022

(1) 17,869,663 $ 1.09

(1) The Company’s subsidiaries in China have employees who are citizens of People’s Republic of China (PRC).

Pursuant to the regulation Circular 78 and Circular 7 issued by the Central State Administration of Foreign Exchange of PRC (“SAFE”), we cannot release vested RSUs to it’s PRC citizen employees before they have completed the required SAFE registration with a dedicated account set up for each of them to repatriate proceeds back to China under the SAFE.

As a result, 1,448,697 RSUs of the Company’s PRC citizens employees vested in 2022 were included in the outstanding RSUs at December 31, 2022 as unreleased RSUs because those employees did not complete the SAFE registration process.

As of December 31, 2022, the total unrecognized stock-based compensation expense for RSUs granted under the SI Plan was $ 9.5 million which is expected to be recognized over a weighted average period of 3.18 years.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

The total fair value of RSUs vested during the year ended December 31, 2022 was $ 6.0 million.

As further described in Note 2, Liquidity and Capital Resources and Going Concern , during 2022 management had been undertaking certain cash conservation measures directed toward achieving start of production of the FF 91 with available and secured funds.

As part of these measures, in October 2022, management implemented the Crowd Entrepreneurship – 2022 RSU Project (“CEP”), according to which employees were granted 9,094,405 RSUs, fully vested on December 31, 2022 subject to continued employment with the Company.

The RSUs were granted in lieu of at least a 25 % reduction in salary from November 1, 2022 to December 31, 2022, subject to certain laws and regulations.

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:

A summary of the Company’s stock option activity under the EI Plan is as follows (dollars in thousands except weighted average exercise price):

Options Weighted

8 unchanged sentences

31,962,921 $ 2.81 7.77 $ 86,075

Exercisable as of December 31, 2021

Exercised ( 1,606,795 ) 2.52 3,658

Expired/forfeited ( 6,933,850 ) 2.58 8,784

Outstanding as of December 31, 2022

23,422,276 $ 2.83 6.92 $ 22

Vested and expected to vest as of December 31, 2021

Exercisable as of December 31, 2022

16,013,998 $ 2.63 6.62 $ 21

The weighted-average assumptions used in the Black-Scholes option pricing model for awards granted during the twelve

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Stock-Based Compensation (cont.)

months ended December 31, 2021 and 2020 are as follows:

The weighted-average assumptions used in the Black-Scholes option pricing model for awards granted during the year ended December 31, 2021 are as follows:

Risk-free interest rate:

0.79 % 0.45 %

Expected term (in years):

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.

The total grant date fair value of options vested during the years ended December 31, 2022 and 2021 was $ 6.5 million and $ 7.0 million, respectively.

As of December 31, 2022, the total unrecognized stock-based compensation expense for stock options granted under the EI Plan was $ 6.1 million which is expected to be recognized over a weighted average period of 2.3 years.

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.

2 unchanged sentences

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.

In the event that the intrinsic value of the option is less than the accrued outstanding rent payments of $ 0.9 million 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:

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

A summary of the Company’s stock option activity under the STI Plan is as follows (dollars in thousands except weighted average exercise price):

Options Weighted

8 unchanged sentences

9,526,727 $ 5.55 8.01 $ 13,905

Exercisable as of December 31, 2021

Granted — $ —

Exercised ( 2,181,335 ) 2.50 1,468

Expired/forfeited ( 1,726,880 ) 7.78

Outstanding as of December 31, 2022

5,618,512 $ 6.34 6.94 $ —

Vested and expected to vest as of December 31, 2021

Exercisable as of December 31, 2022

1,181,230 $ 3.96 6.20 $ —

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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:

The Company 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 are as follows:

Risk-free interest rate:

1.39 % 0.59 %

Expected term (in years):

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 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:

The total grant date fair value of options vested during the years ended December 31, 2022 and 2021 was $ 0.1 million and $ 3.1 million, respectively.

As of December 31, 2022, the total unrecognized stock-based compensation expense for stock options granted under the STI Plan was $ 1.3 million, which is expected to be recognized over a weighted average period of approximately 3.5 years.

Stock-based compensation expense

Research and development $ 13,118 $ 4,001

2 unchanged sentences

$ 17,653 $ 11,345

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.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

Restricted Stock Awards for Employee Bonus

On July 21, 2021, in connection with the closing of the Business Combination, the Company issued 1,404,459 restricted stock awards (“RSAs”) 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:

The following table presents stock-based compensation expense related to RSAs included in each respective expense category in the Consolidated Statements of Operations and Other Comprehensive Loss for the year ended December 31, 2021 (dollars in thousands):

Restricted stock awards for employee bonus, net 2021

2 unchanged sentences

General and administrative 8,694

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

The provision for income tax consisted of the following:

The provision for income tax consisted of the following (dollars in thousands):

Federal $ — $ —

7 unchanged sentences

Total provision $ 61 $ 240

The components of losses before income taxes, by taxing jurisdiction, were as follows for the years ended December 31:

The components of losses before income taxes, by taxing jurisdiction, were as follows for the years ended December 31 (dollars in thousands):

$ ( 510,727 ) $ ( 408,520 )

1 unchanged sentence

Total $ ( 552,008 ) $ ( 516,265 )

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

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:

13 unchanged sentences

The main changes in foreign tax rate difference and valuation allowance related to higher foreign losses incurred in 2022.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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:

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 (dollars in thousands):

Deferred Tax Assets:

16 unchanged sentences

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.

The Company has recognized a full valuation allowance as of December 31, 2022 and 2021 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

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

The valuation allowance was $ 366.3 million and $ 256.4 million as of December 31, 2022 and 2021, 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.

3 unchanged sentences

As of December 31, 2022, 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.

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.

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.

federal and foreign net operating loss carryforwards of $ 1,159.0 million and $ 67.5 million, respectively, which will begin to expire in 2034 and 2023, respectively.

federal net operating loss carryforwards of $ 1,078.5 million 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.

federal net operating loss carryforwards of $ 80.5 million generated prior to December 31, 2017 may be carried forward for twenty years.

As of December 31, 2022, the Company has California net operating loss carryforwards of $ 953.1 million, 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.

federal R&D tax credit carryforwards and a state R&D tax credit carryforward of $ 4.2 million as of December 31, 2022.

state tax credits do not expire and can be carried forward indefinitely.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

6 unchanged sentences

As of December 31, 2022, the 2017 through 2022 federal returns and 2017 through 2022 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.

The Company is not under any income tax audits.

All of the prior year tax returns, from 2017 through 2022, 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:

The aggregate change in the balance of unrecognized tax benefits for the years ended December 31, is as follows (dollars in thousands):

Beginning balance $ 4,997 $ 2,666

5 unchanged sentences

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:

As of December 31, 2022 and

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

2021, 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 (dollars in thousands):

Beginning balance $ 256,413 $ 256,413

1 unchanged sentence

Ending balance $ 366,349 $ 256,413

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Net Loss per Share

6 unchanged sentences

The following table presents the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of December 31:

Convertible SPA notes 43,942,609 —

SPA make-whole provisions 130,180,503 —

SPA warrants 346,453,115 —

Convertible ATW notes — 9,009,210

ATW NPA warrants 76,804,450 —

Other warrants 29,454,593 4,544,258

Stock-based compensation awards – SI Plan - Options 6,646,452 —

Stock-based compensation awards – SI Plan - RSUs (1)

Stock-based compensation awards – EI Plan 23,422,276 31,962,921

2 unchanged sentences

Private warrants 111,131 674,551

Other warrants 4,544,258 272,730

Convertible notes payable 9,009,210 —

Total 704,044,292 78,695,235

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.

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:

(1) The Company’s subsidiaries in China have employees who are citizens of the PRC.

Pursuant to the regulation Circular 78 and Circular 7 issued by the Central State Administration of Foreign Exchange of PRC (“SAFE”), we cannot release vested RSUs to its PRC citizen

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

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.

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 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;

employees before they have completed the required SAFE registration with a dedicated account set up for each of them to repatriate proceeds back to China under the SAFE.

Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the Consolidated Financial Statements were issued.

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.

Bridge Notes Conversions

Between January 9, 2023 and the date of the filing of this Annual Report on Form 10-K, the Purchasers converted portions of the aggregate principal amount of the outstanding convertible notes of $ 23.5 million of Bridge Notes principal at a conversion price of $ 0.89 to $ 1.05 per share into 78,342,565 shares of Class A Common Stock.

Amended and Restated Shareholder Agreement

On January 13, 2023, the Company entered into an Amended and Restated Shareholder Agreement (the “Amended Shareholder Agreement”) with FF Top, pursuant to which the Company agreed to submit proposals for approval by the Company’s stockholders regarding the following amendments to the Company’s Amended and Restated Charter:

(i) an amendment to provide that (a) the voting power of the Class B Common Stock will be 10 votes per share, and (b) the voting power of the Class B Common Stock will increase from 10 votes per share to 20 votes per share immediately following the Company achieving a $ 3,000,000 equity market capitalization;

(ii) an amendment to include in the Amended and Restated Charter FF Top’s right to nominate and propose removal of its designees to the Board pursuant to the Amended Shareholder Agreement;

(iii) an amendment to provide stockholders with a written consent right subject to certain conditions, including that FF Top continue to hold a certain number of shares of Common Stock;

and (iv) an amendment to require, in the case of amendments to the Amended and Restated Charter or to the Company’s amended and restated bylaws that amend the rights afforded to FF Top pursuant to the Amended Shareholder Agreement, (a) unanimous Board approval, (b) approval by holders of two-thirds of all issued and outstanding shares of Common Stock, voting together as a single class, and (c) approval by holders of a majority of issued and outstanding shares of Class B Common Stock, voting together as a separate class.

The Company intends to call a special meeting in March 2023 to obtain stockholder approval of these proposals.

Fifth Amendment to the SPA

On January 25, 2023, FFIE entered into a Limited Consent and Amendment No.

5 to the SPA (“Fifth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser, pursuant to which Senyun agreed to purchase 10.0 million in principal amount of additional SPA Notes no later than January 27, 2023, which 10.0 million amount was funded on January 26, 2023.

Pursuant to the Fifth Amendment, FFIE also agreed (a) to use commercially reasonable efforts to file an amendment to the Company’s registration statement (File No.

333-268972) no later than January 29, 2023 and to seek effectiveness of such registration statement on or prior to February 10, 2023, which effectiveness notice was received on February 8, 2023 ;

(b) to use commercially reasonable efforts to file an additional registration statement on Form S-1 registering the re-sale by Senyun of all remaining shares of Class A Common Stock underlying Senyun’s SPA Notes and SPA Warrants no later than February 10, 2023 and to seek effectiveness of such additional registration statement as promptly as practicable thereafter (which registration statement was eventually filed on February 13, 2023);

(c) to honor the conversion notice submitted by Senyun on January 18, 2023, and to reserve sufficient shares of Class A Common Stock to satisfy the conversion and exercise of all of Senyun’s SPA Notes and SPA Warrants to the extent FFIE has sufficient authorized but unissued or uncommitted shares of Class A Common Stock.

The notes subjected to the January 18, 2023 conversion notice were issued in February 2023.

Sixth Amendment to the SPA

On February 3, 2023, the Company entered into an amendment to the SPA (“Sixth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun, FF Top, FF Simplicity and other purchasers, pursuant to which the Company secured funding commitments of $ 135.0 million in exchange for the issuance of senior secured convertible notes (“Tranche C

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Subsequent Events (cont.)

• the appointment of Jordan Vogel as Lead Independent Director;

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;

• 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;

• 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.

The funding of such commitments shall be in stages and contingent upon completing certain conditions, as described in the agreement between the parties.

The Tranche C Notes constitute SPA Notes and, among others, are issuable at 10 % original issue discount and have a $ 1.05 base conversion price subject to full ratchet anti-dilution price protection and other adjustments as set forth therein, five year interest make-whole (calculated using the greater of (x) $ 0.21 per share of Common Stock and (y) 90 % of the lowest VWAP for the five consecutive trading days ending on the trading day that is immediately prior to the date on which interest is paid in shares of Common Stock), which entitle the lenders to receive all interest that accrued and would have accrued on their converted notes had they been held to maturity, 10 % per annum interest rate (or 15 % if paid in Common Stock subject to certain conditions).

As part of the Sixth Amendment, the Company agreed to issue warrants, which constitute SPA Warrants, to purchase number of shares of Common Stock equal to 33 % of such purchaser’s conversion shares, with an exercise price equal to $ 1.05 per share, subject to full ratchet anti-dilution price protection and other adjustments and a seven year termination date.

Each purchaser also has the option to purchase a certain amount of additional notes and warrants from time to time for twelve months from the effective date of the Sixth Amendment (“Tranche D Notes”).

The Company received gross proceeds of $ 70.0 million as part of the Sixth Amendment ($ 62.2 million net of original issue discount and transaction costs).

Warrant Exchange Agreement

Pursuant to the Sixth Amendment and the Exchange Agreements entered into concurrently therewith between FFIE and holders of ATW NPA Warrants and SPA Warrants (“Exchange Agreements”), (i) the provision under the ATW NPA Warrants and SPA Warrants then-issued that allowed investors to receive the right to purchase additional shares in connection with down round financings was removed, (ii) the ATW NPA Warrants and FF Simplicity’s SPA Warrants then issued, exercisable for an aggregate of 198,129,990 shares of Class A Common Stock, were exchanged for a combination of new warrants, exercisable at $ 0.23 per share subject to full ratchet anti-dilution price protection and other adjustments, for an aggregate of 42,489,346 shares of Class A Common Stock and new senior secured convertible notes with aggregate principal amount of $ 25.0 million, and (ii) Senyun’s SPA Warrants then issued, exercisable for an aggregate amount of 276,270,842 shares of Class A Common Stock, were exchanged for a combination of new warrants, each exercisable at $ 0.2275 per share subject to full ratchet anti-dilution price protection and other adjustments, for an aggregate of 48,000,000 shares of Class A Common Stock and new senior secured convertible notes with aggregate principal amount of $ 16.0 million (collectively with the notes issued pursuant to clause (ii), the “exchange Notes”).

The Exchange Notes are convertible at a conversion rate calculated at the lesser of (a) 90 % of the VWAP for the trading day that is immediately prior to the date on which interest is paid in shares of Common Stock or (b) the greater of (x) $ 0.21 per share of Common Stock and (y) 90 % of the average VWAP for the five consecutive trading days ending on the trading day that is immediately prior to the date on which interest is paid in shares of Common Stock.

The Exchange Notes will constitute SPA Notes, except:

(i) the holders thereof do not have the option under the SPA to purchase certain additional SPA Notes within 24 months from the effective date of the Sixth Amendment;

(ii) such notes are not subject to any prepayment premium or penalty applicable to other SPA Notes;

(iii) such notes are not subject to an original discount of 10 %;

and (iv) such notes are not entitled to the most favorable terms granted to other SPA Notes purchased simultaneously or after the purchase of such notes.

Such notes are prepayable and redeemable at par at any time by FFIE upon fifteen days ’ prior written notice.

Bridge Warrant and ATW NPA Warrant Exercises

Between January 13, 2023 and February 7, 2023, Holders of Bridge Warrants exercised 35,314,752 Bridge Warrants using an exercise price of $ 0.23 per share into 31,087,999 shares of Class A Common Stock.

Between January 13, 2023 and February 7, 2023, the Investors exercised 25,080,851 NPA ATW Warrants using an exercise price of $ 0.23 per share into 20,040,709 shares of Class A Common Stock.

The Company received $ 4.1 million in cash for proceeds of warrants.

Tranche B SPA Funding

In February 2023, Senyun and a Purchaser affiliated with ATW Partners LLC exercised 20 % of their options to purchase additional senior secured notes and SPA Warrants of the Company under the same terms as the Incremental Notes.

The Company received gross proceeds of $ 18.0 million $ 16.2 million net of original issuance discount) in exchange for such issuances.

Faraday Future Intelligent Electric Inc.

Notes to Consolidated Financial Statements

December 31, 2021 and 2020

(in thousands, except share and per share data)

Subsequent Events (cont.)

Beverly Hills, California Flagship Store Lease

In February 2022, the Company signed a Retail Lease Agreement with B.

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.

Start of Production and Start of Delivery Incentive Plan

On February 16, 2023, the Board approved the Company’s Start of Production and Start of Delivery Incentive Plan (“Incentive Plan”) granting cash bonuses and equity incentive awards to all active employees of the Company upon the commencement of the start of production of the Company’s FF 91 Futurist on or prior to March 31, 2023 and the commencement of the start of delivery of the Company’s FF 91 Futurist on or prior to April 30, 2023.

The Company determined that the Incentive Plan does not have a material impact on the Consolidated Financial Statements as of and for the year ended December 31, 2022.

Reporting Lines Restructuring

On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board approved Mr.

Yueting Jia (alongside Mr.

Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments reporting directly to Mr.

The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.

Xuefeng Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.

The Company’s remaining departments continue to report to Mr.

Xuefeng Chen.

Based on the changes to his responsibilities within the Company, the Board determined that Mr.

Jia is an “officer” of the Company within the meaning of Section 16 of the Exchange Act and an “executive officer” of the Company under Rule 3b-7 under the Exchange Act.

Authorized Shares

On February 28, 2023, the Company’s stockholders approved the proposal adopt an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000 , increasing the total number of authorized shares of Common Stock and Preferred Stock from 900,000,000 to 1,775,000,000 .

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk