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The following discussion and analysis is intended to help the reader understand FF’s results of operations and financial condition.
−Removed: This discussion and analysis is provided as a supplement to, and should be read in conjunction with FF’s unaudited Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this quarterly report on Form 10-Q (this “Report”).
+Added: This discussion and analysis is provided as a supplement to, and should be read in conjunction with FF’s Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this quarterly report on Form 10-Q (this “Report”).
Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to FF’s plans and strategy for FF’s business, includes forward-looking statements that involve risks and uncertainties.
−Removed: FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” in the Company’s Annual Report on Form 10-K/A filed on August 21, 2023 (“Form 10-K/A”), and “Cautionary Note Regarding Forward-Looking Statements” below.
+Added: FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” in the Company’s Annual Report on Form 10-K/A filed on August 21, 2023 (“Form 10-K/A”), “Risk Factors” in this Report and “Cautionary Note Regarding Forward-Looking Statements” below.
The objective of this section is to provide investors an understanding of the financial drivers and levers in FF’s business and describe the financial performance of the business.
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These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
−Removed: These risks and uncertainties include, but are not limited to, those factors described under the section titled “ Risk Factors ” in the Form 10-K/A.
+Added: These risks and uncertainties include, but are not limited to, those factors described under the section titled “ Risk Factors ” in the Form 10-K/A, as updated in this Report.
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
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(together with its consolidated subsidiaries, “FF,” “the Company,” “we,” “us” or “our”) is a California-based, global, shared, intelligent, mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry.
−Removed: On July 21, 2021, Faraday Future Intelligent Electric Inc.
−Removed: (f/k/a Property Solutions Acquisition Corp.
−Removed: (“PSAC”)), a Delaware corporation, consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of January 27, 2021 (as amended, the “Merger Agreement”), by and among PSAC, 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 FF Intelligent Mobility Global Holdings Ltd.
+Added: On July 21, 2021, FF (f/k/a Property Solutions Acquisition Corp.
+Added: (“PSAC”)), a Delaware corporation, consummated the previously announced business combination pursuant to an agreement and plan of merger, dated as of January 27, 2021 (as amended, the “Merger Agreement”), by and among PSAC, 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 FF Intelligent Mobility Global Holdings Ltd.
(“Legacy FF”).
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With headquarters in Los Angeles, California, FF designs and engineers next-generation, intelligent, connected, electric vehicles.
−Removed: FF manufactures vehicles at its ieFactory California production facility in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing agreement with Myoung Shin Co., Ltd.
+Added: FF manufactures vehicles at its production facility in Hanford, California (the “FF ieFactory California”), with additional future production capacity needs addressed through a contract manufacturing agreement with Myoung Shin Co., Ltd.
(“Myoung Shin”), an automotive manufacturer headquartered in South Korea.
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FF believes these innovations will enable FF to set new standards in luxury and performance that will redefine the future of intelligent mobility.
−Removed: FF’s innovations in technology include its proprietary Variable Platform Architecture (“VPA”), propulsion system, and Internet Artificial Intelligence (“I.A.I.”) system.
We believe the following combination of capabilities of FF’s products, technology, the recent upgrade to FF Product and Technology Upgrade Generation 2.0 (PT Gen 2.0), team, and business model distinguish FF from its competitors:
−Removed: • FF has designed and developed a breakthrough mobility platform — its proprietary VPA.
+Added: • FF has designed and developed a breakthrough mobility platform — its proprietary Variable Platform Architecture (“VPA”).
• FF’s propulsion system provides a competitive edge in acceleration and range, enabled by an expected industry-leading inverter design, and propulsion system.
−Removed: • FF’s advanced I.A.I.
−Removed: technology offers high-performance computing, high speed internet connectivity, Over the Air (“OTA”) updating, an open ecosystem for third-party application integration, and a Level 3 autonomous driving-ready system, in addition to several other proprietary innovations that enable FF to build an advanced, highly-personalized user experience.
+Added: • FF’s advanced Internet Artificial Intelligence (“I.A.I.”) technology offers high-performance computing, high speed internet connectivity, Over the Air (“OTA”) updating, an open ecosystem for third-party application integration, and a Level 3 autonomous driving-ready system, in addition to several other proprietary innovations that enable FF to build an advanced, highly-personalized user experience.
• Since inception, FF has developed a portfolio of intellectual property, established its proposed supply chain, and assembled a global team of automotive and technology experts and innovators to achieve its goal of redefining the future of the automotive industry.
−Removed: As of August 10, 2023, FF has been granted approximately 660 patents globally.
+Added: As of November 7, 2023, FF has been granted approximately 660 patents globally.
• FF’s B2C (business-to-customer) passenger vehicle pipeline over the next five years is planned to include the FF 91 series, the FF 81 series, and the FF 71 series.
−Removed: • FF believes that the FF 91 Futurist will be the first ultra-luxury EV to offer a highly-personalized, fully-connected user experience for driver and passengers.
−Removed: FF announced the start of production of the FF 91 Futurist on March 29, 2023, and FF’s first production FF 91 Futurist vehicle came off the line on April 14, 2023.
+Added: • FF believes that the FF 91 Futurist ( the “FF 91,” “FF 91 Futurist,” or “FF 91 2.0 Futurist Alliance”) will be the first ultra-luxury electric vehicle to offer a highly-personalized, fully-connected user experience for driver and passengers.
+Added: FF started production on the first FF 91 futurist and delivered the first FF 91 2.0 Futurist Alliance in the first half of 2023.
• Subject to future financing, FF plans to produce and deliver its second passenger vehicle, the FF 81, which will be a premium, mass-market electric vehicle positioned to compete against the Tesla Model S, Tesla Model X, the BMW 5-series, and the Nio ES8.
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FF’s modular VPA facilitates entry into the last-mile delivery segment, allowing FF to expand its total addressable market and avenues of growth.
−Removed: FF has adopted a hybrid manufacturing strategy consisting of its refurbished manufacturing facility in Hanford, California and a collaboration with Myoung Shin in South Korea.
−Removed: FF is also exploring other potential contract manufacturing options in addition to the contract manufacturing agreement in South Korea along with the possibility of manufacturing capacity in China through a joint venture or other arrangements.
−Removed: All passenger vehicles as well as the SLMD vehicle are expected to be available for sale in the U.S.
+Added: All FF vehicles are expected to be available for sale in the U.S.
and China, with potential expansion to European markets.
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Segment Information
−Removed: On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board approved Mr.
+Added: On February 26, 2023, after an assessment by the board of directors of the Company (the “Board”) of the Company’s management structure, the Board approved Mr.
Yueting Jia (alongside Mr.
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The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.
−Removed: Xuefeng Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
−Removed: The Company’s remaining departments continue to report to Mr.
−Removed: Xuefeng Chen.
+Added: Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
Based on the changes to his responsibilities within the Company, the Board determined that Mr.
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Given the Company’s pre-revenue operating stage, it currently has no concentration exposure to products, services or customers.
+Added: On September 16, 2023, Mr.
+Added: Chen notified the Company of his decision to resign from his position as Global CEO of the Company and as a member of the Board effective September 29, 2023.
+Added: On September 21, 2023, the Board appointed Mattias Aydt to succeed Mr.
+Added: Chen as Global Chief Executive Officer and as a member of the Board, effective September 29, 2023.
+Added: The change in the Company’s Global CEO has not impacted the Company’s prior determination that its co-CODM's are both its Global CEO and Founder.
Recent Developments
−Removed: During the six months ended June 30, 2023, these milestones and events took place:
−Removed: • Announced Faraday Future’s return to the Consumer Electronics Show, CES 2023, in Las Vegas, NV.
−Removed: • Announced the shipment of one of the latest production-intent FF 91 Futurist testing vehicles to China for market testing and validation, including charging and infrastructure compatibility along with other hardware and software applications.
−Removed: • Announced that FF is targeting a start of production date for its flagship FF 91 Futurist of March 30, 2023, assuming timely receipt of funds from the Company’s investors, at the Company’s Hanford California manufacturing facility, “FF ieFactory California.”
−Removed: • Announced, on March 29, 2023, the start of production of FF’s flagship FF 91 Futurist at the FF ieFactory California.
−Removed: • Announced the completion of FF’s first production build vehicle, the FF 91 Futurist, which came off its production line at FF ieFactory California on April 14, 2023.
−Removed: • Announced the launch of FF’s Generative AI Product Stack, which will be integrated in the Company’s flagship vehicle, the FF 91 Futurist.
−Removed: FF is one of the first automotive manufacturers to integrate and demonstrate generative AI capabilities in a vehicle.
−Removed: • Appointed Rich Schmidt as Vice President of Manufacturing.
−Removed: Schmidt is responsible for leading all facets of FF’s production and manufacturing, focusing on the FF ieFactory California.
−Removed: He oversees the continued development, component tooling, and hiring related to the production of the FF 91 Futurist.
−Removed: Schmidt succeeded Mathias Hofmann, FF’s Senior Vice President of Global Supply Chain.
−Removed: • Appointed Ed Darwick as Head of Finance Operations.
−Removed: Reporting to the Company’s Interim Chief Financial Officer, Ed is accountable for developing, implementing, and improving systems and staffing across the entire range of functions and groups under his direction.
−Removed: • Held its virtual 2023 Global Supplier Summit on May 17, 2023 for its global supply chain network of key suppliers and strategic partners.
−Removed: Over 200 suppliers signed up to listen in to the Company’s leadership team give a comprehensive overview of the Company’s global strategy, vision, business plan and project updates.
−Removed: • Announced its newly established “Mission Farad,” designed to encompass the Company’s many benefits to its user-based co-creation philosophy.
−Removed: “Mission Farad” is expected to bring the Company’s users more innovative experiences and opportunities.
−Removed: It consists of four key components:
−Removed: an open-source co-creation technology platform, a co-sharing business model, a co-partnership governance structure, and a win-win product portfolio.
−Removed: • Announced on May 25, 2023 that the FF 91 Futurist successfully passed the Federal Motor Vehicle Safety Standard (“FMVSS”) crash test requirements.
−Removed: The Company has performed the highest severity crash tests and has passed all of these tests successfully, including front, side and rear crash tests.
−Removed: • Unveiled on May 30, 2023 its “FF 91 Final Launch & Faraday Future 2.0 Event.” The Company announced product upgrades since the FF 91 Futurist’s introduction six years ago leading into the 2.0 era of mobility and officially unveiled the release of the silicon-based new species, the FF 91 2.0 Futurist Alliance and the FF 91 2.0 Futurist.
−Removed: The FF 91 2.0 Futurist Alliance is priced at U.S.
−Removed: MSRP of $309,000 and is currently limited to 300 units globally.
−Removed: The Company also launched its mobile ecosystem product, “FF aiHypercar+,” which will be available for an annual subscription price of $14,900 both in the U.S.
−Removed: and China with the price of $100 for pre-orders.
−Removed: FF’s mobility ecosystem products encompass software, internet, vehicle service, personalized AI algorithms, and even special hardware versions tailored to specific user needs.
−Removed: These products are relevant to vehicle usage and user special rights.
−Removed: • Announced on June 2, 2023 the signing of the first sales contract for the FF 91 2.0 Futurist Alliance as the Company continues to execute on the first phase of its three-phase delivery plan.
−Removed: • Announced on June 8, 2023 a successful completion of the Company’s first FF Developer Co-creation Mission event, which took place at Willow Springs International Raceway on June 6, 2023.
−Removed: The Company also announced the confirmation of the second and third users of the FF 91 2.0 Futurist Alliance.
−Removed: The first three users of the FF 91 2.0 Futurist Alliance are committed to providing long-term support for FF’s product development, product improvement, brand marketing, product design, sales and user acquisitions.
−Removed: These users have joined or are currently considering participating in the FF owner-developer co-creation project.
−Removed: The co-creation business model is an open UP2U business model that allows users to become FF partners and enable value co-creation.
−Removed: The shared technology platform is expected to provide more innovation and services for users and achieve better co-sharing benefits.
−Removed: In particular, the user developer part of FF’s co-creation program enables FF to establish a strong cooperative relationship with valued users and consultants.
−Removed: These user developers are acquiring the FF 91 2.0 Futurist Alliance upon payment of the purchase consideration.
−Removed: They are also entering into consulting, branding, and other arrangements with FF in exchange for fees ranging from approximately $225,000 to $475,000.
−Removed: Through these collaborations, the initial group of car users will establish a strong cooperative relationship with FF as valued users and consultants.
−Removed: This development cooperation is expected to enable FF to tap into Spire user markets within the luxury home, celebrity, and luxury car circles.
−Removed: • Announced on June 16, 2023 that due to a supplier’s timing constraints and the completion timing of an additional system testing related to the Company’s enhanced safety testing of a single unique product feature of the FF 91 2.0 Futurist Alliance, the Company updated the timing of its previously announced FF 91 2.0 Futurist Alliance Phase 2 delivery from the end of the second quarter 2023 to August 2023.
−Removed: The Company’s enhanced safety testing is unrelated to what is required by the FMVSS requirements.
−Removed: In the period subsequent to June 30, 2023, these additional milestones and events took place:
−Removed: • Announced on July 5, 2023 that Yun Han notified the Company of her decision to resign from her positions as Interim CFO, principal financial officer and principal accounting officer effective immediately.
−Removed: Han will continue her role as Chief Accounting Officer of the Company.
−Removed: On July 11, 2023 the Board appointed Jonathan Maroko as Interim Chief Financial Officer, principal financial officer and principal accounting officer effective July 24, 2023.
−Removed: • Announced on August 14, 2023 the official delivery of its first Ultimate AI Techluxury FF 91 2.0 Futurist Alliance.
−Removed: This marks FF’s entry into its revenue generation stage and the formation of a complete operational closed loop.
−Removed: A delivery ceremony was held for FF’s first Spire user on August 12, 2023.
Recent Governance Developments
−Removed: • As previously disclosed, from June to September 2022, FF and FF Global Partners LLC (“FF Global”) were party to a dispute over various terms of the Shareholder Agreement as then in effect, including relating to FF Global’s right to remove its designees from the Board.
−Removed: On September 23, 2022, the Company, FF Global and FF Top Holding LLC (“FF Top”) entered into a governance settlement with FF Top, the largest holder of the Company’s Common Stock, including with respect to the composition of the Board, resignation of Ms.
−Removed: Susan Swenson and Mr.
−Removed: Brian Krolicki, and the appointment of Adam (Xin) He to the Board.
−Removed: In connection with an agreement between FF Global and FF Top (the “Heads of Agreement”), on September 23, 2022, the Company and FF Global entered into a mutual release agreement (the “Mutual Release”), pursuant to which, the Company and FF agreed to a mutual general release of claims and to settle fully and finally all differences between them, including any differences that arose out of the Company directors’ service as a director, employee, officer or manager of the Company up through and including the date of the Mutual Release subject to customary exceptions .
−Removed: Pursuant to the Heads of Agreement, FF Top and FF Global caused all actions in the Court of Chancery of the State of Delaware, and any other forum, filed by FF Top, FF Global and/or any of their respective controlled affiliates as of the effective date of the Heads of Agreement, naming the Company or any of its directors or officers to be dismissed without prejudice as of September 27, 2022.
−Removed: 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.
−Removed: On September 30, 2022, FF Global alleged that the Company was in material breach of the spirit of the Heads of Agreement.
−Removed: The Company believes it has complied with the applicable terms of the Heads of Agreement, and disputes any characterization to the contrary.
−Removed: Such disputes divert management and Board resources and are costly.
−Removed: There can be no assurance that this or any other dispute between the Company and FF Global will not result in litigation
−Removed: On October 3, 2022, Ms.
−Removed: Swenson and Mr.
−Removed: Scott Vogel, a member of the Board, tendered their resignation from the Board effective immediately.
−Removed: On October 3, 2022, Mr.
−Removed: 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.
−Removed: • On October 14, 2022, FF Top delivered to the Company a “Notice of Nomination of Replacement FF Top Designees” stating, among other things, that FF Top was nominating a director to fill the vacancy on the Board left by Ms.
−Removed: Swenson’s resignation.
−Removed: FF Top asserted the right to nominate a director to fill the vacancy created by Ms.
−Removed: Swenson’s resignation because such resignation was not effected in accordance with the Heads of Agreement, and thus, the provision that Ms.
−Removed: Swenson’s seat would remain empty until the Annual Meeting did not apply.
−Removed: FF Top maintained that it believed that Ms.
−Removed: Swenson’s vacancy should be filled with a nominee of FF Top, notwithstanding the current level of FF Top’s beneficial ownership of the Company shares, in light of substantial dilution in its ownership of the Company shares based on recent financing transactions entered into by the Company.
−Removed: • On October 22, 2022, FFIE and FF Top entered into an amendment (the “FF Top Amendment”) to the Letter Agreement Regarding Advanced Approval, dated as of September 23, 2022, between the Company and FF Top (the “FF Top Voting Agreement”).
−Removed: Pursuant to the FF Top Amendment, FF Top (among other things) reaffirmed its commitment under the FF Top Voting Agreement, in light of the extension of the maturity date of the Bridge Notes under the Third Amendment, to vote all of its shares of the Company voting stock in favor of the proposal to approve (for purposes of the Nasdaq Stock Market LLC (“Nasdaq”) listing rules) the issuance, in the aggregate, of shares in excess of 19.99% of the total issued and outstanding shares of the Company Common Stock pursuant to the Financing Documents at the special meeting of the Company’s stockholders held on November 3, 2022.
−Removed: FF Top’s obligations pursuant to the FF Top Amendment are conditioned on (i) the appointment of Mr.
−Removed: Chad Chen (or a substitute nominee, as applicable), to the Board as the fourth FF Top designee no later than October 27, 2022 (provided that Mr.
−Removed: Chen or a substitute nominee, as applicable, is reasonably acceptable to the Nominating and Corporate Governance Committee of the Board with respect to the Nasdaq independence rules and legal compliance and criminal compliance) (provided that if Mr.
−Removed: Chen is not so reasonably acceptable to the Nominating and Corporate Governance Committee of the Board, then FF Top will be permitted to nominate another individual to the Board);
−Removed: and (ii) constructive engagement by Mr.
−Removed: Adam (Xin) He, the Interim Chairman of the Board until his resignation on July 31, 2023, directly with representatives of FF Top on certain additional governance and management matters and, to the extent the Chairman of the Board so determines, in his discretion, such matters will be put to a discussion and a vote of the full Board.
−Removed: On October 27, 2022, Mr.
−Removed: Chen was appointed to the Board.
−Removed: On October 28, 2022, Mr.
−Removed: Brian Krolicki tendered his resignation from the Board effective immediately.
−Removed: • On November 26, 2022, the Board appointed Mr.
−Removed: Xuefeng Chen as Global CEO, effective as of November 27, 2022.
−Removed: Xuefeng Chen replaced Dr.
−Removed: Carsten Breitfeld, who was removed from the Global CEO position by the Board on November 26, 2022.
−Removed: • On November 29, 2022, Mr.
−Removed: Robert Kruse, FF’s former Senior Vice President, Product Execution, resigned from the Company.
−Removed: On December 13, 2022, Mr.
−Removed: Matthias Aydt took on the role of Senior Vice President, Product Execution, effective immediately.
−Removed: • On December 15, 2022, Mr.
−Removed: Lee Liu tendered his resignation from the Board, which resignation was effective on December 18, 2022.
−Removed: On December 18, 2022, Mr.
−Removed: Jie Sheng was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On December 25, 2022, Mr.
−Removed: Edwin Goh tendered his resignation from the Board, which resignation was effective on December 26, 2022.
−Removed: On December 27, 2022, Ms.
−Removed: Ke Sun was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: Sheng and Ms.
−Removed: Sun are designees of FF Top pursuant to the Amended Shareholder Agreement.
−Removed: On December 26, 2022, Dr.
−Removed: Carsten Breitfeld tendered his resignation from the Board, which resignation was effective immediately.
−Removed: On December 27, 2022, Mr.
−Removed: Xuefeng Chen was appointed to the Board, effective immediately, following the resignation of Dr.
−Removed: On January 20, 2023, Mr.
−Removed: Qing Ye tendered his resignation from the Board, which resignation was effective immediately.
−Removed: 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.
−Removed: On January 25, 2023, Mr.
−Removed: Chui Tin Mok was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On March 9, 2023, Mr.
−Removed: Matthias Aydt tendered his resignation from the Board, effective upon the nomination and approval by the Board of a replacement director.
−Removed: On March 13, 2023, upon the recommendation of the Nominating and Corporate Governance Committee, the Board appointed Li Han to fill the vacancy on the Board due to Mr.
−Removed: Aydt’s resignation.
−Removed: • On January 13, 2023, the Company entered into an Amended and Restated Shareholder Agreement (the “Amended Shareholder Agreement”) with FF Top and, solely for purposes of certain amendments to the Heads of Agreement, FF Global, which amended and restated the Shareholder Agreement, as amended by the Heads of Agreement.
−Removed: Pursuant to the Amended Shareholder Agreement, (a) FF Top has the right to nominate certain designees to the Board, (b) the Company agreed not to elect to be treated as a “controlled company” as defined under Nasdaq rules, (c) the Company agreed to cooperate with any written requests by FF Top relating to any pledge, hypothecation or grant of shares of Common Stock, (d) FF Top informed the Company that FF Top expects certain proposals to be submitted to Company stockholders for approval to amend provisions of the Company’s Amended and Restated Certificate of Incorporation related to voting power of Class B common stock, par value $0.0001 per share (the Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”), FF Top designees to the Board and written consent of stockholders, (e) the Company agreed not to enter into any transaction or series of related transactions that would require a stockholder vote under Nasdaq Listing Rule 5635(d) (without giving effect to Section 5635(f) thereof) without FF Top’s prior written consent, which written consent shall not be unreasonably withheld, conditioned or delayed, (f) the Company agreed that investors under the SPA (as defined below) shall have the right to enter into any voting agreement or grant a voting proxy, at any time and on any terms, with or to FF Top with respect to any shares of Common Stock held by such investors, (g) FF Top agreed (i) to vote all shares of Common Stock that it beneficially owns in favor of an increase in the Company’s authorized shares of Class A Common Stock from 815.0 million to 1.69 billion (as such number may be adjusted due to any stock split, reverse stock split or other similar corporate action after January 13, 2023) at the next meeting of the Company’s stockholders held to consider such proposal (as such meeting may be adjourned or postponed) and (ii) not to transfer, convert or otherwise take any action that would result in the conversion of any shares of Class B Common Stock into Class A Common Stock of the Company prior to the Company’s receipt of stockholder approval for an increase in the number of authorized shares of Class A Common Stock in accordance with the foregoing, (h) (i) FF Top released and waived claims it or any other “FF Top Parties” (i.e., FF Top, FF Peak Holding LLC, a Delaware limited liability company, Pacific Technology Holding LLC, a Delaware limited liability company, FF Global and each of their affiliates, and their respective successors and assigns) may have had against the Company and the Company Parties (described below;
−Removed: such claims, the “FF Top Claims”) relating to matters occurring at any time after September 23, 2022 but prior to the execution of the Amended Shareholder Agreement (the “FF Top Release”), and (ii) the Company released and waived any and all claims it or any other “Company Parties” (i.e., the Company and each of the Company’s controlled affiliates, each individual currently serving as a director or on the management team of the Company or any of its controlled affiliates, and the respective successors and assigns of any of the foregoing) may have against FF Top Parties relating to any matters occurring at any time after September 23, 2022 but prior to the execution of the Amended Shareholder Agreement, and (i) the Company, FF Top and FF Global agreed that certain conditions in the Heads of Agreement have been satisfied, that there are no Definitive Documents (as such term is defined in the Heads of Agreement) beyond the Heads of Agreement and the Amended Shareholder Agreement, and to certain other amendments of the Heads of Agreement.
−Removed: • On February 26, 2023, after an assessment by the Board of FF’s management structure, the Board approved Mr.
−Removed: Yueting Jia (alongside Mr.
−Removed: 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.
−Removed: The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.
−Removed: Xuefeng Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
−Removed: The Company’s remaining departments continue to report to Mr.
−Removed: Xuefeng Chen.
−Removed: Based on the changes to his responsibilities within the Company, the Board determined that Mr.
−Removed: 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.
−Removed: • Announced on June 16, 2023 that the Board has approved a proposal, to be submitted to stockholders for approval at a special meeting of stockholders (scheduled for August 16, 2023), to authorize the Board to effect a reverse stock split of the Company’s Common Stock.
−Removed: The reverse stock split proposal includes a proposed range between 1-for-2 and 1-for-90 shares of outstanding Common Stock.
−Removed: The final ratio will be determined by the Board after stockholder approval.
−Removed: The reverse stock split would not affect any stockholder’s percentage ownership interests or proportionate voting power, except to the extent that it results in a stockholder receiving an additional whole share in lieu of a fractional share.
−Removed: In addition, the reverse stock split would not reduce the total number of shares of Common Stock that the Company is authorized to issue.
−Removed: • On June 16, 2023, in connection with a purchase agreement entered into with Xuefeng Chen, the Company’s Global CEO, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware.
−Removed: The Series A Certificate of Designation designates one share of the Company’s Preferred Stock as Series A Preferred, and establishes and designates the preferences, rights and limitations thereof.
−Removed: The Series A Certificate of Designation became effective upon filing.
−Removed: The closing of the sale and purchase of the share of Series A Preferred, par value $0.0001 per share (the “Series A Preferred”), was completed on June 16, 2023 for a purchase price of $100.00.
−Removed: The share of Series A Preferred is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company.
−Removed: The share of Series A Preferred shall not be entitled to receive dividends.
−Removed: The holder of Series A Preferred Stock is entitled to 60,000,000,000 votes for each share held of record, but has the right to vote only on any reverse stock split proposal and until such time as a reverse stock split proposal is approved by the stockholders, and will have no voting rights except (i) with respect to a reverse stock split proposal in which its votes are cast for and against such reverse stock split proposal in the same proportion as shares of Common Stock are voted for and against such reverse stock split proposal (with any shares of Common Stock that are not voted, whether due to abstentions, broker non-votes or otherwise not counted as votes for or against the reverse stock split proposal) and (ii) unless the holders of one-third (1/3rd) of the outstanding shares of Common Stock are present, in person or by proxy, at the meeting of stockholders at which a reverse stock split proposal is submitted for stockholder approval (or any adjournment thereof).
−Removed: The share of Series A Preferred will vote together with the Common Stock as a single class on any reverse stock split proposal.
−Removed: The Series A Preferred has no other voting rights, except as may be required by the General Corporation Law of the State of Delaware.
−Removed: Upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily, pursuant to which assets of the Company or consideration received by the Company are to be distributed to the stockholders, the holder of Series A Preferred will be entitled to receive, before any payment is made to the holders of Common Stock by reason of their ownership thereof, an amount equal to $100.00.
−Removed: The Series A Preferred may not be transferred at any time prior to stockholder approval of a reverse stock split without the prior written consent of the Board.
−Removed: The outstanding share of Series A Preferred will be redeemed in whole, but not in part, for a redemption price of $100.00, payable out of funds lawfully available therefor, (i) if such redemption is ordered by the Board in its sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion, or (ii) automatically immediately following the approval by the Company’s stockholders of a reverse stock split.
−Removed: The Series A Preferred was redeemed following the Special Meeting.
−Removed: • On July 6, 2023, the Company issued a press release announcing that the Board has approved an additional proposal to be submitted to stockholders for approval at the previously announced planned special meeting of stockholders.
−Removed: The new additional proposal is designed to cap the increase in the total authorized shares at seven times the number of post reverse split shares authorized assuming the previously disclosed reverse stock split proposal is approved and the reverse stock split is implemented.
−Removed: • On July 20, 2023, FF filed a Proxy Statement with the SEC in connection with the special meeting of FFIE stockholders, which was held on August 16, 2023.
−Removed: At such meeting FFIE stockholders approved a proposal to authorize the Board to effect a reverse stock split of the Company’s outstanding common stock at a range between 1-for-2 and 1-for-90 shares of outstanding common stock.
−Removed: This approval gives the Board the discretion to amend the Amended and Restated Charter to effect a reverse stock split (with such ratio to be determined in the discretion of the Board in the range of 1-for-2 to 1-for-90) of the outstanding Common Stock at any time within one year of the date of such special meeting of stockholders.
−Removed: In addition, at the special meeting, FFIE stockholders approved a proposal to, if and only if the reverse stock split proposal is approved and the reverse stock split is implemented at a ratio of 1-for-8 or greater, a proposal to limit the number of shares of authorized Common Stock to a number equal to 12,355,000,000 divided by the reverse stock split ratio determined by the Board.
−Removed: This approval essentially caps the number of authorized shares of Common Stock to a number that is seven times the amount of authorized shares currently available.
−Removed: The Company anticipates implementing the reverse stock split (which will result in an increase in authorized shares of Common Stock) soon after the issuance of the unaudited Condensed Consolidated Financial Statements.
−Removed: In addition, at the special meeting, FFIE stockholders approved, as is required by the applicable Nasdaq rules and regulations, additional transactions involving notes and warrants issued to Metaverse Horizon Limited (“MHL”), V W Investment Holding Limited (“VW”), FF Vitality Ventures LLC (“FFVV”), and Senyun International Ltd.
−Removed: (“Senyun”) under the Unsecured SPA, as amended.
−Removed: • On August 4, 2023, the Board appointed Lev Peker as a member of the Board and as a member and Chair of the Audit Committee of the Board to fill the vacancy on the Board and Audit Committee created by Adam (Xin) He’s resignation from the Board on July 31, 2023.
+Added: • On August 4, 2023, the Board appointed Mr.
+Added: Lev Peker as a member of the Board and as a member and Chair of the Audit Committee of the Board to fill the vacancy on the Board and Audit Committee created by Mr.
+Added: Adam (Xin) He’s resignation from the Board on July 31, 2023.
In connection with Mr.
−Removed: He’s resignation, and to comply with Nasdaq Listing Rule 5605(c)(4)(B), on August 2, 2023, the Company notified Nasdaq that the Company no longer complied with Nasdaq’s independent director and audit committee requirements as set forth in Listing Rule 5605 as the Board was not comprised of a majority of independent directors as required by Nasdaq Listing Rule 5605(b)(1) and the Audit Committee was not comprised of at least three independent directors as required by Nasdaq Listing Rule 5605(c)(2)(A), which noncompliance was subsequently cured by the appointment of Mr.
+Added: He’s resignation, and to comply with the Nasdaq Stock Market LLC (“Nasdaq”) Listing Rule 5605(c)(4)(B), on August 2, 2023, the Company notified Nasdaq that the Company no longer complied with Nasdaq’s independent director and audit committee requirements as set forth in Listing Rule 5605 as the Board was not comprised of a majority of independent directors as required by Nasdaq Listing Rule 5605(b)(1) and the Audit Committee was not comprised of at least three independent directors as required by Nasdaq Listing Rule 5605(c)(2)(A), which noncompliance was subsequently cured by the appointment of Mr.
Peker as a member of the Board and as a member of the Audit Committee.
2 unchanged sentences
Peker as a member of the Board and as a member and chair of the Audit Committee, the Company regained compliance with the board independence requirements as set forth in Nasdaq Listing Rule 5605(b)(1) and the audit committee requirements as set forth in Nasdaq Listing Rule 5605(c)(2)(A).
−Removed: Financing Discussion and Recent Financing Developments
−Removed: On March 29, 2023, FF announced the start of production of the FF 91 Futurist and, on April 14, 2023, FF’s first production FF 91 Futurist vehicle came off the line.
−Removed: Although FF has successfully obtained commitments since August 2022 from several investors totaling $462.9 million in convertible note financing, subject to certain conditions, and continues financing discussions with multiple parties, FF has experienced delays in securing additional funding commitments, which have exacerbated the supply chain pressures on FF’s business.
−Removed: 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 implementing headcount reductions and other expense reduction and payment delay measures.
−Removed: Further efforts, including additional headcount reductions, may be undertaken in response to FF’s financial condition and market conditions.
−Removed: FF has developed a three-phase delivery plan for the FF 91.
−Removed: The first phase began on May 31, 2023, the second phase began in August 2023, and will be followed by the third phase.
−Removed: The first phase is the “Industry Expert Futurist Product Officer (FPO) Co-Creation Delivery.” In this first phase, the Industry Expert FPO(s) are expected to pay in full for an FF 91 vehicle in order to reserve the vehicle and be trained in the use of the vehicle.
−Removed: The reserved FF 91 vehicle will be delivered to the FPO at the beginning of the second phase, the “FPO Co-Creation Delivery.” In this second phase, FPO(s) will take possession of the FF 91 vehicle.
−Removed: In this second phase, the FPO(s) are also entering into consulting, branding, and other arrangements with FF in exchange for fees to be paid by the Company to the FPO(s).
−Removed: The third phase is the “Full Co-Creation Delivery,” in which FF will deliver FF 91 vehicles to all spire users that pay in full for an FF 91 vehicle.
−Removed: Further, FF expects to need substantial additional financing to start the third phase of the delivery plan and is in discussions with additional potential investors to obtain such financing.
−Removed: The Company needs to raise additional capital to support the production and delivery of the FF 91 and satisfy its other capital needs.
−Removed: There is no assurance FF will be able to timely receive sufficient funding under existing financing commitments to produce and deliver the FF 91 on that timeline or at all or to satisfy other capital needs.
−Removed: 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 or at all.
−Removed: Further, even if adequate financing is secured, there cannot be any assurance that FF will be able to develop the manufacturing capabilities and processes, or secure reliable sources of component supply to meet the quality, engineering, design or production standards, or to meet the required production volumes to successfully grow into a viable, cash flow positive business.
−Removed: Convertible Senior Secured Promissory Notes
−Removed: On August 14, 2022, FF entered into a definitive Securities Purchase Agreement (the “Secured SPA”) with FF Simplicity Ventures LLC (“FFSV”), an entity affiliated with ATW Partners LLC, Senyun, and RAAJJ Trading LLC (“RAAJJ”) for $52.0 million of committed near-term convertible senior secured notes financing subject to certain conditions (which was increased on September 23, 2022 to $57.0 million, which increase was subsequently terminated upon the funding of the initial $10.0 million tranche of Secured SPA Notes to Senyun, which occurred on October 27, 2022, another $10.0 million on November 15, 2022, and another $10.0 million in December 2022), and the potential for an additional $243.0 million of incremental senior secured convertible notes (the “Secured SPA Notes”) financing to be funded within 90 days after the initial closing.
−Removed: A committed amount of $100.5 million ($86.5 million net of original issue discount and transaction costs) has been funded to date.
−Removed: On September 23, 2022, FF and certain investors affiliated with ATW Partners LLC (the “ATW Investors”) entered into a Warrant Exercise Agreement (the “Warrant Exercise Agreement”), pursuant to which, subject to the satisfaction of certain minimum trading price, minimum trading volume and certain other Equity Conditions (as described below), FF will have the right, exercisable on one or more occasions prior to January 23, 2023, to require the ATW Investors to exercise on a cash basis (each, a “Forced Exercise”) certain warrants held by the ATW Investors, in part, in exchange for newly issued shares
−Removed: of Class A Common Stock in an amount not to exceed (a) for any single Forced Exercise, $7.0 million in aggregate exercise price, and (b) for all Forced Exercises in the aggregate, the difference of (x) the maximum exercise price amount allowed under the Warrant Exercise Agreement (which is approximately $20.0 million) less (y) the aggregate exercise price of any voluntary exercises of the same warrants held by the ATW Investors after the date of the Warrant Exercise Agreement.
−Removed: The “Equity Conditions” are defined in the Warrant Exercise Agreement to include (among others):
−Removed: (a) the effectiveness of one or more registration statements under the Securities Act, (b) the availability of the Annual Report on Form 10-K contained in such registration statement(s) for the resale of the applicable Warrant shares, (c) the continued listing of shares of the Company’s Class A Common Stock on a national securities exchange, (d) no occurrence of any “Price Failure” ( i.e.
−Removed: , the VWAP of the Class A Common Stock failing to exceed $0.85 per share (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions) on any two (2) trading days during the ten (10) trading day measurement period immediately preceding the relevant determination date), subject to certain permitted adjustments, and (e) no occurrence of any “Volume Failure” ( i.e.
−Removed: , the aggregate daily dollar trading volume (as reported on Bloomberg) falling below $10.0 million on any two (2) trading days during the ten (10) trading day measurement period immediately preceding the relevant determination date).
−Removed: On September 23, 2022, FFIE entered into Amendment No.
−Removed: 1 to the Secured SPA (the “First Secured SPA Amendment”) and convertible senior secured promissory notes, to amend, among other things (a) the Secured SPA, (b) that certain convertible senior secured promissory note in favor of FFSV in the principal amount of $25.0 million, dated as of August 15, 2022, and (c) that certain convertible senior secured promissory note in favor of FF Simplicity in the principal amount of $10.0 million, dated as of September 14, 2022.
−Removed: On September 25, 2022, FFIE entered into a Joinder and Amendment Agreement with Senyun, FFSV and RAAJJ, for the purchase of up to $60.0 million under the Secured SPA (with potential increase to $90.0 million), of which $35.6 million (net of original issue discount and transaction costs) has been funded to date.
−Removed: The initial $10.0 million tranche was funded on October 27, 2022, the second $10.0 million tranche was funded on November 15, 2022, and the third $10.0 million tranche was funded in parts on different dates in December 2022.
−Removed: On October 24, 2022, FFIE entered into a Limited Consent and Third Amendment to the Secured SPA with FFSV as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ as purchaser, pursuant to which the maturity date for the Bridge Notes was extended from August 14, 2026 to October 27, 2028, and each purchaser and the agent waived certain defaults and events of default under the Secured SPA, any notes issued pursuant to the Secured SPA and other related documents..
−Removed: On November 8, 2022, FFIE entered into a Limited Consent and Amendment to the Secured SPA (the “Fourth Secured SPA Amendment”) with FFSV as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ as purchaser, 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 Secured 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.
−Removed: On December 28, 2022, FFIE entered into a Letter Agreement and Amendment to the Secured SPA (the “Senyun Amendment”) with FFSV as administrative and collateral agent and Senyun as purchaser, 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.
−Removed: 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..
−Removed: On January 25, 2023, FFIE entered into a Limited Consent and Amendment No.
−Removed: 5 to the Secured SPA (the “Fifth Secured SPA Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser.
−Removed: On February 3, 2023, FFIE entered into an Amendment No.
−Removed: 6 to the Secured SPA (the “Sixth Amendment”) with FFSV as administrative and collateral agent and Senyun, FF Top, FFSV, FF Prosperity Ventures LLC (“FF Prosperity”), Acuitas and other purchasers, pursuant to which the Company agreed to sell up to $135.0 million in aggregate principal amount of the Secured SPA Notes (the “Tranche C Notes”) with terms largely congruent to prior issuances and a $1.05 base conversion price subject to full ratchet anti-dilution price protection.
−Removed: As of the date this Report, we have received $120.0 million ($106.1 million net of original issue discount and transaction costs) in Tranche C Notes under the Sixth Secured SPA Amendment.
−Removed: On March 23, 2023, the Company entered into an Amendment No.
−Removed: 7 to the Secured SPA (the “Seventh Secured SPA Amendment”) with Senyun and entities affiliated with ATW Partners LLC, pursuant to which the parties agreed to accelerate the funding timeline of Tranche C Notes in the amount of $40.0 million, and an entity affiliated with ATW Partners LLC agreed to purchase additional Tranche B Notes (as defined in the Seventh Secured SPA Amendment) in the amount of $5.0 million, in each case, subject to meeting certain conditions, in exchange for an agreement to increase the original issuance costs associated with such funding.
−Removed: As part of the agreement, original issuance discount related to $25.0 million in principal amount of Tranche C Notes and Tranche B Notes was agreed to be 14% and 16%, respectively.
−Removed: On May 9, 2023, FFIE entered into an Amendment No.
−Removed: 8 to Secured SPA (the “Eighth Secured SPA Amendment”) with FFSV as administrative, collateral agent and purchaser, and Senyun and FF Prosperity as purchasers, pursuant to which:
−Removed: (i) the definition of Floor Price (as defined in each such Secured SPA Notes), was amended from $0.21 to $0.10;
−Removed: (ii) make-whole interest shall be paid upon conversion of principal of the Secured SPA Notes;
−Removed: (iii) the conversion price for the Secured SPA Notes was amended from $1.05 to $0.89, subject to adjustment as set forth in the Secured SPA Notes;
−Removed: and (iv) the exercise price for the Secured SPA Warrants was amended from $1.05 to $0.89, subject to adjustment as set forth in the Secured SPA Warrants.
−Removed: On August 4, 2023, the Company entered into Amendment No.
−Removed: 9 to Secured SPA (the “Ninth Secured SPA Amendment”) with FFVV (the “ATW Party”), as purchaser, and Amendment No.
−Removed: 10 to Secured SPA (the “ Tenth Secured SPA Amendment” and together with the Ninth Secured SPA Amendment, the “Amendments”) with Senyun, as purchaser, pursuant to which, the Company and each of the ATW Party and Senyun, respectively, as required purchasers under the Secured SPA, agreed to the following amendment to the Secured SPA:
−Removed: the definition of Required Minimum (as defined in the Secured SPA), was amended to mean (a) until the earlier of (x) September 30, 2023 and (y) the earlier of (I) the trading day immediately following the date of consummation of a reverse stock split of the Common Stock and (II) the 15th business day after the Company shall have obtained stockholder approval to increase the authorized shares of Common Stock (as applicable, the “Waiver Expiration Date”), zero shares of Common Stock, and (b) immediately after the Waiver Expiration Date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents (as defined in the Secured SPA), including any Underlying Shares (as defined in the Secured SPA) issuable upon exercise in full of all Warrants (as defined in the Secured SPA) or conversion in full of all Secured SPA Notes (including Underlying Shares issuable as payment of interest on the Secured SPA Notes), ignoring any conversion or exercise limits set forth therein.
−Removed: On June 26, 2023, the Company entered into a Joinder and Amendment Agreement (the “ATW Joinder” or “FFVV Joinder”) with FFVV (the “ATW Party”), pursuant to which FFSV or a permitted assign agreed to exercise its option to purchase $20.0 million of Tranche B Notes in accordance with the terms of the Secured SPA, with funding of 75% of such amount within five business days of the date of the ATW Joinder and the remaining 25% of such amount within three business days thereafter, subject to the satisfaction of the closing conditions.
−Removed: On June 26, 2023, Senyun executed a Second Joinder and Amendment Agreement (the “Senyun Joinder”), pursuant to which, Senyun agreed to exercise its option to purchase $15.0 million of Tranche A Notes in accordance with the terms of the Secured SPA, with funding of 75% of such amount within five business days of the date of the Senyun Joinder and the remaining 25% of such amount within three business days thereafter, subject to the satisfaction of the closing conditions.
−Removed: On August 4, 2023, the Company entered into Waiver and Amendment Agreement (the “ATW Amendment”) to the ATW Joinder, pursuant to which the ATW Party has agreed to waive any and all requirements of the Company to reserve shares of Common Stock for issuance pursuant to Notes or Warrants (each as defined in each of the Secured SPA and the Unsecured SPA, which is discussed further below) and defers any obligations of the Company to deliver any shares of Common Stock for issuance pursuant to the Notes or Warrants until the earlier of (x) September 30, 2023 and (y) the earlier of (I) the trading day immediately following the date of consummation of a reverse stock split of the Common Stock and (II) the 15th business day after the Company’s receipt of stockholder approval to increase the authorized shares of Common Stock.
−Removed: Further the ATW Amendment provides that if the ATW Party or a permitted assign exercises its option to invest another $10.0 million of Tranche B Notes in accordance with the terms of the Secured SPA (the “Additional Tranche B Investment”) on or prior to the latest of (x) August 1, 2023, (y) four business days after the meeting of the Company’s stockholders for the required stockholder approval under the Unsecured SPA to increase the Company’s authorized shares of Common Stock and for purposes of the Nasdaq Listing Rule 5635 (to the extent needed) (the “Stockholder Approval”), and (z) six business days after the Company has filed this Report, then the ATW Party shall have the right, upon delivery of a written notice to the Company, at any time prior to the 30th day after the date of consummation of such Additional Tranche B Investment, to invest another $20.0 million in New Notes (as defined in the ATW Joinder), subject to terms substantially identical to those provided for in the Unsecured SPA.
−Removed: Senior Unsecured Convertible Promissory Notes
−Removed: On May 8, 2023, the Company entered into a Securities Purchase Agreement (the “Unsecured SPA”) with Metaverse Horizon Limited and V W Investment Holding Limited (the ”Unsecured SPA Purchasers”) to issue and sell, subject to the satisfaction of certain closing conditions, $100.0 million aggregate principal amount of the Company’s senior unsecured convertible promissory notes (the “Unsecured SPA Notes”).
−Removed: The Unsecured SPA Purchasers committed to fund in eight subsequent closings fifteen days apart, subject to the satisfaction of certain closing conditions.
−Removed: Each Unsecured SPA Purchaser will also have the right to invest an additional 50% in the Company on terms and conditions substantially identical to the funded Unsecured SPA Note.
−Removed: The Unsecured SPA Notes are subject to an original issue discount of 10%, and are convertible into shares of Class A Common Stock, at a conversion price equal to $0.8925, plus an interest make-whole amount as set forth in the Unsecured SPA Notes, subject to certain adjustments including full ratchet anti-dilution price protection.
−Removed: Each Unsecured SPA Note matures on the date that is six years after the date of the applicable last closing under such Unsecured SPA Note.
−Removed: The Unsecured SPA Notes accrue interest at 10% per annum, payable on each conversion date and the maturity date in cash, Class A Common Stock, or a combination thereof, provided that, subject to certain conditions set forth in the Unsecured SPA Notes, the Company may elect to pay such interest in Class A Common Stock at a rate equal to 15% per annum with respect to the portion of such payment made in Class A Common Stock.
−Removed: Under the Unsecured SPA Notes, at each closing, the Unsecured SPA Purchaser is entitled to receive a warrant (an “Unsecured SPA Warrant”) to purchase up to a number of shares of Class A Common Stock equal to 33% of such shares issuable to such Unsecured SPA Purchaser upon conversion of the aggregate principal amount under the Unsecured SPA Note funded at such closing, with an exercise price equal to $0.8925 per share, subject to full ratchet anti-dilution protection and other adjustments, and are exercisable for seven years on a cash or cashless basis.
−Removed: Pursuant to the Unsecured SPA, the Company is required to use its reasonable best efforts to hold a special stockholders meeting to, among other things, obtain stockholder approval of transactions involving the notes and warrants of the Company issued or to be issued pursuant to the Unsecured SPA, including the issuance of any shares in excess of 19.99% of the issued and outstanding shares of the Company’s Common Stock in respect of such notes and warrants.
−Removed: Such approval was obtained at the special stockholders meeting that occurred on August 16, 2023.
−Removed: The Company is required to use its reasonable best efforts to efforts (i) to file, on or prior to May 31, 2023, a registration statement providing for the resale by the Unsecured SPA Purchasers of the reserved shares (the “First Registration Statement”);
−Removed: and (ii) to file, on or prior to the date that is 30 days following the Company’s receipt of stockholder approval (and the filing of an amendment to its charter to reflect such increased in authorized shares of Common Stock), a registration statement providing for the resale by the Unsecured SPA Purchasers of all the remaining shares issuable pursuant to the financing documents (the “Second Registration Statement” and, together with the First Registration Statement, the “Registration Statements”).
−Removed: The Company is also required to use reasonable best efforts (i) to cause the First Registration Statement to become effective within 90 days following the date of the Unsecured SPA;
−Removed: (ii) to cause the Second Registration Statement to become effective within 90 days following the Company’s filing thereof;
−Removed: and (iii) to keep each Registration Statement effective at all times until no Unsecured SPA Purchaser owns any Unsecured SPA Notes, Unsecured SPA Warrants, or shares of Class A Common Stock issuable upon exercise or conversion thereof.
−Removed: On June 26, 2023, the Company entered into Amendment No.
−Removed: 1 to the Unsecured SPA (the “First Unsecured SPA Amendment”) which amended and restated Section 2.1(a)(i) of the Unsecured SPA to provide that the Unsecured SPA Purchasers may, in their reasonable discretion, postpone or cancel any closing of their purchase of the Unsecured Notes pursuant to the Unsecured SPA if the Company has not issued a press release or other public announcement confirming that the second phase of the Company’s three-phase delivery plan has begun on or prior to August 31, 2023, within 15 calendar days of such date.
−Removed: The Company issued a press release on August 14, 2023 announcing the official delivery of its first Ultimate AI Techluxury FF 91 2.0 Futurist Alliance at a delivery ceremony on August, 12, 2023, which marked the beginning of the second phase of the Company’s three-phase delivery plan.
−Removed: On June 26, 2023, pursuant to the FFVV Joinder, FFVV agreed to purchase, under the Unsecured SPA, Unsecured Notes in an aggregate principal amount of up to $40.0 million (collectively, the “New Notes”) in installments of $5.0 million at each of the eight closing dates.
−Removed: The conversion price of the New Notes shall be $0.8925 subject to adjustment, as set forth in the Unsecured SPA.
−Removed: The floor price of the New Notes and, as amended pursuant to the FFVV Joinder, for each of the notes issued to FFSV (or its affiliates) under the Secured SPA shall be $0.05.
−Removed: On June 26, 2023, pursuant to the Senyun Joinder, Senyun agreed to purchase, under the Unsecured SPA, Unsecured Notes (the “New Senyun Notes”) in an aggregate principal amount of up to $30.0 million in installments of $3.75 million at each of the eight closing dates.
−Removed: The floor price of the New Senyun Notes pursuant to the Senyun Joinder and, as amended pursuant to the Senyun Joinder, for each notes issued to Senyun under the Secured SPA shall be $0.05.
−Removed: As of June 30, 2023, the Company has received aggregate gross funds of $41.7 million under the Unsecured SPA ($37.2 million net of original issue discount and transaction costs).
−Removed: Standby Equity Purchase Agreement
−Removed: On November 14, 2022, FFIE announced entry into the Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd.
−Removed: (“Yorkville”), with an initial commitment of $200.0 million.
−Removed: Under the terms of the SEPA, FFIE has the right, but not the obligation, to issue and sell to Yorkville up to $200.0 million in shares Class A Common Stock subject to customary conditions including an effective registration statement for the resale of such shares.
−Removed: FFIE has the right to increase the $200.0 million commitment by up to $150.0 million in one or more installments.
−Removed: The shares will be sold to Yorkville at a discounted price of 97% of the three-day VWAP at the time of funding, and generally limited to one-third of FFIE’s trading volume during such time period.
−Removed: On December 8, 2022, FFIE filed with the SEC a registration statement on Form S-1 (File No.
−Removed: 333-268722), which has been converted into a registration statement on Form S-3 to register shares of Class A Common Stock to be issued under the SEPA.
−Removed: Such registration statement was declared effective by the SEC on March 22, 2023.
−Removed: Shelf Registration
−Removed: On June 16, 2023, the Company filed a shelf registration on Form S-3 with the SEC (the “Shelf Registration”), which was declared effective by the SEC on June 28, 2023.
−Removed: As a result, the Company may from time-to-time issue Class A Common Stock and/or warrants, up to an aggregate amount of $300.0 million in one or more offerings.
−Removed: The Shelf Registration creates an ability for the company to raise additional capital through Class A Common Stock and/or warrant issuances to both institutional and retail investors as it looks to raise additional financing to support production ramp.
−Removed: Unsecured Securities Purchase Agreement – Streeterville Capital, LLC (“Streeterville”)
−Removed: On August 4, 2023, the Company entered into a Securities Purchase Agreement (the “Streeterville SPA”) with Streeterville, to issue and sell $16.5 million aggregate principal amount of the Company’s unsecured convertible senior promissory notes (the “Streeterville Note”) and a common stock purchase warrant (the “Streeterville Warrant”) to purchase up to 6,100,840 shares of Common Stock with an exercise price equal to $0.8925 per share, subject to full ratchet anti-dilution protection and other adjustments, and are exercisable for seven years on a cash or cashless basis.
−Removed: The Streeterville Note is subject to an original issue discount of $1.5 million.
−Removed: In addition, the Company will pay Streeterville $0.2 million to cover Streeterville’s legal fees and other transaction costs incurred in connection with the purchase and sale of the Streeterville Note (the “Transaction Expense Amount”).
−Removed: The original issue discount will be included in the initial principal balance of the Streeterville Note and will be reduced from the amount funded at closing.
−Removed: The Streeterville Note is convertible into shares of Class A Common Stock of the Company, par value $0.0001 per share (“Common Stock”), at a conversion price equal to $0.8925, plus an interest make-whole amount as set forth in the Streeterville Note, subject to certain adjustments including full ratchet anti-dilution price protection.
−Removed: The Streeterville Note matures on August 4, 2029.
−Removed: The Streeterville Note accrues interest at 10% per annum, payable on each conversion date and the maturity date in cash, or, at the Company’s option if all the Equity Conditions (as defined in the Streeterville Note) have been met, Common Stock or a combination thereof, provided that, subject to certain conditions set forth in the Streeterville Note, the Company may elect to pay such interest in Common Stock at a rate equal to 15% per annum with respect to the portion of such payment made in Common Stock.
−Removed: The Company may, from time to time, prepay the principal amount owing under the Streeterville Note, subject to a prepayment premium percentage in an amount ranging from 0% to 10% of the principal amount of such Note determined in accordance with a schedule set forth in the Streeterville SPA, so long as (i) the Company provides at least 15 days’ prior written notice to Streeterville of such prepayment and delivers to Streeterville an appropriately completed payment notification, and (ii) the Company accompanies such prepayment with the payment of any interest make-whole amount as set forth in the Streeterville Note.
−Removed: Under the Streeterville SPA, the Company is required to reserve 25,000,000 shares of Common Stock from its authorized and unissued Common Stock to provide for all issuances of Common Stock under the Streeterville Note (the “Share Reserve”).
−Removed: On September 8, 2023 and from time to time thereafter until the Streeterville Note is paid in full, subject to certain conditions, the Company is required to add additional shares of Common Stock to the Share Reserve in increments of 1,000,000 shares as and when requested by Streeterville if the number of shares held in the Share Reserve is less than two (2) times the number of shares of Common Stock Streeterville would be entitled to receive upon conversion of all interest under the Streeterville Note (including any Make-Whole Amount (as defined in the Streeterville Note)) plus two (2) times the number of shares Streeterville would be entitled to receive upon conversion of all principal under the Streeterville Note.
−Removed: Streeterville has the option, from time to time for 12 months after the date of the Streeterville SPA, to purchase up to $7.5 million in aggregate (or $15.0 million in aggregate with Company’s consent) in additional convertible senior unsecured notes
−Removed: and warrants on the same terms as the Streeterville Note and Streeterville Warrant.
−Removed: Additionally, from the date of the Streeterville SPA until the date that is the five-year anniversary of the date of the Streeterville SPA, upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (subject to certain exceptions set forth in the Streeterville SPA) (each, a “Subsequent Financing”), if Streeterville that then owns at least $7.5 million principal amount of Streeterville Notes (when aggregated with any affiliates of Streeterville) shall have the right to participate in up to an amount of the Subsequent Financing such that Streeterville’s ownership of the Company remains the same immediately following such Subsequent Financing as its ownership immediately prior to such Subsequent Financing, pursuant to the procedures outlined in the Streeterville SPA.
−Removed: Under the Streeterville SPA, so long as the Streeterville Note is outstanding, upon any issuance by Company of any security with a More Favorable Term (as defined in the Streeterville SPA), or amendment, waiver or adjustment to any existing security that results in the granting of a More Favorable Term, then the Company is required to notify Streeterville and such More Favorable Term, at Streeterville’s option, will become a part of the Transaction Documents (as defined in the Streeterville SPA) for the benefit of Streeterville.
−Removed: Additionally, if the Company fails to notify Streeterville of any such More Favorable Term, but Streeterville becomes aware that the Company has granted such a term to any third party, Streeterville may notify the Company and such More Favorable Term will become a part of the Transaction Documents retroactive to the date on which the More Favorable Term was granted to the applicable third party.
−Removed: The Company is required to use commercially reasonable efforts to file, within 15 calendar days of the date of the Streeterville SPA, a registration statement on the appropriate form providing for the resale by Streeterville of at the least the Initial Required Registration Amount (as defined in the Streeterville Note).
−Removed: The Company is also required to use commercially reasonable efforts to cause such registration statement to become effective as promptly as possible and to maintain the effectiveness of such registration statement at all times until each Streeterville no longer owns any Warrants or Streeterville Notes or shares of Class A common stock issuable upon exercise or conversion thereof.
−Removed: Pursuant to the Streeterville Note, the Company agrees to include a proposal to obtain stockholder approval, as is required by the Nasdaq listing rules, with respect to the issuance of any shares of Common Stock in excess of 19.99% of the issued and outstanding shares of Common Stock (the “Issuance Cap”), of the Conversion Shares (as defined in the Streeterville Note), the Warrant Shares (as defined in the Streeterville SPA), and subject to any applicable Nasdaq rules, any shares of Common Stock issuable pursuant to the note and warrant issuable in connection with the reinvestment right set forth in the Streeterville SPA (so long as such reinvestment is made within 90 days of the Approval) in excess of the Issuance Cap (the “Approval”) at the earlier of its next annual meeting of stockholders to be held in 2024 and any special meeting of stockholders called by the Company at which at least one “routine” proposal (as determined by the New York Stock Exchange) is to be included in the proxy statement for such special meeting;
−Removed: provided however, that if at any time after the date of the Streeterville SPA and prior to the Approval, Streeterville submits a Conversion Notice (as defined in the Streeterville Note) at such time as the Issuance Cap would prohibit the conversion of less than 150% of the Conversion Shares subject to such Conversion Notice, the Company will use its reasonable best efforts to hold a special meeting of stockholders (which may also be at the annual meeting of stockholders) for the Approval within 45 days from the date of the Company’s receipt of such Conversion Notice, and in any case, with the recommendation of the Board that such proposal be approved, and the Company will solicit proxies from its stockholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxy holders are required to vote their proxies in favor of such proposal.
−Removed: The Company is required to use its reasonable best efforts to obtain such Approval, including if the Company does not obtain the Approval at such special meetings, the Company will use reasonable best efforts to hold a new special meeting within 45 days from the date of such previous special meeting to obtain such Approval.
−Removed: If the Approval is not obtained at either meeting, the Company will be required to use its reasonable best efforts to seek such approval at each subsequent annual meeting of stockholders until such approval is obtained or the Streeterville Notes are no longer outstanding.
−Removed: FF will need further financing to support the ramp up and development of its sales and service systems for its flagship FF 91 Futurist vehicle and beyond.
−Removed: In particular, the Company is currently conducting due diligence on potential financing sources.
−Removed: This process has been time consuming and may result in the Company not being able to consummate any financing from these or other financing sources on a timely basis or at all.
−Removed: Additionally, certain investors under the Secured SPA or Unsecured SPA may not fund their commitments until the Company increases the number of authorized shares of its Class A Common Stock and registers the securities underlying the Secured or Unsecured SPA Warrants and Secured SPA Notes or Unsecured SPA Notes in an effective registration statement.
−Removed: If we are unable to raise sufficient additional funds in the near term, we may be required to further delay our production and delivery plans for the FF 91 Futurist, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, and/or cease operations.
−Removed: FF’s cash needs after the start of production of the FF 91 Futurist will depend on the extent to which FF’s actual costs vary from FF’s estimates and FF’s ability to control these costs and raise additional funds.
−Removed: Any challenges in supplier engagements, delays in ramping capacity or labor at the FF ieFactory California or for sales and service engagements, rising
−Removed: prices of materials, or ongoing global supply chain disruptions may further increase the need for additional capital to produce and deliver the FF 91 series.
−Removed: In particular, recently, some suppliers have threatened to terminate their relationship with the Company because of late payments or requested accelerated payments and other terms and conditions as a result of our past payment history and concerns about the Company’s financial condition, leading to less favorable payment terms than the Company had anticipated, and delaying or putting at risk certain deliveries.
−Removed: FF is in active negotiations with these suppliers to minimize these risks.
−Removed: Apart from the FF 91 series, substantial additional capital will be required to fund operations, research, development, design efforts, and manufacturing for future vehicles.
−Removed: Special Committee Investigation
−Removed: 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.
−Removed: The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist with its review.
−Removed: On February 1, 2022, FFIE announced that the Special Committee completed its review.
−Removed: 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.
−Removed: In connection with the Special Committee’s review and subsequent investigative work, the following findings were made:
−Removed: In connection with the Business Combination, statements made by certain Company employees to certain investors describing the role of Mr.
−Removed: 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.
−Removed: • The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 Futurist vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest.
−Removed: • 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.
−Removed: • The Company’s corporate culture failed to sufficiently prioritize compliance.
−Removed: 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.
−Removed: • 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.
−Removed: 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.
−Removed: The investigation also found that certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.
−Removed: 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.
−Removed: The failure to cooperate with the investigation was taken into consideration in connection with the remedial actions outlined below with respect to Jiawei (“Jerry”) Wang, and withholding of information also affected the remedial action taken with respect to Matthias Aydt.
−Removed: 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.
−Removed: Although 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.
−Removed: 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:
−Removed: • The appointment of Susan Swenson, a former member of the Board, to the then newly created position of Executive Chairperson of FF.
−Removed: Carsten Breitfeld, FF’s former Global CEO, reporting directly to Ms.
−Removed: Swenson and receiving a 25% annual base salary reduction;
−Removed: • The removal of Mr.
−Removed: Jia as an executive officer, although continuing in his position as Chief Product and User Ecosystem Officer of FFIE.
−Removed: Certain dual-reporting arrangements were eliminated with respect to Mr.
−Removed: Jia, and he is required to report directly to Ms.
−Removed: Swenson, a non-independent director nominated by FF Top.
−Removed: 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) I.A.I., and advanced R&D technology;
−Removed: • Matthias Aydt, then Senior Vice President, Business Development and Product Definition and a former director of FFIE, and currently Senior Vice President, Product Execution, 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;
−Removed: • The appointment of Jordan Vogel as Lead Independent Director;
−Removed: 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;
−Removed: Jordan Vogel stepping down from the Nominating and Corporate Governance Committee;
−Removed: and Scott Vogel becoming the Chair of the Audit Committee and the Nominating and Corporate Governance Committee of the Board;
−Removed: • 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;
−Removed: • 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;
−Removed: • 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;
−Removed: • The implementation of a comprehensive training program for all directors and officers regarding, among other things, internal FF policies;
−Removed: • The separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary;
−Removed: • Certain other disciplinary actions and terminations of employment with respect to other FF employees (none of whom is an executive officer).
−Removed: As of the date of this Report, FF is continuing to implement certain of the remedial actions approved by the Board.
−Removed: In addition to the above, the Company is strengthening its compliance policies and procedures, including the hiring of a Compliance Officer with the title of Deputy General Counsel (hired in March 2023), who reports directly to the Chair of the Audit Committee.
−Removed: The Company is also actively looking to hire a Chief Compliance Officer.
−Removed: However, no assurance can be provided that the remedial measures will continue to be implemented and additional actions by the Company to enhance its compliance policies and procedures will be implemented in a timely manner or at all, or will be successful to prevent inaccurate disclosures in the future.
−Removed: Certain of these remedial actions are no longer in effect.
−Removed: For instance, Ms.
−Removed: Swenson resigned from the Board on October 3, 2022.
−Removed: Moreover, effective on February 26, 2023, certain departments within the Company report to both Mr.
−Removed: Xuefeng Chen, including the Company’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments.
−Removed: In connection with the changes to the reporting structure, the Company implemented policies and procedures within the Company’s capital markets and human resources and administration functions.
−Removed: In the third quarter of 2023, the Company implemented additional policies and procedures for the capital markets and human resources and administration functions.
−Removed: It also implemented additional controls for the user ecosystem function.
−Removed: The Company’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments report directly to Mr.
−Removed: Jia, while the remaining
−Removed: departments continue to report to Mr.
−Removed: Xuefeng Chen.
−Removed: Further, based on the changes to his responsibilities within FF, the Board determined that Mr.
−Removed: 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.
−Removed: Further, pursuant to the Heads of Agreement, FF has implemented certain governance changes that impact certain of the above-discussed remedial actions.
−Removed: On October 3, 2022, Ms.
−Removed: Swenson tendered her resignation from her role as both Executive Chairperson and member of the Board effective immediately.
−Removed: In addition, on October 3, 2022, Mr.
−Removed: Scott Vogel resigned from the Board effective immediately and Mr.
−Removed: Jordan Vogel resigned effective on October 5, 2022 upon his receipt of a supplemental release pursuant to the mutual release.
−Removed: On October 28, 2022, Mr.
−Removed: Brian Krolicki tendered his resignation from the Board effective immediately.
−Removed: On December 15, 2022, Mr.
−Removed: Lee Liu tendered his resignation from the Board, effective on December 18, 2022.
−Removed: On December 18, 2022, Mr.
−Removed: Jie Sheng was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On December 25, 2022, Mr.
−Removed: Edwin Goh tendered his resignation from the Board, effective on December 26, 2022.
−Removed: On December 27, 2022, Ms.
−Removed: Ke Sun was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: Sheng and Ms.
−Removed: Sun are designees of FF Top pursuant to the Amended Shareholder Agreement.
−Removed: On December 26, 2022, Dr.
−Removed: Carsten Breitfeld tendered his resignation from the Board, effective immediately.
−Removed: On December 27, 2022, Mr.
−Removed: Xuefeng Chen was appointed to the Board, effective immediately, following the resignation of Dr.
−Removed: On January 20, 2023, Mr.
−Removed: Qing Ye tendered his resignation from the Board, effective immediately.
−Removed: Ye remains a consultant of the Company as an independent contractor.
−Removed: On January 25, 2023, Mr.
−Removed: Chui Tin Mok was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On March 9, 2023, Mr.
−Removed: Matthias Aydt tendered his resignation from the Board, effective upon the nomination and approval by the Board of a replacement director.
−Removed: On March 13, 2023, upon the recommendation of the Nominating and Corporate Governance Committee, the Board appointed Ms.
−Removed: Li Han to fill the vacancy on the Board due to Mr.
−Removed: Aydt’s resignation.
−Removed: On April 14, 2023, FF held its 2023 Annual Meeting and nominated directors for election as contemplated in the Amended and Restated Shareholder Agreement.
−Removed: On July 31, 2023, Mr.
−Removed: Adam (Xin) He resigned from the Board, effective immediately.
−Removed: On August 4, 2023, the Board appointed Lev Peker as a member of the Board and as a member and Chair of the Audit Committee of the Board to fill the vacancy on the Board and Audit Committee created by Mr.
−Removed: He’s resignation from the Board.
−Removed: 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.
−Removed: FFIE is cooperating fully with the SEC’s investigation, including responding to multiple subpoenas and requests for information, some of which are unrelated to the matters that were the subject of the Special Committee investigation.
−Removed: The outcome of such an investigation is difficult to predict.
−Removed: FF has incurred, and may continue to incur, significant expenses related to legal, accounting and other professional services in connection with the SEC investigation.
−Removed: 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.
−Removed: 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.
−Removed: FF has responded to that request and intends to fully cooperate with any future requests from the DOJ.
+Added: • At a special meeting of the Company’s stockholders held on August 16, 2023, the Company’s stockholders approved a proposal authorizing the Board to effect a reverse stock split of the Company’s outstanding common stock, par value $0.0001 per share (the “Common Stock”) at a range between 1-for-2 and 1-for-90, and a proposal stating that if a reverse stock split is implemented at a ratio of 1-for-8 or greater, the Company will amend its Second Amended and Restated Certificate of Incorporation to reduce the number of authorized shares of the Common Stock to a number equal to 12,355,000,000 divided by the reverse stock split ratio determined by the Board.
+Added: On August 22, 2023, the Board approved a reverse stock split ratio of 1-for-80 of Common Stock (the “Reverse Stock Split”).
+Added: Accordingly, on August 24, 2023, the Company filed the Third Amended and Restated Certificate of Incorporation of the Company to effect the Reverse Stock Split and to set the number of authorized shares of Common Stock, to 154,437,500 (which is 12,355,000,000 divided by 80, the Reverse Stock Split ratio).
+Added: As a result, effective August 25, 2023, every 80 shares of the issued and outstanding Common Stock were converted into one share of Common Stock, without any change in par value per share, and the Company’s authorized shares of Common Stock were reduced to 154,437,500, composed of (i) 147,875,000 shares of Class A Common Stock and (ii) 6,562,500 shares of the Company’s Class B Common Stock, par value $0.0001 per share (the “Class B Common Stock”).
+Added: No fractional shares of common stock were issued as a result of the Reverse Stock Split.
+Added: Stockholders who would otherwise have received a fractional share were instead issued a full share in lieu of such fractional share.
+Added: The Class A Common Stock began trading on The Nasdaq Capital Market on a split-adjusted basis at the opening of trading on August 28, 2023 under the symbol “FFIE” with a new CUSIP number (307359 505).
+Added: The Company’s Public Warrants continue to be traded on the Nasdaq Capital Market under the symbol “FFIEW” and the CUSIP number for the warrants remains unchanged.
+Added: However, every 80 warrants are now exercisable for one share of Class A Common Stock at an exercise price of $920.00 per share.
+Added: • On September 16, 2023, Mr.
+Added: Chen notified the Company of his decision to resign from his position as Global CEO of the Company and as a member of the Board effective September 29, 2023.
+Added: On September 21, 2023, the Board appointed Mr.
+Added: Mattias Aydt to succeed Mr.
+Added: Chen as Global Chief Executive Officer and as a member of the Board, effective September 29, 2023.
+Added: • On October 10, 2023, Ke Sun, a member of the Board notified the Company of her decision to resign as a director of the Company effective immediately.
Components of FF’s Results of Operations
2 unchanged sentences
Production and Operations
−Removed: FF expects to continue to incur significant operating costs that will impact its future profitability, including research and development expenses as it introduces new models and improves existing models;
−Removed: capital expenditures for the expansion of its manufacturing capacities;
+Added: FF expects to continue to incur significant operating costs that will impact its future profitability, including R&D expenses as it introduces new models and improves existing models;
+Added: capital expenditures for the expansion of its manufacturing
additional operating costs and expenses for production ramp-up;
5 unchanged sentences
FF’s ability to become profitable in the future will depend on its ability to successfully market its vehicles and control its costs.
−Removed: To date, FF has not yet sold any electric vehicles.
+Added: As of September 30, 2023, FF has delivered only three vehicles to spire users.
As a result, FF will require substantial additional capital to develop products and fund operations for the foreseeable future.
−Removed: Until FF can generate sufficient revenue from product sales, FF will fund its ongoing operations through a combination of various funding and financing alternatives, including equipment leasing and construction financing of the FF ieFactory California, manufacturing facility, secured syndicated debt financing,
−Removed: convertible notes, working capital loans, and equity offerings, among other options.
+Added: Until FF can generate sufficient revenue from product sales, FF will fund its ongoing operations through a combination of various funding and financing alternatives, including equipment leasing and construction financing of the FF ieFactory California, 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.
−Removed: Any delays in the successful completion of its FF ieFactory California manufacturing facility will impact FF’s ability to generate revenue.
−Removed: For additional discussion of the substantial doubt about FF’s ability to continue as a going concern, see Note 2, Liquidity and Capital Resources in the notes to the unaudited Condensed Consolidated Financial Statements and for further details on liquidity, please see the “Liquidity and Capital Resources” section below.
−Removed: FF is a development stage company and has not recognized any revenue to date.
−Removed: FF’s introduction of the FF 91 Futurist, its first vehicle, is expected to generate FF’s future revenue while other vehicles are in development.
−Removed: The FF 81, FF 71, and SLMD electric vehicle models are in various stages of planning or development and expected to be released after the FF 91 series depending on availability of adequate funding and other strategic factors.
−Removed: Costs of Revenues
−Removed: On March 29, 2023, the Company announced the start of production of its first electric vehicle, the FF 91 Futurist and, on April 14, 2023, the Company’s first production FF 91 Futurist vehicle came off the line.
−Removed: However, the Company has not yet recognized any revenue to date.
−Removed: Accordingly, cost of revenues recognized during the three months ended June 30, 2023, in advance of recognizing any revenue, represent production costs that in accordance with U.S.
−Removed: generally accepted accounting principles (“GAAP”) cannot be capitalized in inventory as of June 30, 2023, including charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value.
+Added: Any delays in the successful completion of its FF ieFactory California will impact FF’s ability to generate revenue.
+Added: For additional discussion of the substantial doubt about FF’s ability to continue as a going concern, see Note 2, Liquidity and Capital Resources in the notes to the Condensed Consolidated Financial Statements and for further details on liquidity, please see the “Liquidity and Capital Resources” section below.
+Added: Revenue Recognition
+Added: Automotive Sales Revenue
+Added: We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023.
+Added: Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, twenty-four-seven roadside assistance, OTA software updates, internet connectivity and destination fees.
+Added: We recognize revenue on automotive sales upon delivery to the customer, which is when control of a vehicle transfers.
+Added: Payments are typically received at the point control transfers or in accordance with payment terms customary to the business indicated in the sales contract.
+Added: OTA software updates are provisioned upon control transfer of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer.
+Added: For our obligations related to automotive sales, we estimate standalone selling price by considering costs used to develop and deliver the good or service, third-party pricing of similar options and other information that may be available.
+Added: The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations.
+Added: Our vehicle contracts do not contain a significant financing component.
+Added: We have entered into and may continue to enter into co-creator consulting agreements with our customers under which customers share feedback, driving data, ideas, experiences with our engineers, social media posts and other promotions in exchange for specified fees.
+Added: We consider these arrangements consideration payable to a customer.
+Added: The consideration paid to the customer relates to marketing and R&D services that are distinct and could be purchased by the Company from a separate third-party.
+Added: We perform an analysis in which we maximize the use of observable market inputs to ascribe a fair value to these services and record the fair value of these services to sales and marketing expense or R&D expense, as applicable.
+Added: Any consideration payable to a customer that is above the fair value of the distinct services being provided is treated as a reduction of revenue.
+Added: Customer Deposits
+Added: The Company’s customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time.
+Added: Refundable deposits, for vehicle reservations and services, received from customers prior to an executed vehicle purchase agreement are recorded as customer deposits (Accrued expenses and other current liabilities).
+Added: Customer deposits were $3.3 million and $3.4 million as of September 30, 2023 and December 31, 2022, respectively.
+Added: When vehicle purchase agreements are executed, the consideration for the vehicle and any accompanying products and services must be paid in advance prior to the transfer of products or services by the Company.
+Added: Such advance payments are considered non-refundable, and the Company defers revenue related to any products or services that are not yet transferred.
+Added: We provide a manufacturer’s warranty on all vehicles sold.
+Added: The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components.
+Added: The warranty does not cover any item where failure is due to normal wear and tear.
+Added: This assurance-type warranty does not create a performance obligation separate from the vehicle.
+Added: Management tracks warranty claims by vehicle ID, owner, and date.
+Added: As we continue to manufacture and sell more vehicles we will reassess and evaluate our warranty claims for purposes of our warranty accrual.
+Added: Cost of Automotive Sales Revenue
+Added: Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, and reserves for estimated warranty expenses.
+Added: Cost of automotive sales revenues also includes adjustments to warranty expense.
Operating Expenses
1 unchanged sentence
R&D activities represent a significant part of FF’s business.
−Removed: FF’s research and development efforts focus on the design and development of FF’s electric vehicles and continuing to prepare its prototype electric vehicles to exceed industry standards for compliance, innovation, and performance.
−Removed: R&D expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on research and development activities, other related costs, depreciation, and an allocation of overhead.
−Removed: FF expects research and development expenses to decrease in the near future as the Company substantially completed R& D activities related to the FF 91.
+Added: FF’s R&D efforts focus on the design and development of FF’s electric vehicles and continuing to prepare its prototype electric vehicles to exceed industry standards for compliance, innovation, and performance.
+Added: R&D expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on R&D activities, other related costs, depreciation, R&D services provided by co-creators, and an allocation of overhead.
+Added: FF expects R&D expenses to decrease in the near future as the Company substantially completed R& D activities related to the FF 91.
Sales and Marketing
−Removed: Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on sales and marketing, costs associated with sales and marketing activities, and an allocation of overhead.
+Added: Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on sales and marketing, costs associated with sales and marketing activities, marketing services provided by co-creators, and an allocation of overhead.
Marketing activities are those related to introducing FF’s brand and its electric vehicle prototypes to the market.
6 unchanged sentences
Loss on disposal of property and equipment relates to the abandonment of certain FF 91 Futurist program construction in progress assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation of FF’s cost reduction program.
−Removed: Charges associated with disposals are recognized within operating expenses in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
+Added: Charges associated with disposals are recognized within operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Change in Fair Value of Earnout Liability
7 unchanged sentences
Loss on Settlement of (Related Party and Third Party) Notes Payable
−Removed: Loss on settlement of notes payable consists of losses resulting from the settlement of notes payable as part of the Company’s ongoing financing activities.
+Added: Loss on settlement of notes payable consists of losses resulting from the settlement of notes payable as part of the Company’s ongoing financing activities and losses incurred on modifications of the Company’s notes payable that qualify as an extinguishment pursuant to ASC 470-50, Debt–Modifications and Extinguishments .
Interest Expense
7 unchanged sentences
Results of Operations
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022
8 unchanged sentences
General and administrative 24,023 28,551
−Removed: Loss on disposal of property and equipment — 1,407
Change in fair value of earnout liability (67) —
7 unchanged sentences
Related party interest expense (69) (996)
−Removed: Other (expense) income, net (1,466) (6,936)
+Added: Other expense, net (1,624) (6,457)
Loss before income taxes (78,046) (119,872)
1 unchanged sentence
Net loss $ (78,046) $ (119,872)
−Removed: Cost of Revenues
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
+Added: Auto Sales $ 551 $ — $ 551 NM*
+Added: *NM = not meaningful.
+Added: Automotive sales revenue was $0.6 million for the three months ended September 30, 2023.
+Added: The Company started vehicle delivery to its customers during the three months ended September 30, 2023.
Cost of Revenues
+Added: Three Months Ended September 30,
+Added: (in thousands) 2023 2022 Amount %
+Added: Cost of revenues $ 16,131 $ — $ 16,131 NM*
+Added: *NM = not meaningful.
+Added: Cost of revenues was $16.1 million for the three months ended September 30, 2023.
On March 29, 2023, the Company announced the start of production of its first electric vehicle, the FF 91 Futurist and, on April 14, 2023, the Company’s first production FF 91 Futurist vehicle came off the line.
−Removed: However, the Company has not yet recognized any revenue to date.
−Removed: Accordingly, cost of revenues recognized during the three months ended June 30, 2023, in advance of recognizing any revenue, represent production costs that in accordance with GAAP cannot be capitalized in inventory as of June 30, 2023, including charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value.
+Added: The Company started to recognize automotive sales revenue during the three months ended September 30, 2023 and the corresponding cost of revenue.
+Added: Cost of revenue is primarily driven by higher costs of early-stage cost inefficiencies including lower fixed cost absorption largely due to depreciation of tooling and
+Added: To a lesser extent, the Cost of Revenues includes higher initial manufacturing inefficiencies coupled with higher initial cost of parts resulting from lower volume associated with delivery of the FF 91 Futurist vehicles.
Research and Development
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
1 unchanged sentence
The decrease in R&D expense is primarily due to the reduction in engineering, design, and testing (“ED&T”) services of $11.9 million as the Company substantially completed R& D activities related to the FF 91 Futurist vehicle in 2022.
−Removed: Further, as the Company started production on March 29, 2023, during the three months ended June 30, 2023 certain costs were recognized as cost of sales and certain materials purchases were capitalized to inventory versus all being recognized as R&D expense
−Removed: during the three months ended June 30, 2022.
−Removed: In addition, there was a decrease in personnel and compensation expenses of $6.4 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position, as well as the allocation of certain personnel from the R&D department to production;
−Removed: a decrease in professional services expenses of $4.9 million;
−Removed: and a decrease in stock-based compensati on expense of $2.6 million;
−Removed: partially offset by an increase in depreciation and amortization expense of $6.5 million.
+Added: Further, as the Company started production in March 2023, certain costs were recognized as cost of revenues and certain materials purchases were capitalized to inventory versus all being recognized as R&D expense.
+Added: In addition, there was a decrease in personnel and compensation expenses of $10.0 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position, as well as the allocation of certain personnel from the R&D department to production, a decrease in stock-based compensati on expense of $2.7 million and a decrease in other miscellaneous expenses of $1.3 million.
Sales and Marketing
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
Sales and marketing $ 5,318 $ 3,823 $ 1,495 39 %
−Removed: The increase in sales and marketing expense is due to an increase in professional services expenses of $1.0 million and an increase in marketing expenses of $0.5 million as the Company ramps up in preparation of achieving start of delivery.
+Added: The increase in sales and marketing expense is due to an increase in compensation expenses of $0.9 million, an increase in professional services expenses of $0.4 million and an increase in marketing expenses of $0.1 million as the Company allocated more resources to sales and marketing due to the achievement of the delivery milestone in August 2023.
General and Administrative
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
General and administrative $ 24,023 $ 28,551 $ (4,528) (16) %
−Removed: The decrease in general and administrative expense is primarily due to a decrease in personnel and compensation expenses of $10.3 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and the focus on achieving start of production;
−Removed: a decrease in professional services expenses of $10.4 million due to the conclusion of the Special Committee investigation in 2022;
−Removed: partially offset by an increase in insurance expenses of $3.3 million due to increased premiums associated with a new D&O policy entered into in the third quarter of 2022;
−Removed: and an incr ease in depreciation expense of $1.2 million.
−Removed: Change in Fair Value of Earnout Liability
−Removed: Three Months Ended June 30,
−Removed: 2023 2022 Amount %
+Added: The decrease in general and administrative expense is primarily due to a decrease in professional services expenses of $6.6 million due to the conclusion of the Special Committee investigation in 2022;
+Added: partially offset by an increase in compensation related expense of $2.1 million.
Change in Fair Value of Earnout Liability
−Removed: As of April 21, 2023, 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, Derivatives and Hedging - Contracts in Entity’s Own Equity .
−Removed: As a result of the reclassification, the Company reclassified $2.1 million out of Additional paid-in capital into the Earnout liability.
−Removed: As of June 30, 2023, the fair value of the Earnout liability was $1.4 million.
−Removed: The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the three months ended June 30, 2023.
+Added: Three Months Ended September 30,
+Added: (in thousands) 2023 2022 Amount %
+Added: Change in fair value of earnout liability $ (67) $ — $ (67) NM*
+Added: *NM = not meaningful.
+Added: As of August 25, 2023, the Company reclassified the Earnout Shares from liability classification to equity classification as a result of the Company having sufficient authorized shares to share-settle the earnout, which was determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .
+Added: The $0.1 million decrease in the Earnout liability was recognized as a Change in fair value of earnout liability during the three months ended September 30, 2023.
Change in Fair Value of Notes Payable and Warrant Liabilities
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
Change in fair value of notes payable and warrant liabilities $ 17,571 $ (1,764) $ 19,335 (1,096) %
−Removed: The increased change in the fair value of notes payable and warrant liabilities is primarily due to notes payable and warrants that were measured at fair value in the comparative period in 2022 and were revalued during 2023 at predominantly lower fair values due to pricing inputs that use the market price of the Company’s Common Stock and debt discount rate which have experienced a decline.
−Removed: Additionally, during the three months ended June 30, 2022 the Company did not have material liability classified warrants with changes in fair value included in earnings.
−Removed: During the three months ended June 30, 2023, the Company recognized a gain in the Change in fair value of notes payable and warrant liabilities of $11.4 million, specific to the change in fair value of the Company’s warrant liabilities.
+Added: The Change in the fair value of notes payable and warrant liabilities is primarily due to a significant increase in the volume of outstanding notes payable and warrants accounted for at fair value when compared with the comparative period in 2022.
+Added: As of September 30, 2022 the Company had $44.5 million of notes payable outstanding, compared with $130.1 million outstanding as of September 30, 2023, excluding the impact of mark to market valuation adjustments.
+Added: Additionally, during the three months ended September 30, 2022 the Company did not have material liability classified warrants with changes in fair value included in earnings.
+Added: During the three months ended September 30, 2023, the Company recognized a gain in the Change in fair value of notes payable and warrant liabilities of $21.9 million, specific to the change in fair value of the Company’s warrant liabilities.
+Added: These gains were offset by an increase in the fair value of the Company’s notes payable during the period, stemming from the impact of the full ratchet price adjustments that were applied to the Company’s SPA Notes.
Change in Fair Value of Related Party Notes Payable and Related Party Warrant Liabilities
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
Change in fair value of related party notes payable and related party warrant liabilities
−Removed: $ 384 $ — $ 384 100 %
−Removed: The Company did not have any related party notes payable or warrants that were re-measured at fair value during the three months ended June 30, 2022.
−Removed: In May 2023, the Company entered into the Unsecured SPA Notes with a related party.
−Removed: On June 30, 2023, the related party Unsecured SPA Notes and warrant were revalued at a lower fair value than at their issuance due to pricing inputs that use the market price of the Company’s Common Stock and debt discount rate which have experienced a decline.
+Added: $ 4,726 $ — $ 4,726 NM*
+Added: *NM = not meaningful.
+Added: The Company did not have any related party notes payable or warrants that were re-measured at fair value during the three months ended September 30, 2022.
+Added: In May 2023, the Company entered into Unsecured SPA Notes with MHL, who is a related party, and VW.
+Added: On September 30, 2023, the related party Unsecured SPA Notes and warrant were revalued at a lower fair value than at their issuance due to pricing inputs that use the market price of the Class A Common Stock and debt discount rate which have experienced a decline.
Loss on Settlement of Notes Payable
−Removed: Three Months Ended June 30,
−Removed: 2023 2022 Amount %
+Added: Three Months Ended September 30,
+Added: (in thousands) 2023 2022 Amount %
Loss on settlement of notes payable $ (21,357) $ (30,454) $ 9,097 (30) %
−Removed: The Loss on settlement of notes payable during the three months ended June 30, 2023 is primarily due to a $74.0 million loss on settlement of Secured SPA Notes in connection with their conversion into Class A Common Stock.
−Removed: The Company recognized a Loss on settlement of notes payable for the difference between the carrying value of the debt and the fair value of the shares transferred and the losses are driven by shares issued in connection with the Make-Whole Amount.
−Removed: In addition, the Company recognized during the three months ended June 30, 2023 a $11.4 million Loss on settlement of notes payable from amendments to the Company’s Secured SPA Notes in May 2023 accounted for as extinguishments.
−Removed: These transactions did not occur in the prior period.
+Added: The decrease in the Loss on settlement of notes payable during the three months ended September 30, 2023 is primarily driven by a reduced conversion volume during the period.
+Added: During the three months ended September 30, 2023 note holders converted $25.8 million of notes payable compared with $67.2 million in the prior period.
+Added: The impact of the volume difference is offset by a larger loss on settlement per dollar of principal.
+Added: The increase in the loss on settlement per dollar of principal is driven by the trailing-twelve-month trend of declines in the fair value of the Company’s notes payable driven by the change in the Company’s stock price over the period.
Loss on Settlement of Related Party Notes Payable
−Removed: Three Months Ended June 30,
−Removed: 2023 2022 Amount %
+Added: Three Months Ended September 30,
+Added: (in thousands) 2023 2022 Amount %
Loss on settlement of related party notes payable
−Removed: $ (6,492) $ — $ (6,492) 100 %
−Removed: The Company did not have any related party notes payable that settled during the three months ended June 30, 2022.
−Removed: In May 2023, the Company entered into the Unsecured SPA Notes with a related party.
−Removed: During the three months ended June 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 69,731,668 shares of the Company’s Class A Common Stock.
+Added: $ (10,756) $ — $ (10,756) NM*
+Added: *NM = not meaningful.
+Added: The Company did not have any related party notes payable that settled during the three months ended September 30, 2022.
+Added: In May 2023, the Company entered into Unsecured SPA Notes with MHL,who is a related party, and VW.
+Added: During the three months ended September 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $6.6 million in exchange for 2,621,940 shares of Class A Common Stock.
The Company recognized a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
−Removed: This transaction did not occur in the prior period.
Interest Expense
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
Interest expense $ (90) $ (245) $ 155 63 %
−Removed: The decrease in interest expense was primarily due to the Company’s repayment of $85.0 million of Ares notes payable principal and the conversion of $73.9 million of ATW NPA notes payable principal into the Company’s Class A Common Stock in the year ended December 31, 2022.
−Removed: The Company’s SPA Notes are carried at fair value and fluctuations in interest expense are included in the Change in fair value of notes payable.
+Added: The decrease in Interest expense was primarily due to the Company’s repayment of $85.0 million of Ares notes payable principal and the conversion of $73.9 million of ATW NPA notes payable principal into the Class A Common Stock in the year ended December 31, 2022.
+Added: The SPA Notes are carried at fair value and fluctuations in interest expense are included in the Change in fair value of notes payable.
Related Party Interest Expense
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
2 unchanged sentences
Other (Expense) Income, Net
−Removed: Three Months Ended June 30,
+Added: Three Months Ended September 30,
(in thousands) 2023 2022 Amount %
−Removed: Other (expense) income, net $ (1,466) $ (6,936) $ 5,470 79 %
−Removed: The change in other (expense) income, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.
+Added: Other expense, net $ (1,624) $ (6,457) $ 4,833 75 %
+Added: The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.
Dollars that are remeasured at the end of each period.
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
(in thousands) 2023 2022
Consolidated Statements of Operations
+Added: Auto $ 551 $ —
Cost of revenues
+Added: Auto 22,744 —
Gross loss (22,193) —
17 unchanged sentences
Net loss $ (347,947) $ (414,664)
−Removed: Cost of Revenues
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
+Added: Auto Sales $ 551 $ — $ 551 NM*
+Added: *NM = not meaningful.
+Added: Automotive sales revenue was $0.6 million for the nine months ended September 30, 2023.
+Added: The Company started vehicle delivery to its customers during the nine months ended September 30, 2023.
Cost of Revenues
+Added: Nine Months Ended September 30, Change
+Added: (in thousands) 2023 2022 Amount %
+Added: Cost of revenues $ 22,744 $ — $ 22,744 NM*
+Added: *NM = not meaningful.
+Added: Cost of revenue was $22.7 million for the nine months ended September 30, 2023.
On March 29, 2023, the Company announced the start of production of its first electric vehicle, the FF 91 Futurist and, on April 14, 2023, the Company’s first production FF 91 Futurist vehicle came off the line.
−Removed: However, the Company has not yet recognized any revenue to date.
−Removed: Accordingly, cost of revenues recognized during the six months ended June 30, 2023, in advance of recognizing any revenue, represent production costs that in accordance with GAAP cannot be capitalized in inventory as of June 30, 2023, including charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value.
+Added: The Company started to recognize automotive sales revenue during the three months ended September 30, 2023 and the corresponding cost of revenue.
+Added: Cost of revenue is primarily driven by higher costs of early-stage cost inefficiencies including lower fixed cost absorption largely due to depreciation of tooling and
+Added: To a lesser extent, the Cost of Revenues includes higher initial manufacturing inefficiencies coupled with higher initial cost of parts resulting from lower volume associated with delivery of the FF 91 Futurist vehicle.
Research and Development
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Research and development $ 104,670 $ 259,741 $ (155,071) (60) %
−Removed: The decrease in R&D expense was primarily due to the reduction in ED&T services of $119.3 million as the Company substantially completed R& D activities related to the FF 91 Futurist vehicle in 2022.
−Removed: Further, as the Company started production on March 29, 2023, during the six months ended June 30, 2023 certain costs were recognized as cost of sales and certain materials purchases were capitalized to inventory versus all being recognized as R&D expense during the six months ended June 30, 2022.
−Removed: In addition, there was a decrease in personnel and compensation expenses of $10.5 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and the focus on achieving Start of Production ;
−Removed: a decrease in professional services expenses of $6.4 million;
−Removed: and a decrease in equipment related expenses of $1.1 million;
−Removed: partially offset by an increase in depreciation expense of $6.7 million and an increase in stock-based compensation expense of $2.2 million.
+Added: The decrease in R&D expense is primarily due to the reduction in ED&T services of $118.5 million as the Company substantially completed R& D activities related to the FF 91 Futurist vehicle in 2022.
+Added: Further, as the Company started production in March 2023, certain costs were recognized as cost of revenues and certain materials purchases were capitalized to inventory versus all being recognized as R&D expense in 2022.
+Added: In addition, there was a decrease in personnel and compensation expenses of $15.7 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position, as well as the allocation of certain personnel from the R&D department to production;
+Added: a decrease in professional services related expense of $15.3 million as the Company substantially completed R&D activities related to the FF 91 Futurist vehicle in 2022 and a decrease in other miscellaneous expenses of $3.6 million.
Sales and Marketing
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Sales and marketing $ 18,082 $ 16,207 $ 1,875 12 %
−Removed: The increase in sales and marketing expense is primarily due to the increase in professional services expenses of $1.0 million;
−Removed: an increase in stock-based compensation expense of $0.2 million;
−Removed: an increase in other miscellaneous expenses of $0.3 million;
−Removed: partially offset by a decrease in personnel and compensation expenses of $1.4 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and the focus on achieving start of production.
+Added: The increase in sales and marketing expense is primarily due to the increase in professional services expenses of $1.5 million and an increase in other miscellaneous expenses of $1.8 million due to the allocation of more resources to sales and marketing due to the achievement of the delivery milestone;
+Added: partially offset by a decrease in personnel and compensation expenses of $0.3 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and a decrease of $0.3 million in stock-based compensation expense.
General and Administrative
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
General and administrative $ 67,598 $ 89,069 $ (21,471) (24) %
−Removed: The decrease in general and administrative expense was primarily due to the decrease in personnel and compensation expenses of $11.4 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and the focus on achieving start of production;
+Added: The decrease in general and administrative expense was primarily due to the decrease in personnel and compensation expens es of $14.3 million due to a decrease in headcount as part of cost saving measures implemented by the Company in light of its financial position and the focus on achieving start of production;
a decrease in professional services expenses of $13.7 million due to the conclusion of the Special Committee investigation in 2022;
−Removed: a decrease in information technology related expenses of $0.8 million;
−Removed: partially offset by an increase in insurance expenses of $7.2 million due to increased premiums associated with a new D&O policy entered into in the third quarter of 2022;
−Removed: an increase in depreciation expense of $1.5 million;
−Removed: and an increase in stock-based compensation expense of $0.4 million.
+Added: a decrease in information technology related expens es of $0.9 million;
+Added: partially offset by $4.8 million in increased premiums associated with a new D&O policy entered into in the third quarter of 2022 and an increase in remaining other miscellaneous expenses of $2.6 million.
Loss on Disposal of Property and Equipment
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Loss on disposal of property and equipment $ 3,698 $ 1,407 $ 2,291 163 %
−Removed: The loss on disposal of property and equipment during the six months ended June 30, 2023 was primarily due to the write off of $3.7 million of certain construction in process assets that are not expected to be used as part of start of production.
−Removed: Change in Fair Value of Earnout Liability
−Removed: Six Months Ended June 30, Change
−Removed: 2023 2022 Amount %
+Added: The loss on disposal of property and equipment during the nine months ended September 30, 2023 was primarily due to the write off of $3.7 million of certain construction in process assets that are not expected to be used as part of start of production.
Change in Fair Value of Earnout Liability
+Added: Nine Months Ended September 30, Change
+Added: (in thousands) 2023 2022 Amount %
+Added: Change in fair value of earnout liability $ 2,033 $ — $ 2,033 NM*
+Added: *NM = not meaningful.
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, Derivatives and Hedging - Contracts in Entity’s Own Equity .
−Removed: As a result of the
−Removed: reclassification, the Company reclassified $2.2 million out of Additional paid-in capital into the Earnout liability.
+Added: As a result of the reclassification, the Company reclassified $2.2 million out of Additional paid-in capital into the Earnout liability.
On February 28, 2023, upon shareholder approval to increase the Company’s authorized shares, the Company had sufficient authorized shares to fully settle all outstanding equity-linked financial instruments.
2 unchanged sentences
As of April 21, 2023, the Company had insufficient authorized shares to fully settle its equity-linked financial instruments in shares primarily due to the issuance of additional convertible notes and warrants between February 28, 2023 and April 21, 2023.
−Removed: As a result, on April 21, 2023, reclassified $2.1 million out of Additional paid-in capital into the Earnout liability.
−Removed: As of June 30, 2023, the fair value of the Earnout liability was $1.4 million.
−Removed: The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the three months ended June 30, 2023.
+Added: As a result, on April 21, 2023, the Company reclassified $2.1 million out of Additional paid-in capital into the Earnout liability.
+Added: As of August 25, 2023, the Company reclassified the Earnout Shares from liability classification to equity classification as a result of the Company having sufficient authorized shares to share-settle the earnout.
+Added: The $2.0 million decrease in the Earnout liability from August 25, 2023 to September 30, 2023 was recognized as a Change in fair value of earnout liability during the nine months ended September 30, 2023.
Change in Fair Value of Notes Payable and Warrant Liabilities
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Change in fair value of notes payable and warrant liabilities $ 90,030 $ 4,580 $ 85,450 1,866 %
−Removed: The increased change in the fair value of notes payable and warrant liabilities during the six months ended June 30, 2023 versus the comparative period is primarily due to notes payable and warrants that were measured at fair value in the comparative period in 2022 and were revalued during 2023 at predominantly lower fair values due to pricing inputs that use the market price of the Company’s Common Stock and debt discount rate which have experienced a decline.
−Removed: Additionally, during the six months ended June 30, 2022 the Company did not have material liability classified warrants with changes in fair value included in earnings.
−Removed: During the six months ended June 30, 2023, the Company recognized a gain in the Change in fair value of notes payable and warrant liabilities of approximately $46.5 million, specific to the change in fair value of the Company’s warrant liabilities.
+Added: The change in the fair value of notes payable and warrant liabilities is due to a significant change in the volume of outstanding notes payable and warrants accounted for at fair value when compared with the comparative period in 2022 and the re-valuation of the Company’s notes payable and warrants at predominantly lower fair values due to pricing inputs that use the market price of the Common Stock and debt discount rate, which have experienced a decline.
+Added: As of September 30, 2022 the Company had $44.5 million of notes payable outstanding, compared with $130.1 million outstanding as of September 30, 2023, excluding the impact of mark to market valuation adjustments.
+Added: Additionally, during the nine months ended September 30, 2022 the Company did not have material liability classified warrants with changes in fair value included in earnings.
+Added: During the nine months ended September 30, 2023, the Company recognized a gain in the Change in fair value of notes payable and warrant liabilities of $69.8 million, specific to the change in fair value of the Company’s warrant liabilities.
+Added: These gains were offset by an increase in the fair value of the Company’s notes payable during the period, stemming from the impact of the full ratchet price adjustments that were applied to the Company’s SPA Notes.
Change in Fair Value of Related Party Notes Payable and Related Party Warrant Liabilities
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Change in fair value of related party notes payable and related party warrant liabilities
−Removed: $ 384 $ — $ 384 100 %
−Removed: The Company did not have any related party notes payable or warrants that were re-measured at fair value during the six months ended June 30, 2022.
−Removed: In May 2023, the Company issued the Unsecured SPA Notes to a related party.
−Removed: On June 30, 2023, the related party Unsecured SPA Notes and warrants were revalued at a lower fair value than at their issuance due to pricing inputs that use the market price of the Company’s Common Stock and debt discount rate which have experienced a decline.
+Added: $ 5,110 $ — $ 5,110 NM*
+Added: *NM = not meaningful.
+Added: The Company did not have any related party notes payable or warrants that were re-measured at fair value during the nine months ended September 30, 2022.
+Added: In May 2023, the Company issued the Unsecured SPA Notes to MHL, who is a related party, and VW.
+Added: On September 30, 2023, the related party Unsecured SPA Notes and warrants were revalued at a lower fair
+Added: value than at their issuance due to pricing inputs that use the market price of the Class A Common Stock and debt discount rate which have experienced a decline.
Loss on Settlement of Notes Payable
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Loss on settlement of notes payable $ (204,885) $ (30,454) $ (174,431) 573 %
−Removed: The loss on settlement of notes payable during the six months ended June 30, 2023 is primarily due to a $167.8 million loss on settlement of SPA Notes in connection with their conversion into Class A Common Stock.
−Removed: The Company recognized a Loss on settlement of notes payable for the difference between the fair value of the debt and the fair value of the shares transferred and the losses are driven by shares issued to satisfy the SPA Notes Make-Whole Amount.
−Removed: In addition, the Company recognized during the six months ended June 30, 2023 an $11.4 million Loss on settlement of notes payable as a result of amendments to the Company’s Secured SPA Notes in May 2023 that were accounted for as extinguishments.
−Removed: These transactions did not occur in the prior period.
+Added: The increase in the Loss on settlement of notes payable during the three months ended September 30, 2023 is driven by a substantially higher conversion volume during the period and an increase in the loss on settlement per dollar of principal.
+Added: During the nine months ended September 30, 2023 note holders converted $187.7 million of notes payable compared to $67.2 million in the prior period.
+Added: The increase in the loss on settlement per dollar of principal is driven by the trailing-twelve-month trend of declines in the fair value of the Company’s notes payable driven by the change in the Common Stock price over the period.
Loss on Settlement of Related Party Notes Payable
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
−Removed: Loss on settlement of related party notes payable $ (6,492) $ — $ (6,492) 100 %
−Removed: The Company did not have any related party notes payable that settled during the six months ended June 30, 2022.
−Removed: During May 2023, the Company issued the Unsecured SPA Notes to a related party.
−Removed: During the six months ended June 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 69,731,668 shares of the Company’s Class A Common Stock.
−Removed: The Company recognized during the six months ended June 30, 2023 a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
−Removed: This transaction did not occur in the prior period.
+Added: Loss on settlement of related party notes payable $ (17,248) $ — $ (17,248) NM*
+Added: *NM = not meaningful.
+Added: The Company did not have any related party notes payable that settled during the nine months ended September 30, 2022.
+Added: In May 2023, the Company entered into Unsecured SPA Notes with MHL,who is a related party, and VW.
+Added: During the nine months ended September 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $18.7 million in exchange for 72,353,608 shares of Class A Common Stock and the Company recognized a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Interest Expense
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
Interest expense $ (591) $ (5,119) $ 4,528 88 %
−Removed: The decrease in interest expense was primarily due to the Company’s repayment of $85.0 million of Ares notes payable principal and the conversion of $73.9 million of ATW NPA notes payable principal into the Company’s Class A Common Stock in the year ended December 31, 2022.
−Removed: The Company’s SPA Notes are carried at fair value and fluctuations in interest expense are included in the Change in fair value of notes payable.
+Added: The decrease in Interest expense was primarily due to the Company’s repayment of $85.0 million of Ares notes payable principal and the conversion of $73.9 million of ATW NPA notes payable principal into Class A Common Stock in the year ended December 31, 2022.
+Added: The SPA Notes are carried at fair value and fluctuations in interest expense are included in the Change in fair value of notes payable.
Related Party Interest Expense
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
2 unchanged sentences
Other (Expense) Income, Net
−Removed: Six Months Ended June 30, Change
+Added: Nine Months Ended September 30, Change
(in thousands) 2023 2022 Amount %
−Removed: Other (expense) income, net $ (298) $ (7,851) $ 7,553 (96) %
−Removed: The change in other (expense) income, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.
+Added: Other expense, net $ (1,922) $ (14,307) $ 12,385 (87) %
+Added: The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.
Dollars that are remeasured at the end of each period.
1 unchanged sentence
Going Concern
−Removed: The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited Condensed Consolidated Financial Statements are issued.
−Removed: 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 unaudited Condensed Consolidated Financial Statements were issued.
+Added: The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued.
+Added: 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 Condensed Consolidated Financial Statements were issued.
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.
−Removed: Since inception, the Company has incurred cumulative losses from operations and negative cash flows from operating activities, and has an accumulated deficit of $3,796.7 million and a cash balance of $17.9 million as of June 30, 2023.
+Added: Since inception, the Company has incurred cumulative losses from operations and negative cash flows from operating activities, and has an accumulated deficit of $3,874.7 million and a cash balance of $6.7 million as of September 30, 2023.
The Company expects to continue to generate significant operating losses for the foreseeable future.
−Removed: 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 8, Notes Payable ), the sale of Common Stock,
−Removed: and the net proceeds received from the Business Combination and the PIPE Financing (see Note 1, Nature of Business and Organization and Basis of Presentation ).
−Removed: Further, FF needs substantial additional financing to start the third phase of the delivery plan, the “Full Co-Creation Delivery,” in which FF will deliver FF 91 vehicles to all spire users that are expected to have paid in full for an FF 91 vehicle at time of delivery, and to fund its other capital needs and is in discussions with additional potential investors to obtain such financing.
+Added: 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 8, Related Party Transactions and Note 7, Notes Payable ), the sale of Common Stock, and the net proceeds received from the Business Combination and a subscription agreement with certain investors (see Note 1, Nature of Business and Organization and Basis of Presentation ).
+Added: FF announced the start of production of its first electric vehicle, the FF 91 Futurist, on March 29, 2023 and announced the delivery of its first electric vehicle, the Ultimate AI TechLuxury FF 91 2.0 Futurist Alliance, on August 14, 2023.
+Added: However, FF has recognized an insignificant amount of revenue as of the date hereof.
+Added: FF’s future business depends in large part on its ability to execute its plans to develop, manufacture, market, and deliver electric vehicles, including the FF 91, FF 81, FF 71 series, and Smart Last Mile Delivery electric vehicle models that appeal to customers.
+Added: Based on certain management assumptions, including timely completion of certain testing and suppliers meeting our supply chain requirement, FF originally expected deliveries of the FF 91 to users to begin before the end of April 2023.
+Added: However, certain of FF’s suppliers were unable to meet FF’s timing requirements and, therefore, FF updated the timing for the start of deliveries for its FF 91 vehicle.
+Added: FF has developed a three-phase delivery plan for the FF 91 (the “Delivery Plan”).
+Added: The first phase, which began in May 2023, is the “Industry Expert Futurist Product Officer (“FPO”) Co-Creation Delivery.” In this first phase, the Industry Expert FPO(s) are expected to pay in full for an FF 91 vehicle in order to reserve the vehicle and be trained in the use of the vehicle.
+Added: The second phase, which is the “FPO Co-Creation Delivery,” began in August 2023.
+Added: In this second phase, FPO(s) are taking possession of the FF 91 vehicle and are also entering into consulting, branding, marketing, and other arrangements with FF in exchange for fees to be paid by the Company to the FPO(s).
+Added: The third phase is the “Full Co-Creation Delivery,” in which, FF will deliver FF 91 vehicles to all spire users that are expected to have paid in full for an FF 91 vehicle at time of delivery.
+Added: Further, FF needs substantial additional financing to start the third phase of the Delivery Plan and is in discussions with additional potential investors to obtain such financing.
As FF executes the three-phase Delivery Plan, it plans to continue to move vehicles into production and off-the-line with high quality and high product power.
−Removed: There is no assurance FF will be able to timely receive sufficient funding under existing or new financing commitments to produce and deliver the FF 91 Futurist on that timeline or at all or to fund its other capital needs.
+Added: There is no assurance FF will be able to timely receive sufficient funding under existing or new 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 or at all.
−Removed: Further, even if FF receives sufficient funding, there cannot be any assurance that FF will be able to develop the manufacturing capabilities and processes, or secure reliable sources of component supply to meet the quality, engineering, design or production standards, or to meet the required production volumes to successfully grow into a viable, cash flow positive, business.
+Added: Further, there cannot be any assurance that FF will 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.
The Company has continued financing discussions with multiple parties, but has experienced delays in securing additional funding commitments, which have exacerbated the supply chain and liquidity pressures on FF’s business.
−Removed: Additionally, certain investors under the Secured SPA or Unsecured SPA may not fund their commitments until the Company increases the number of authorized shares of its Class A Common Stock and registers the securities underlying the Secured SPA Warrants or Unsecured SPA Warrants and Secured SPA Notes and Unsecured SPA Notes in an effective registration statement.
−Removed: At a special meeting of the FFIE stockholders held on August 16, 2023, FFIE stockholders approved (among other proposals) a proposal authorizing the Board to effect a reverse stock split of the Company’s outstanding common stock at a range between 1-for-2 and 1-for-90 shares of outstanding common stock.
−Removed: The Company anticipates implementing the reverse stock split (which will result in an increase in available authorized shares of Common Stock) soon after the issuance of the unaudited Condensed Consolidated Financial Statements, at which time it will have sufficient authorized shares of Class A Common Stock to fulfill its obligation to issue shares upon exercise of all of the warrants and conversion of all of the notes issued or issuable under the Secured SPA or Unsecured SPA, and to pay interest Make-Whole Amounts in shares upon conversion of such notes.
−Removed: There can be no assurance that FF will be able to satisfy the closing conditions under the Unsecured SPA or that FF will be able further to successfully obtain additional incremental convertible senior secured note purchasers under the Secured SPA or Unsecured SPA or other debt or equity financing in a timely manner or on acceptable terms, if at all.
−Removed: 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.
+Added: Since August 14, 2022, pursuant to the Secured SPA, Unsecured SPA and Unsecured Streeterville SPA (as defined in Note 7, Notes Payable) , the Company has obtained commitments from several investors totaling $513.5 million in convertible note financing.
+Added: Additionally, the Company has received commitments totaling $20.0 million through forced warrant exercise proceeds, subject to certain conditions.
+Added: A total of $300.2 million under these convertible note financing commitments has been funded to date ($263.2 million net of original discount and transaction costs).
+Added: The remaining balance of $213.3 million is subject to various conditions, including achievement of delivery milestones, satisfaction of closing conditions, resolving disputes with investors, and satisfaction or waiver of certain conditions, including for a portion of such financing an effective registration statement for the shares underlying the applicable notes.
+Added: In addition to the amounts received pursuant to the above commitments, the Company received additional optional funding - an aggregated gross proceeds of $38.0 million ($32.9 million net of original issuance discount) under the Secured SPA.
+Added: There can be no assurance that FF will be able to satisfy the closing conditions under the Unsecured SPA or that FF will be able further to successfully obtain additional incremental convertible senior secured note purchasers under the Secured SPA,
+Added: Unsecured SPA, Unsecured Streeterville SPA or other debt or equity financing in a timely manner or on acceptable terms, if at all.
+Added: These factors, in addition to the continued rise in inflation increasing the cost of labor and materials 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 our ongoing capital raising efforts are unsuccessful or significantly delayed, or if we experience prolonged material adverse trends in our business, our production will be delayed or decreased, and our actual use of cash, production volume and revenue for 2023 will vary from our previously disclosed forecasts, and such variances may be material.
1 unchanged sentence
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.
−Removed: Incremental capital needs beyond 2023 to fund development of the Company’s remaining product portfolio and other capital needs 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.
+Added: Incremental capital needs beyond 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.
Apart from the FF 91 Futurist series, substantial additional capital will be required to fund operations, as well as, research, development, and design efforts for future vehicles.
−Removed: Since August 14, 2022, pursuant to the Secured SPA and Unsecured SPA, the Company has obtained commitments from several investors totaling $462.9 million in convertible note financing and in committed forced warrant exercise proceeds, subject to certain conditions.
−Removed: A total of $292.2 million under these commitments has been funded to date ($256.5 million net of original discount and transaction costs).
−Removed: Of the remaining balance of $171.3 million, an amount of $5.0 million is committed and contingent upon delivery of the FF 91 Futurist to the first batch of bona fide customers, an amount of $15.0 million is expected to be funded within five business days after the satisfaction or waiver of certain conditions, including for a portion of such financing an effective registration statement for the shares underlying the applicable notes, and $6.5 million to be funded once certain terms are agreed by the Company and the investor.
−Removed: In addition, the Company had the right to force the exercise of the warrants underlying the Warrant Reserve for a total exercise price of $20.0 million in cash ($9.4 million was funded and $10.6 million was cancelled), upon the completion of certain milestones and conditions.
−Removed: The right to force exercise of the Warrant Reserve expired upon the holders exercising their warrants during 2023.
−Removed: $144.8 million is expected to be funded through installments after the satisfaction of the closing conditions for the Unsecured SPA.
−Removed: In 2023 to date, Senyun, RAAJJ and a purchaser affiliated with ATW Partners LLC exercised their respective options to purchase additional senior secured notes
−Removed: and the accompanying Secured SPA Warrants of the Company.
−Removed: The Company received aggregated gross proceeds of $38.0 million ($32.9 million net of original issuance discount) in exchange for such issuances.
−Removed: Further, pursuant to the SEPA, the Company has the sole right, but not the obligation, to direct Yorkville from time to time to purchase up to $200.0 million of Class A Common Stock during the commitment period ending November 11, 2025, with an option to increase such amount to $350.0 million at FF’s option.
−Removed: On February 28, 2023, the stockholders approved, as is required by the applicable Nasdaq rules and regulations, advances of Class A Common Stock to be issued under the SEPA, including the issuance of any shares in excess of 19.99% of the issued and outstanding shares of Common Stock.
−Removed: On May 8, 2023, the Company entered into the Unsecured SPA with the Unsecured SPA Purchasers to issue and sell, subject to the satisfaction of certain closing conditions, $100.0 million aggregate principal amount of the Unsecured SPA Notes.
−Removed: On May 10, 2023 the Company received gross proceeds pursuant to the Unsecured SPA totaling $3.3 million ($3.0 million net of original issuance cost).
−Removed: The Unsecured SPA Purchasers committed to fund in eight subsequent closings fifteen days apart, subject to the satisfaction of certain closing conditions.
−Removed: In addition, any Unsecured SPA Purchaser may postpone or cancel any closing pursuant to the Unsecured SPA in its reasonable discretion if it reasonably determines, based on public information, that the first phase of the Company’s three-phase delivery plan as disclosed in public filings has not begun or will not begin prior to May 31, 2023 and/or the second phase of such delivery plan has not begun or will not begin prior to June 30, 2023, in each case within 15 calendar days of such deadline.
−Removed: On June 26, 2023, the Company entered into the First Unsecured SPA Amendment.
−Removed: The First Unsecured SPA Amendment amended and restated Section 2.1(a)(i) of the Unsecured SPA to provide that the Unsecured SPA Purchasers may, in their reasonable discretion, postpone or cancel any closing of their purchase of the Company’s unsecured convertible senior promissory notes pursuant to the Unsecured SPA if the Company has not issued a press release or other public announcement confirming that the second phase of the Company’s three phase delivery plan has begun on or prior to August 31, 2023, within 15 calendar days of such date.
−Removed: In addition, the Company is required to use its reasonable best efforts to hold a special stockholders meeting (which meeting occurred on August 16, 2023) to, among other things, obtain stockholder approval of transactions involving the notes and warrants of the Company issued or to be issued pursuant to the Unsecured SPA, including the issuance of any shares in excess of 19.99% of the issued and outstanding shares of the Company’s Common Stock in respect of such notes and warrants.
−Removed: See Note 8, Notes Payable , for more information regarding the Unsecured SPA.
−Removed: Further, the Company is required to use its reasonable best efforts (i) to file, on or prior to May 31, 2023, a registration statement providing for the resale by the Unsecured SPA Purchasers of the reserved shares (the “First Registration Statement”);
−Removed: and (ii) to file, on or prior to the date that is 30 days following the Company’s receipt of stockholder approval (and the filing of an amendment to its charter to reflect such increase in authorized shares of Common Stock), a registration statement providing for the resale by the Unsecured SPA Purchasers of all the remaining shares issuable pursuant to the financing documents (the “Second Registration Statement” and, together with the First Registration Statement, the “Registration Statements”).
−Removed: The Company is also required to use reasonable best efforts (i) to cause the First Registration Statement to become effective within 90 days following the date of the Unsecured SPA;
−Removed: (ii) to cause the Second Registration Statement to become effective within 90 days following the Company’s filing thereof;
−Removed: and (iii) to keep each Registration Statement effective at all times until no Unsecured SPA Purchaser owns any Unsecured SPA Notes, Unsecured SPA Warrants, (each as defined below) or shares of Class A Common Stock issuable upon exercise or conversion thereof.
−Removed: In connection with the Unsecured SPA, the Company entered into equity commitment letters with each of FF Global and the sole stockholder of V W Investment Holding Limited to support the obligations of the Unsecured SPA Purchasers under the Unsecured SPA subject to the limitations set forth therein (the “Equity Commitment Letters”).
−Removed: FF has received third party beneficiary rights in the Equity Commitment Letters to be able to compel the closing or seek damages subject to the limitations set forth therein.
−Removed: In the event of a breach by such investors of their obligations under their equity commitment letters with the Company, the Company may not be able to recover the damages caused by, or receive the funding due to, such breach.
−Removed: On June 26, 2023, pursuant to the FFVV Joinder, FFVV agreed to purchase New Notes in installments of $5.0 million at each of the eight closing dates, and pursuant to the Senyun Joinder, Senyun agreed to purchase New Senyun Notes in an aggregate principal amount of up to $30.0 million in installments of $3.75 million at each of the eight closing dates (see Note 8, Notes Payable , for further discussion).
+Added: On November 11, 2022, FF entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd.
+Added: (“Yorkville”), which is an affiliate of Yorkville Advisors.
+Added: Under the 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 at FF’s option) of Class A Common Stock to an affiliate of Yorkville Advisors, subject to certain limitations, at the time of the Company’s choosing during the three-year term of the SEPA.
+Added: During the three and nine months ended September 30, 2023, FF sold 837,500 shares of Class A Common Stock at a price equal to 97% of the average daily volume weighted average price of the Class A Common Stock to Yorkville under the SEPA for $7.3 million.
On June 16, 2023, the Company filed the Shelf Registration with the SEC, which was declared effective by the SEC on June 28, 2023.
As a result, the Company may from time-to-time issue Class A Common Stock and/or warrants, up to an aggregate amount of $300.0 million in one or more offerings.
−Removed: The Shelf Registration provides an ability for the Company to raise additional capital through Class A common share and/or warrant issuances to both institutional and retail investors as it looks to raise additional financing to support production ramp-up.
−Removed: Despite the possible access to liquidity resulting from the SEPA and the unfunded commitments from the Secured SPA and the Unsecured SPA, the Company projects that it will require additional funds in order to continue operations and support
−Removed: the ramp-up of production of the FF 91 Futurist to generate revenues to put the Company on a path to cash flow break-even.
+Added: The Shelf Registration provides an ability for the Company to raise additional capital through Class A Common Stock and/or warrant issuances to both institutional and retail investors as it looks to raise additional financing to support production ramp-up.
+Added: On September 27, 2023, the Company filed a prospectus supplement to the Shelf Registration regarding the At-the-Market Equity Offering Sales Agreement (the “Sales Agreement”) the Company entered into on September 26, 2023 with Stifel, Nicolaus & Company, Incorporated, B.
+Added: Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc.
+Added: and Maxim Group LLC (the “Sales Agents”) to offer and sell up to $90.0 million of Class A Common Stock.
+Added: In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of Class A Common Stock from time to time through or to the Sales Agents as sales agent or principal by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933.
+Added: The aggregate compensation payable to the Sales Agents shall be up to 3.5% of the gross sales price of the shares sold through the Sales Agents.
+Added: During the three and nine months ended September 30, 2023, the Company issued 780,000 shares of its Class A Common Stock under the Sales Agreement for gross cash proceeds of $1.3 million less placement agent fees of $0.1 million.
+Added: Despite the potential access to liquidity resulting from the SEPA, the Shelf Registration and the unfunded commitments from the Secured SPA and the Unsecured SPA, the Company projects that it will require additional funds in order to continue operations and support the ramp-up of production of the FF 91 Futurist to generate revenues to put the Company on a path to cash flow break-even.
Incremental capital needs beyond 2023 to fund operations and the development of the Company’s remaining product portfolio and ramp up production will be highly dependent on the market success and profitability of the FF 91 Futurist and the Company’s ability to accurately estimate and control costs.
−Removed: 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 FF ieFactory Hanford, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options.
+Added: The Company is exploring various funding and financing alternatives to fund its ongoing operations and to ramp up production, including equipment leasing, construction financing of the FF ieFactory California, 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.
−Removed: 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, other potential impact of the COVID-19 pandemic, and general macroeconomic conditions.
+Added: 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 general macroeconomic conditions.
There can be no assurance that the Company will be successful in achieving its strategic plans, that the Company’s future funding raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all or that the Company will be able to satisfy the closing conditions under its financing agreements.
−Removed: If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures.
+Added: If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be
+Added: required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures.
Any such events would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives, and the Company will likely not be able to continue as a going concern.
−Removed: As of June 30, 2023, the Company was in default on the Secured SPA Notes;
+Added: As of September 30, 2023, the Company was in default on the Secured SPA Notes;
however, the holders of such notes subsequently waived the default.
−Removed: The Company was in breach of its debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balance of $4.5 million.
+Added: As of April 2023, the Company has been in breach of its debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balance of $4.5 million.
As a result of the default, the interest rate on the outstanding principal balance has increased to a rate of 18% per annum until the event of default is no longer applicable.
−Removed: As of December 31, 2022, the Company was in default on the Secured SPA Notes.
−Removed: However, during the three months ended March 31, 2023, the holders of such notes waived the default.
+Added: There can be no assurance that the Company will be able to maintain sufficient authorized shares to fully settle all outstanding equity-linked financial instruments in shares.
Material Cash Requirements
The Company's material cash requirements include the following contractual and other obligations:
−Removed: As of June 30, 2023, the Company had outstanding $18.2 million in aggregate principal amount of notes payable to related parties, of which $3.8 million is due on demand, $4.5 million is scheduled to become due in the succeeding 12 months, and the remainder due in year 2029.
−Removed: The 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 Chief Product and User Ecosystem Officer.
−Removed: See Note 9, Related Party Notes Payable , in the unaudited Condensed Consolidated Financial Statements.
−Removed: As of June 30, 2023, the Company had outstanding $107.8 million in aggregate principal amount of notes payable to third parties, of which $4.8 million is due on demand, $41.0 million is due in year 2025, $0.1 million is due in year 2026, and the remainder due in year 2029.
−Removed: See Note 8, Notes Payable , in the unaudited Condensed Consolidated Financial Statements.
−Removed: As of June 30, 2023, the Company had operating and financing lease obligations (inclusive of interest) of $39.0 million, primarily related to its FF ieFactory California production facility, corporate office, store, equipment, and vehicle lease agreements, of which approximately $8.5 million in payments are scheduled to become due in the succeeding 12 months.
+Added: As of September 30, 2023, the Company had outstanding notes payable to related parties, comprised of $3.8 million which is due on demand, $5.1 million is scheduled to become due in December 2023, and $3.3 million due in the year 2029.
+Added: The related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by Mr.
+Added: Jia, the Company’s founder and Chief Product and User Ecosystem Officer.
+Added: See Note 8, Related Party Transactions , in the Condensed Consolidated Financial Statements.
+Added: As of September 30, 2023, the Company had outstanding $135.1 million in aggregate principal amount of notes payable to third parties, of which $4.8 million is due on demand, $41.0 million and the remainder due in year 2029.
+Added: See Note 7, Notes Payable , in the Condensed Consolidated Financial Statements.
+Added: As of September 30, 2023, the Company had operating and financing lease obligations (inclusive of interest) of $37.0 million, primarily related to its FF ieFactory California production facility, corporate office, store, equipment, and vehicle lease agreements, of which approximately $7.2 million in payments are scheduled to become due in the succeeding 12 months.
We have purchase commitments under legally enforceable agreements for goods and services, including purchases of inventory, tooling, machinery and equipment, and items to be used in research and development activities, with defined terms as to quantity, price and timing of delivery.
Sources of Liquidity
−Removed: As of June 30, 2023, the Company’s principal source of liquidity was cash on hand totaling $17.9 million, which was held for working capital and general corporate purposes.
+Added: As of September 30, 2023, the Company’s principal source of liquidity was cash on hand totaling $6.7 million, which was held for working capital and general corporate purposes.
+Added: The Company also has access to various sources of additional capital, including the SEPA, the Sales Agreement, and the SPA Commitments.
+Added: The Company’s ability to access these sources of capital and further information on amounts available is discussed in Note 2, Liquidity and Capital Resources .
Cash Flow Analysis
Presented below is a summary of FF’s cash flows for the periods indicated:
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Net cash provided by (used in)
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FF continues to experience negative cash flows from operations as FF designs and develops its vehicles and builds its infrastructure both in the U.S.
−Removed: FF’s cash flows from operating activities are significantly affected by FF’s cash investments to support the growth of FF’s business in areas such as research and development associated with FF’s electric vehicles, corporate planning, and general and administrative functions.
+Added: FF’s cash flows from operating activities are significantly affected by FF’s cash investments to support the growth of FF’s business in areas such as R&D associated with FF’s electric vehicles, corporate
+Added: planning, and general and administrative functions.
FF’s operating cash flows are also affected by its working capital needs to support growth and fluctuations in personnel-related expenditures, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.
−Removed: Net cash used in operating activities was $160.7 million for the six months ended June 30, 2023 which were primarily related to ED&T services, compensation and benefits, and other professional services associated with research and development activities performed.
−Removed: The largest components of FF’s cash used by operating activities during the six months ended June 30, 2023, were $83.1 million for research and development expenses, $55.0 million for wages and compensation related expenses, and $22.6 million for professional services.
−Removed: Net cash used in operating activities was $235.1 million for the six months ended June 30, 2022 which were primarily related to ED&T services, compensation and benefits, and other professional services associated with research and development activities performed.
−Removed: The largest components of FF’s cash used by operating activities during the six months ended June 30, 2022, were $131.3 million for research and development expenses, $62.2 million for wages and compensation related expenses, and $35.2 million for professional services.
+Added: Net cash used in operating activities was $240.4 million for the nine months ended September 30, 2023 which were primarily related to ED&T services, compensation and benefits, and other professional services associated with research and development activities performed.
+Added: The largest components of FF’s cash used by operating activities during the nine months ended September 30, 2023, were $87.5 million for research and development expenses, $82.1 million for wages and compensation related expenses, and $31.1 million for professional services.
+Added: Net cash used in operating activities was $355.1 million for the nine months ended September 30, 2022.
+Added: The largest components of FF’s cash used by operating activities during the nine months ended September 30, 2022, were for professional and contracted services totaling $119.5 million, compensation, benefits and related expenses totaling $95.3 million and prepaid insurance totaling $21.7 million.
Investing Activities
−Removed: Net cash used in investing activities was $25.9 million and $90.2 million for the six months ended June 30, 2023 and 2022, respectively, and is related to the acquisition of fixed assets.
+Added: Net cash used in investing activities was $10.8 million and $112.1 million for the nine months ended September 30, 2023 and 2022, respectively, and is related to the acquisition of fixed assets.
Financing Activities
−Removed: For the six months ended June 30, 2023, net cash provided by financing activities was $181.8 million.
−Removed: For the six months ended June 30, 2022, net cash used in financing activities was $85.8 million.
−Removed: Net cash provided by financing activities during the six months ended June 30, 2023, primarily consists of $180.6 million in proceeds from notes payable, net of original issue discount, and $4.1 million in proceeds from the exercise of warrants, partially offset by the payment of $2.2 million in debt issuance costs and $0.7 million in payments of finance lease obligations.
−Removed: Net cash used in financing activities during the six months ended June 30, 2022 primarily consists of $87.3 million in repayment of notes payable, including liquidation premiums, and $0.9 million in payments of finance lease obligations, partially offset by $2.4 million in proceeds from exercise of stock options.
+Added: For the nine months ended September 30, 2023, net cash provided by financing activities was $237.6 million.
+Added: For the nine months ended September 30, 2022, net cash used in financing activities was $40.9 million.
+Added: Net cash provided by financing activities during the nine months ended September 30, 2023, primarily consists of $228.4 million in proceeds from notes payable, net of original issue discount, and $4.1 million in proceeds from the exercise of warrants, partially offset by the payment of $2.5 million in debt issuance costs and $1.0 million in payments of finance lease obligations.
+Added: Net cash used in financing activities during the nine months ended September 30, 2022 primarily consists of $87.3 million in repayment of notes payable, including liquidation premiums, and $1.4 million in payments of finance lease obligations, partially offset by $9.5 million in proceeds from exercise of stock options.
Effect of Exchange Rate Changes on Cash and Restricted Cash
−Removed: The exchange rates effect on cash and restricted cash was $5.6 million and $2.2 million for the six months ended June 30, 2023 and 2022, respectively.
+Added: The exchange rates effect on cash and restricted cash was $3.7 million and $11.6 million for the nine months ended September 30, 2023 and 2022, respectively.
The effects of exchange rate changes on cash and restricted cash result from fluctuations on the translation of assets and liabilities denominated in foreign currencies, primarily Chinese Renminbi.
3 unchanged sentences
The Company did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
−Removed: Thus, the Company did not have any off-balance sheet arrangements as of June 30, 2023 and December 31, 2022.
+Added: Thus, the Company did not have any off-balance sheet arrangements as of September 30, 2023 and December 31, 2022.
Critical Accounting Estimates
−Removed: The preparation of our unaudited Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period.
+Added: The preparation of our Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period.
Management has based its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values that are not readily apparent from other sources.
6 unchanged sentences
For a description of the Company’s critical accounting estimates, refer to the section titled “Critical Accounting Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, of the Form 10-K/A.
−Removed: As of the date of this report, there have been no changes to our critical accounting estimates described in the Form 10-K/A that have had a material impact on our unaudited Condensed Consolidated Financial Statements and related footnotes.
+Added: As of the date of this report, there have been no changes to our critical accounting estimates described in the Form 10-K/A that have had a material impact on our Condensed Consolidated Financial Statements and related footnotes.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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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.