FARADAY FUTURE INTELLIGENT ELECTRIC INC. 10-Q

Item 1. Financial Statements Faraday Future Intelligent Electric Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share data) September 30, 2023 December 31, 2022 Assets Current assets Cash $ 6,714 $ 16,968 Restricted cash 1,853 1,546 Inventory 35,215 4,457 Deposits 62,556 44,066 Other current assets 20,963 17,489 Total current assets 127,301 84,526 Property and equipment, net 416,514 406,320 Finance lease right-of-use assets 12,090 12,362 Operating lease right-of-use assets 17,370 19,588 Other non-current assets 6,252 6,492 Total assets $ 579,527 $ 529,288 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 101,857 $ 91,603 Accrued expenses and other current liabilities 68,446 65,709 Warrant liabilities 1,613 92,781 Related party warrant liabilities 117 — Accrued interest 25 189 Related party accrued interest 139 — Operating lease liabilities, current portion 3,755 2,538 Finance lease liabilities, current portion 1,442 1,364 Related party notes payable, current portion 8,830 8,964 Notes payable, current portion 4,929 5,097 Total current liabilities 191,153 268,245 Finance lease liabilities, less current portion 5,475 6,570 Operating lease liabilities, less current portion 14,868 18,044 Other liabilities 10,783 9,429 Related party notes payable, less current portion 2,945 — Notes payable, less current portion 92,500 26,008 Total liabilities 317,724 328,296 Commitments and contingencies (Note 9) Stockholders’ equity Class A Common Stock, $ 0.0001 par value; 147,875,000 and 71,312,500 shares authorized; 31,764,093 and 7,041,828 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 3 1 Class B Common Stock, $ 0.0001 par value; 6,562,500 shares authorized; 800,008 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively — — Additional paid-in capital 4,128,990 3,724,241 Accumulated other comprehensive income 7,512 3,505 Accumulated deficit ( 3,874,702 ) ( 3,526,755 ) Total stockholders’ equity 261,803 200,992 Total liabilities and stockholders’ equity $ 579,527 $ 529,288 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 3 Table of Contents Faraday Future Intelligent Electric Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenues Auto sales $ 551 $ — $ 551 $ — Cost of revenues Auto sales 16,131 — 22,744 — Gross loss ( 15,580 ) — ( 22,193 ) — Operating expenses Research and development 21,593 47,582 104,670 259,741 Sales and marketing 5,318 3,823 18,082 16,207 General and administrative 24,023 28,551 67,598 89,069 Loss on disposal of property and equipment — — 3,698 1,407 Change in fair value of earnout liability ( 67 ) — 2,033 — Total operating expenses 50,867 79,956 196,081 366,424 Loss from operations ( 66,447 ) ( 79,956 ) ( 218,274 ) ( 366,424 ) Change in fair value of notes payable and warrant liabilities 17,571 ( 1,764 ) 90,030 4,580 Change in fair value of related party notes payable and related party warrant liabilities 4,726 — 5,110 — Loss on settlement of notes payable ( 21,357 ) ( 30,454 ) ( 204,885 ) ( 30,454 ) Loss on settlement of related party notes payable ( 10,756 ) — ( 17,248 ) — Interest expense ( 90 ) ( 245 ) ( 591 ) ( 5,119 ) Related party interest expense ( 69 ) ( 996 ) ( 139 ) ( 2,931 ) Other expense, net ( 1,624 ) ( 6,457 ) ( 1,922 ) ( 14,307 ) Loss before income taxes ( 78,046 ) ( 119,872 ) ( 347,919 ) ( 414,655 ) Income tax provision — — ( 28 ) ( 9 ) Net loss $ ( 78,046 ) $ ( 119,872 ) $ ( 347,947 ) $ ( 414,664 ) Net loss per share of Class A and B Common Stock attributable to common stockholders: Basic $ ( 3.78 ) $ ( 27.67 ) $ ( 23.28 ) $ ( 100.26 ) Diluted ( 3.78 ) ( 27.67 ) ( 23.28 ) ( 100.26 ) Weighted average shares used in computing net loss per share of Class A and B Common Stock: Basic 20,647,430 4,332,194 14,944,452 4,135,984 Diluted 20,647,430 4,332,194 14,944,452 4,135,984 Total comprehensive loss Net loss $ ( 78,046 ) $ ( 119,872 ) $ ( 347,947 ) $ ( 414,664 ) Foreign currency translation adjustment ( 1,560 ) 9,864 4,007 13,548 Total comprehensive loss $ ( 79,606 ) $ ( 110,008 ) $ ( 343,940 ) $ ( 401,116 ) See accompanying notes to unaudited Condensed Consolidated Financial Statements. 4 Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Class A Class B Shares Amount Shares Amount Balance as of June 30, 2023 17,796,893 $ 2 800,008 $ — $ 4,065,282 $ 9,072 $ ( 3,796,656 ) $ 277,700 Conversion of notes payable and accrued interest into Class A Common Stock (Note 7) 12,182,048 1 — — 51,906 — — 51,907 Reclassification of August 25, 2023 earnout shares liability to equity due to authorized share increase — — — — 1,381 — — 1,381 Reclassification of August 25, 2023 stock-based awards liability to equity due to authorized share increase — — — — 2,043 — — 2,043 Issuance of Common Stock 1,617,500 — — — 8,520 — — 8,520 Reverse Stock split related round up share issuances 163,885 — — — — — — Stock-based compensation — — — — 216 — — 216 Issuance of shares for RSU vesting net of tax withholdings 3,767 — — — ( 358 ) — — ( 358 ) Foreign currency translation adjustment — — — — — ( 1,560 ) — ( 1,560 ) Net loss — — — — — — ( 78,046 ) ( 78,046 ) Balance as of September 30, 2023 31,764,093 $ 3 800,008 $ — $ 4,128,990 $ 7,512 $ ( 3,874,702 ) $ 261,803 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 5 Table of Contents Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) (in thousands, except share data) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Class A Class B Shares Amount Shares Amount Balance as of December 31, 2022 7,041,828 $ 1 800,008 $ — $ 3,724,241 $ 3,505 $ ( 3,526,755 ) $ 200,992 Conversion of notes payable and accrued interest into Class A Common Stock (Note 7) 22,271,914 2 — — 335,013 — — 335,015 Change in classification of warrants from Additional paid-in capital to liability pursuant to the Warrant Exchange (Note 7) — — — — ( 6,811 ) — — ( 6,811 ) Reclassification of February 28, 2023 earnout shares liability to equity due to authorized share increase (Note 10) — — — — 5,014 — — 5,014 Reclassification of February 28, 2023 stock-based awards liability to equity due to authorized share increase (Note 10) — — — — 8,978 — — 8,978 Reclassification of earnout shares from equity to liability on April 21, 2023 due to insufficient authorized shares (Note 10) — — — — ( 2,112 ) — — ( 2,112 ) Reclassification of stock-based awards from equity to liability on April 21, 2023 due to insufficient authorized shares (Note 10) — — — — ( 2,979 ) — — ( 2,979 ) Reclassification of August 25, 2023 earnout shares liability to equity due to authorized share increase — — — — 1,381 — — 1,381 Reclassification of August 25, 2023 stock-based awards liability to equity due to authorized share increase — — — — 2,043 — — 2,043 Issuance of Common Stock 1,617,500 — — — 8,520 — — 8,520 Reverse Stock split related round up share issuances 163,885 — — — — — — — Stock-based compensation — — — — 4,840 — — 4,840 Exercise of warrants 639,109 — — — 51,276 — — 51,276 Exercise of stock options 619 — — — 44 — — 44 Issuance of shares for RSU vesting net of tax withholdings 32,330 — — — ( 458 ) — — ( 458 ) Cancellations ( 3,092 ) — — — — — — — Foreign currency translation adjustment — — — — 4,007 — 4,007 Net loss — — — — — ( 347,947 ) ( 347,947 ) Balance as of September 30, 2023 31,764,093 $ 3 800,008 $ — $ 4,128,990 $ 7,512 $ ( 3,874,702 ) $ 261,803 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 6 Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Commitment to Issue Class A Common Stock and Stockholders’ Equity (Unaudited) (in thousands, except share data) Commitment to Issue Class A Common Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) Class A Class B Shares Amount Shares Amount Shares Amount Balance as of June 30, 2022 — $ 32,900 2,981,794 $ — 800,008 $ — $ 3,491,071 $ ( 3,261 ) $ ( 3,219,308 ) $ 268,502 Issuance of shares pursuant to the commitment to issue Class A and Class B Common Stock — — 253,309 — — — — — — — Transfer of private warrants to unaffiliated parties — — — — — — 186 — — 186 Amendment of ATW NPA Warrants (Note 13) — — — — — — 1,238 — — 1,238 Issuance pursuant to commitment to issue registered shares — ( 32,900 ) 29,844 — — — 32,900 — — 32,900 Conversion of notes payable into Class A Common Stock — — 810,549 — — — 84,780 — — 84,780 Stock-based compensation — — — — — — 2,670 — — 2,670 Exercise of stock options — — 39,217 — — — 7,181 — — 7,181 Repurchase of Common Stock — — ( 1,210 ) — — — ( 767 ) — — ( 767 ) Receipt of Class A Common Stock in consideration of exercises of options — — ( 3,899 ) — — — ( 669 ) — — ( 669 ) Exercise of warrants — — 212,828 — — — 1,728 — — 1,728 Foreign currency translation adjustment — — — — — — — 9,864 — 9,864 Net loss — — — — — — — — ( 119,872 ) ( 119,872 ) Balance as of September 30, 2022 — $ — 4,322,432 $ — 800,008 $ — $ 3,620,318 $ 6,603 $ ( 3,339,180 ) $ 287,741 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 7 Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Commitment to Issue Class A Common Stock and Stockholders’ Equity (Unaudited) (in thousands, except share data) Commitment to Issue Class A Common Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit) Class A Class B Shares Amount Shares Amount Shares Amount Balance as of December 31, 2021 — $ — 2,108,667 $ — — $ — $ 3,482,243 $ ( 6,945 ) $ ( 2,907,644 ) $ 567,654 Reclassification of obligation to issue registered shares of Class A Common Stock upon adoption of ASU 2020-06 — 32,900 — — — — — — ( 20,265 ) ( 20,265 ) Transfer of private warrants to unaffiliated parties — — — — — — 186 — — 186 Amended Exercise price of ATW NPA warrants (Note 13) — — — — — — 1,238 — — 1,238 Reclassification of deferred gain upon adoption of ASC 842 — — — — — — — — 3,393 3,393 Issuance of shares pursuant to the commitment to issue Class A and Class B Common Stock — — 1,114,402 — 800,008 — — — — — Issuance pursuant to commitment to issue registered shares — ( 32,900 ) 29,844 — — — 32,900 — — 32,900 Conversion of notes payable into Class A Common Stock — — 810,549 — — — 84,780 — — 84,780 Stock-based compensation — — — — — — 9,144 — — 9,144 Exercise of stock options — — 51,251 — — — 9,535 — — 9,535 Repurchase of Common Stock — — ( 1,210 ) — — — ( 767 ) — — ( 767 ) Receipt of Class A Common Stock in consideration of exercises of options — — ( 3,899 ) — — — ( 669 ) — — ( 669 ) Exercise of warrants — — 212,828 — — — 1,728 — — 1,728 Foreign currency translation adjustment — — — — — — — 13,548 — 13,548 Net loss — — — — — — — — ( 414,664 ) ( 414,664 ) Balance as of September 30, 2022 — $ — 4,322,432 $ — 800,008 $ — $ 3,620,318 $ 6,603 $ ( 3,339,180 ) $ 287,741 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 8 Table of Contents Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities Net loss $ ( 347,947 ) $ ( 414,664 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 27,673 2,532 Stock-based compensation 8,906 9,144 Loss on disposal of property and equipment 3,698 1,407 Non-cash change in fair value of related party notes payable and related party warrant liabilities ( 5,110 ) — Non-cash change in fair value of notes payable and warrant liabilities ( 90,461 ) ( 4,580 ) Change in fair value of earnout liability 1,381 — Change in operating lease right-of-use assets 2,491 2,265 Loss on foreign exchange 218 2,484 Loss on write-off of vendor deposits, net 408 2,992 Non-cash interest expense — 8,050 Loss on settlement of notes payable 204,885 30,454 Loss on settlement of related party notes payable 17,248 — Other 1,008 324 Changes in operating assets and liabilities: Deposits ( 19,237 ) 13,364 Inventory ( 30,758 ) — Other current and non-current assets ( 3,415 ) ( 10,656 ) Accounts payable 13,838 27,467 Accrued payroll and benefits — 9,372 Accrued expenses and other current liabilities ( 23,332 ) ( 21,117 ) Operating lease liabilities ( 1,838 ) ( 1,226 ) Accrued interest expense ( 26 ) ( 12,721 ) Net cash used in operating activities ( 240,370 ) ( 355,109 ) Cash flows from investing activities Payments for property and equipment ( 10,846 ) ( 112,099 ) Net cash used in investing activities ( 10,846 ) ( 112,099 ) Cash flows from financing activities Proceeds from related party notes payable, net of original issuance discount 19,782 — Proceeds from notes payable, net of original issuance discount 208,650 40,050 Proceeds from the sale of Common Stock, net of issuance costs 8,520 — Proceeds from exercise of warrants 4,074 1,728 Payments of notes payable — ( 87,258 ) Payment of notes payable issuance costs ( 2,489 ) ( 2,813 ) Payments of finance lease obligations ( 1,016 ) ( 1,410 ) Repurchase of Common Stock — ( 767 ) Proceeds from exercise of stock options 44 9,535 Net cash provided by (used in) financing activities 237,565 ( 40,935 ) Effect of exchange rate changes on cash and restricted cash 3,704 11,594 Net decrease in cash and restricted cash ( 9,947 ) ( 496,549 ) Cash and restricted cash, beginning of period 18,514 530,477 Cash and restricted cash, end of period $ 8,567 $ 33,928 9 Table of Contents Faraday Future Intelligent Electric Inc. Condensed Consolidated Statement of Cash Flows (Unaudited) (in thousands) The following table provides a reconciliation of cash and restricted cash reported within the Condensed Consolidated Balance Sheets that aggregate to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows: September 30, 2023 December 31, 2022 Cash and restricted cash Cash $ 6,714 $ 16,968 Restricted cash 1,853 1,546 Total cash and restricted cash $ 8,567 $ 18,514 Nine Months Ended September 30, 2023 2022 Supplemental disclosure of noncash investing and financing activities Reclassification of February 28, 2023 stock-based awards liability to equity due to authorized share increase $ 8,978 $ — Reclassification of February 28, 2023 earnout shares liability to equity due to authorized share increase 5,014 — Reclassification of earnout shares from equity to liability on April 21, 2023 due to insufficient authorized shares 2,112 — Reclassification of stock-based awards from equity to liability on April 21, 2023 due to insufficient authorized shares 2,979 — Reclassification of August 25, 2023 earnout shares liability to equity due to authorized share increase 1,381 — Reclassification of August 25, 2023 stock-based awards liability to equity due to authorized share increase 2,043 — Conversion of related party notes payable and related party accrued interest into Class A Common Stock 11,254 — Conversion of notes payable and accrued interest into Class A Common Stock 114,073 — Recognition of operating right of use assets and lease liabilities upon adoption of ASC 842 and for new leases entered into in 2022 — 11,906 Additions of property and equipment included in accounts payable and accrued expenses — 12,056 Issuance of Secured SPA Warrants 34,257 — Issuance pursuant to commitment to issue registered shares — 32,900 Receipt of class A common stock in consideration of exercises of options — 669 Transfer of private warrants to unaffiliated parties — 186 Conversion of convertible note to equity — 84,780 Acquisitions of property and equipment included in accounts payable 34,124 — Issuance of Secured SPA Notes pursuant to the Exchange Agreement (Note 7) 16,500 — Change in classification of warrants from Additional paid-in capital to liability pursuant to the Warrant Exchange (Note 7) 6,811 — Reduction in outstanding warrants pursuant to the Exchange Agreement (Note 7) ( 16,506 ) — Supplemental disclosure of cash flow information Cash paid for interest 465 12,721 See accompanying notes to unaudited Condensed Consolidated Financial Statements. 10 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 1. Nature of Business and Organization and Basis of Presentation Nature of Business and Organization Faraday Future Intelligent Electric Inc. (“FFIE”), a holding company incorporated in the State of Delaware on February 11, 2020, conducts its operations through the subsidiaries of FF Intelligent Mobility Global Holdings Ltd. (“Legacy FF”), founded in 2014 and headquartered in Los Angeles, California. References to the “Company” or “FF” refer to FFIE and its consolidated subsidiaries. FF is a global shared intelligent electric mobility ecosystem company with a vision to reformat the automotive industry. On July 21, 2021 (the “Closing Date”), the Company consummated a business combination pursuant to an agreement and plan of merger dated January 27, 2021 (as amended, the “Merger Agreement”), by and among the Company, PSAC Merger Sub Ltd. (“Merger Sub”), an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of Property Solutions Acquisition Corp. (“PSAC”), a Delaware corporation our predecessor company, and Legacy FF. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy FF surviving the merger as a wholly-owned subsidiary of the Company (the “Business Combination”). Upon the consummation of the Business Combination (the “Closing”), PSAC changed its name from “Property Solutions Acquisition Corp.” to “Faraday Future Intelligent Electric Inc.” Concurrently with the execution of the Merger Agreement, the Company entered into separate subscription agreements with a number of investors (“PIPE Investors”) pursuant to which, on the Closing Date, the PIPE Investors purchased, and the Company issued, an aggregate of 951,750 shares of Class A Common Stock (as defined below in this Note), for a purchase price of $ 800.00 per share with an aggregate purchase price of $ 761.4 million (“PIPE Financing”). Shares sold and issued in the PIPE Financing included registration rights. The closing of the private placement occurred immediately prior to the Closing Date. The Company operates in a single operating segment and designs and engineers next-generation, intelligent, electric vehicles. The Company manufactures vehicles at its production facility in Hanford, California (“FF ieFactory California”) and has additional engineering, sales, and operations capabilities in China. The Company has created innovations in technology, products, and a user-centered business model that are being incorporated into its planned electric vehicle platform. Principles of Consolidation and Basis of Presentation The Condensed Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim reports. They include the accounts of the Company, its wholly-owned subsidiaries and all other entities in which the Company has a controlling financial interest, including the accounts of any Variable Interest Entity (“VIE”) in which the Company has a controlling financial interest and for which it is the primary beneficiary. All intercompany transactions and balances have been eliminated upon consolidation. These Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual audited financial statements prepared in accordance with GAAP and should be read in conjunction with the Company’s audited Consolidated Financial Statements for the year ended December 31, 2022, included in the Company’s Form 10-K/A filed with the SEC on August 21, 2023 (“Form 10-K/A”). Accordingly, the Condensed Consolidated Balance Sheet as of December 31, 2022, has been derived from the Company’s annual audited Consolidated Financial Statements but does not contain all of the footnote disclosures from the annual financial statements. The Company believes that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position, its results of operations, and cash flows for the periods presented. The accounting policies used in the preparation of these Condensed Consolidated Financial Statements are the same as those disclosed in the audited Consolidated Financial Statements for the year ended December 31, 2022, included in the Form 10-K/A, except as described below. Our annual reporting period is the calendar year. The results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year. 11 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions, which affect the reported amounts in the financial statements. Estimates are based on historical experience, where applicable, and other assumptions which management believes are reasonable under the circumstances. On an ongoing basis management evaluates its estimates, including those related to the: (i) valuation of equity securities including warrants; (ii) recognition and disclosure of contingent liabilities, including litigation reserves; and (iii) fair value of related party notes payable and notes payable. Such estimates often require the selection of appropriate valuation methodologies and financial models and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances. Given the global economic climate, estimates are subject to additional volatility. As of the date the Company’s Condensed Consolidated Financial Statements were issued, the Company is not aware of any specific event or circumstance that would require it to update its estimates or judgments or to revise the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained. Actual results could differ from these estimates and any such differences may have a material impact on the Company’s Condensed Consolidated Financial Statements. Revenue Recognition Automotive sales revenue was $ 0.6 million for the three and nine months ended September 30, 2023. Services and other revenue was immaterial for the three and nine months ended September 30, 2023. Automotive Sales Revenue We began the production of our first vehicle the FF 91 Futurist (the “FF 91,” “FF 91 Futurist”, or “FF 91 2.0 Futurist Alliance”) in March 2023 and started making deliveries to customers in August 2023. 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, over-the-air (“OTA”) software updates, internet connectivity and destination fees. We recognize revenue on automotive sales upon delivery to the customer, which is when control of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business and as indicated in the sales contract. OTA software updates are provisioned upon transfer of control 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. 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. The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations. Our vehicle contracts do not contain a significant financing component. Revenue from immaterial promises will be combined with the vehicle performance obligation and recognized when the product has been transferred. We accrue costs to transfer these immaterial goods and services regardless of whether they have been transferred. The Company provides its customers with a residual value guarantee which may or may not be exercised in the future. The impact of such residual value guarantees was immaterial to the Company’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2023. 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. We consider these arrangements consideration payable to a customer. The consideration paid to the customer relates to marketing and research and development services that are distinct and could be purchased by the Company from a separate third-party. We perform an analysis in which we maximize the use of observable market inputs to 12 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements ascribe a fair value to these services and record the fair value of these services to sales and marketing expense or research and development expense, as applicable. 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. Customer Deposits and Deferred Revenue The Company’s customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time. 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). Customer deposits were $ 3.3 million and $ 3.4 million as of September 30, 2023 and December 31, 2022, respectively. 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. Such advance payments are considered non-refundable, and the Company defers revenue related to any products or services that are not yet transferred. Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Deferred revenue related to products and services was immaterial as of September 30, 2023, and December 31, 2022. Warranties We provide a manufacturer’s warranty on all vehicles sold. The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components. The warranty does not cover any item where failure is due to normal wear and tear. This assurance-type warranty does not create a performance obligation separate from the vehicle. Management tracks warranty claims by vehicle ID, owner, and date. As we continue to manufacture and sell more vehicles we will reassess and evaluate our warranty claims for purposes of our warranty accrual. (in thousands) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Accrued warranty- beginning of period $ — $ — Provision for warranty 262 262 Warranty costs incurred ( 12 ) ( 12 ) Accrued warranty- end of period $ 250 $ 250 Cost of Revenue 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. Cost of automotive sales revenues also includes adjustments to warranty expense. Cost of services and other revenue includes costs associated with providing non-warranty after-sales services, costs for retail merchandise, and costs to provide vehicle insurance. Cost of services and other revenue also includes direct parts and material. Cost of services and other revenue was immaterial for the three and nine months ended September 30, 2023 . Inventory and Inventory Valuation Inventory is stated at the lower of cost or net realizable value and consists of raw materials, work in progress, and finished goods. The Company primarily computes cost using standard cost, which approximates cost on the first-in, first-out basis. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company assesses the valuation of inventory and periodically adjusts its value for estimated excess and obsolete inventory based upon expectations of future demand and market conditions, as well as damaged or otherwise impaired goods. Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance and repairs, which do not extend the assets 13 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements lives, are charged to operating expense as incurred. Upon sale or disposition, the cost and related accumulated depreciation or amortization are removed from the Condensed Consolidated Balance Sheets and any gain or loss is included in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Depreciation and amortization on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets and for leasehold improvements, over the term of the lease, if shorter. Useful Life (in years) Buildings 39 Building improvements 15 Computer hardware 5 Tooling, machinery, and equipment 5 to 10 Vehicles 5 Computer software 3 Leasehold improvements Shorter of 15 years or term of the lease Construction in progress (“CIP”) consists of the construction activities related to the FF ieFactory California plant and tooling, machinery and equipment being built to serve the manufacturing of production vehicles. These assets are capitalized and depreciated once put into service. The amounts capitalized in CIP that are held at vendor sites relate to the completed portion of work-in-progress of tooling, machinery and equipment built based on the Company’s specific needs. The Company may incur storage fees or interest fees related to CIP which are expensed as incurred. CIP is presented within Property and Equipment, net on the Condensed Consolidated Balance Sheets. Impairment of Long-Lived Assets The Company reviews its long-lived assets, consisting primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset groups) may not be recoverable. The Company performs impairment testing at the asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets, including any cash flows upon their eventual disposition, to the assets carrying values. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. Assets classified as held for sale are also assessed for impairment and such amounts are determined at the lower of the carrying amount or fair value, less costs to sell the asset. No impairment charges were recorded during the three and nine months ended September 30, 2023 and 2022. Stock-Based Compensation Effective January 1, 2023, stock-based compensation expense is reduced for forfeitures only when they occur. This change of accounting policy resulted in the recognition of a cumulative increase of prior stock-based compensation expenses totaling $ 1.8 million, which was recorded in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three months ended March 31, 2023. Income Tax The income tax provision (benefit) recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 was immaterial. The difference in the Company’s effective tax rate from the federal statutory rate of 21% is primarily due to full domestic and international valuation allowances. The Company records a full valuation allowance to reflect limited benefits for income taxes in jurisdictions that historically reported losses and a provision for income taxes in jurisdictions that are profitable. The income tax provision for each period was the combined calculated tax expenses/benefits for various jurisdictions. 14 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements The Company is subject to taxation and files income tax returns with the U.S. federal government, the state of California and China. The Company’s income tax returns are open to examination by the relevant tax authorities until the expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. As of September 30, 2023, the Company is not under any tax audits on its income tax returns. All of the Company’s prior year tax returns, from 2016 through 2021, are open under Chinese tax law. The Company did not accrue any interest or penalties related to the Company's unrecognized tax benefits as of September 30, 2023 and 2022, as the uncertain tax benefits only reduced the net operating losses. The Company does not expect the uncertain tax benefits to have a material impact on its Condensed Consolidated Financial Statements within the next twelve months. Reclassifications Certain reclassifications have been made to the prior period in the accompanying Condensed Consolidated Financial Statements to conform with the current presentation. Inventory and Finance lease right-of-use assets are now separately presented in the Condensed Consolidated Balance Sheets, as they were previously included in Other current assets and Property and equipment, net, respectively (see Note 4, Deposits and Other Current Assets and Note 5, Property and Equipment, Net ). In addition, the Buildings and Leasehold improvements within Property and equipment, net (see Note 5, Property and Equipment, Net ) have been combined, as they were previously presented separately. On the Condensed Consolidated Statement of Cash Flows, amortization of prepaid software costs is now presented in Changes in operating assets and liabilities instead of Depreciation and amortization expense, and Change in operating lease right-of-use assets is now separately presented instead of being combined with Depreciation and amortization expense. Reverse Stock Split and Recasting of Per-Share Amounts On August 22, 2023, the Company’s board of directors (the “Board”) approved the implementation of a 1-for-80 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $ 0.0001 per share (“Common Stock”) and 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). The Reverse Stock Split was effected after market close on August 25, 2023, and shares of the Company’s Class A common stock par value $ 0.0001 per share (“Class A Common Stock”) and publicly traded warrants (the “Public Warrants”) began trading on a split-adjusted basis as of market open on August 28, 2023. All shares of Common Stock, Public Warrants, stock-based compensation awards, earnout shares and per share amounts contained in the Condensed Consolidated Financial Statements and accompanying notes have been retroactively adjusted to reflect the Reverse Stock Split. In addition, proportionate adjustments were made to the number of shares of Class A Common Stock issuable upon exercise or conversion of the Company’s outstanding convertible debt securities and warrants, as well as the applicable exercise or conversion prices. See Note 10, Stockholders' Equity , and Note 11, Stock-Based Compensation , for further discussion regarding the Reverse Stock Split. 2. Liquidity and Capital Resources 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. 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, the build out of the FF ieFactory California, and capital raising. Since inception, the Company has incurred cumulative losses from operations and negative cash flows from operating activities, and has an accumulated deficit of $ 3.9 billion 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. 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 15 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 7, Notes Payable ), the sale of Common Stock, 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 ). 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. However, FF has recognized an insignificant amount of revenue as of the date hereof. 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. As a result of certain management assumptions, including timely completion of certain testing and suppliers meeting our supply chain requirement, FF originally expected deliveries of the FF 91 Futurist to users to begin before the end of April 2023. 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. FF has developed a three-phase delivery plan for the FF 91 (the “Delivery Plan”). 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. The Company began delivery of the reserved FF 91 vehicles to the FPO during the second phase, which is the “FPO Co-Creation Delivery.” In the second phase, FPO(s) are taking possession of the FF 91 vehicle and are entering into consulting, branding, marketing, and other arrangements with FF in exchange for fees to be paid by the Company to the FPO(s). 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. 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 Delivery Plan, it plans to continue to move vehicles into production and off-the-line with high quality and high product power. 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 on that timeline or at all. If FF is 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 if at all. 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. Since August 14, 2022, pursuant to the Securities Purchase Agreement (the “Secured SPA”), Unsecured Securities Purchase Agreement (the “Unsecured SPA”), and the Streeterville Securities Purchase Agreement (the “Unsecured Streeterville SPA” and collectively the “SPA Commitments”), the Company has obtained commitments from several investors totaling $ 513.5 million in convertible note financing. A total of $ 300.2 million under these convertible note financing commitments has been funded ($ 263.2 million net of original discount and transaction costs) as of September 30, 2023. 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. 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. Additionally, the Company has received commitments totaling $ 20.0 million through forced warrant exercise proceeds, subject to certain conditions. There can be no assurance that FF will be able to satisfy the closing conditions under the Secured SPA, Unsecured SPA and Unsecured Streeterville SPA or that FF will be able further to successfully obtain additional incremental convertible senior secured note purchasers under the Secured SPA, Unsecured SPA, Unsecured Streeterville SPA or other debt or equity financing in a timely manner or on acceptable terms, if at all. These factors, in addition to the continued rise in inflation and other challenging macroeconomic conditions, have led FF to take steps to preserve its current cash position, including reducing spending, extending payment cycles and implementing other similar measures. If FF’s ongoing capital raising efforts are unsuccessful or significantly delayed, or if FF experiences prolonged material adverse trends in its business, FF’s production will be delayed or decreased, and actual use of cash, production volume and revenue for 2023 will vary from the Company’s previously disclosed forecasts, and such variances may be material. 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 the ongoing legal risks. Incremental capital needs beyond 2023 to 16 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 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 series and the Company’s ability to accurately estimate and control costs. Apart from the FF 91 series, substantial additional capital will be required to fund operations, research, development, design, and manufacturing efforts for future vehicles. On November 11, 2022, FF entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”), which is an affiliate of Yorkville Advisors. Under 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 Yorkville, subject to certain limitations, at the time of the Company’s choosing during the three-year term of the SEPA. 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 a shelf registration on Form S-3 with the SEC (the “Shelf Registration”), 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. The Shelf Registration allows 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. On September 27, 2023, the Company filed a prospectus supplement to the Shelf Registration regarding an at-the-market equity offering sales agreement (the “Sales Agreement”) the Company entered into on September 26, 2023 with Stifel, Nicolaus & Company, Incorporated, B. Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc. and Maxim Group LLC (the “Sales Agents”) to offer and sell up to $ 90.0 million of Class A Common Stock. In accordance with the terms of the Sales Agreement, the Company may offer and sell shares of the 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, as amended. The aggregate compensation payable to the Sales Agents is up to 3.5 % of the gross sales price of the shares sold through the Sales Agents. During the three and nine months ended September 30, 2023, the Company issued 780,000 shares of Class A Common Stock under the Sales Agreement for gross cash proceeds of $ 1.3 million less placement agent fees of $ 0.05 million. Despite the potential access to liquidity resulting from the SEPA, the Shelf Registration (including pursuant to the Sales Agreement) and the unfunded commitments from the Secured SPA, the Unsecured SPA and the Unsecured Streeterville 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 to 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. 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. 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. If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures. Any such events would have a material adverse effect on the Company’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives, and the Company will likely not be able to continue as a going concern. 17 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements The Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the Condensed Consolidated Financial Statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. As of and since December 31, 2022, the Company was and has been in default on the Secured SPA Notes. However, for the periods ended March 31, 2023, June 30, 2023 and September 30, 2023, the holders of such notes subsequently waived the default. Since 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. 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. 3. Inventory (in thousands) September 30, 2023 December 31, 2022 Raw materials (net of reserves) $ 33,839 $ 4,457 Work in progress 1,063 — Finished goods 313 — Total inventory $ 35,215 $ 4,457 The increase in inventory is due to the start of production on March 29, 2023. The inventory reserve was $ 1.0 million and zero as of September 30, 2023 and December 31, 2022 , respectively. 4. Deposits and Other Current Assets (in thousands) Deposits: September 30, 2023 December 31, 2022 Deposits for research and development, prototype and production parts, and other $ 59,783 $ 40,879 Deposits for goods and services yet to be received (“Future Work”) 2,773 3,187 Total deposits $ 62,556 $ 44,066 Other current assets: Prepaid expenses $ 11,260 $ 14,437 Other current assets 9,703 3,052 Total other current assets $ 20,963 $ 17,489 Deposits for research and development, prototype and production parts, and other are recognized and reported as Research and development expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss when services are provided or as prototype parts are received. In addition, during the three and nine months ended September 30, 2023, the Company made deposits for inventory and property and equipment items which are classified out of Deposits upon receipt of title. Prepaid expenses primarily consist of software subscriptions and insurance, and other current assets includes certain deferred expenses. As of September 30, 2023, Other current assets also includes an insurance receivable relating to a legal settlement with a corresponding liability recognized in Accrued expenses and other current liabilities. 18 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 5. Property and Equipment, Net (in thousands) September 30, 2023 December 31, 2022 Buildings and leasehold improvements $ 86,320 $ 5,598 Computer hardware 2,142 3,112 Tooling, machinery and equipment 265,760 9,542 Vehicles 669 337 Computer software 4,172 4,212 Construction in process 93,626 393,814 Less: Accumulated depreciation ( 36,175 ) ( 10,295 ) Total property and equipment, net $ 416,514 $ 406,320 FF announced the start of production of its first electric vehicle, the FF 91 Futurist, on March 29, 2023, at which point the Company classified a portion of its construction in process assets that are available for their intended use in the amount of $ 225.7 million and $ 75.7 million to Tooling, machinery and equipment and Buildings and leasehold improvements, respectively, during the three months ended March 31, 2023. In the three months ended September 30, 2023, the Company made available for intended use another $ 30.7 million and $ 5.0 million of Tooling, machinery and equipment and Buildings and leasehold improvements, respectively. Depreciation expense related to property and equipment totaled $ 13.2 million and $ 0.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 27.5 million and $ 2.3 million for the nine months ended September 30, 2023 and 2022, respectively. 6. Accrued Expenses and Other Current Liabilities (in thousands) September 30, 2023 December 31, 2022 Accrued payroll and benefits $ 27,309 $ 20,502 Accrued legal contingencies 21,819 18,940 Other current liabilities 19,318 26,267 Total accrued expenses and other current liabilities $ 68,446 $ 65,709 7. Notes Payable The Company has entered into notes payable agreements with third parties, which consist of the following as of September 30, 2023 and December 31, 2022: September 30, 2023 (in thousands) Contractual Maturity Date Contractual Interest Rates Unpaid Principal Balance Fair Value Measurement Adjustments Original Issue Discount and Proceeds Allocated to Warrants Net Carrying Value Secured SPA Notes (1) Various 10 %- 15 % $ 113,376 $ ( 20,945 ) $ ( 13,567 ) $ 78,864 Unsecured SPA Notes (1)* Various dates in 2029 10 %- 15 % 20,073 133 ( 3,625 ) 16,581 Notes payable – China other Due on Demand — % 4,847 4,847 Auto loans October 2026 7 % 82 82 $ 138,378 $ ( 20,812 ) $ ( 17,192 ) 100,374 Less: Related party notes payable $ ( 2,945 ) Less: Notes payable, current portion ( 4,929 ) Total: Notes payable, less current portion $ 92,500 * includes amounts attributed to the Unsecured Streeterville SPA 19 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements December 31, 2022 (in thousands) Contractual Maturity Date Contractual Interest Rates Unpaid Principal Balance Fair Value Measurement Adjustments Original Issue Discount and Proceeds Allocated to Warrants Net Carrying Value Secured SPA Notes (1) October 27, 2028 10 % $ 36,622 $ 264 $ ( 10,878 ) $ 26,008 Notes payable – China other Due on Demand — % 4,997 — — 4,997 Auto loans October 2026 7 % 100 — — 100 $ 41,719 $ 264 $ ( 10,878 ) 31,105 Less: Notes payable, current portion ( 5,097 ) Total: Notes payable, less current portion $ 26,008 (1) Secured and Unsecured SPA Notes On August 14, 2022, the Company entered into the Secured SPA with FF Simplicity Ventures LLC (“FFSV”) as administrative agent, collateral agent,and purchaser and certain additional purchasers (collectively the “Secured SPA Purchasers”) to issue and sell the Company’s senior secured convertible notes (the “Secured SPA Notes” and with the Unsecured SPA Notes (as defined below) the “SPA Notes”) in three tranches originally aggregating to $ 52.0 million in principal with a four year maturity, which was subsequently extended to six year . On May 8, 2023, as further described below, the Company entered into the Unsecured SPA with Metaverse Horizon Limited (“MHL”) and V W Investment Holding Limited (“VW”, and together with MHL and other purchasers, the ”Unsecured SPA Purchasers”) to issue and sell $ 100.0 million aggregate principal of the Company’s senior unsecured convertible notes (the “Unsecured SPA Notes”). In August 2023, as further described below, the Company entered into the Unsecured Streeterville SPA (collectively included with the Unsecured SPA and Unsecured SPA Notes in future references), as part of its issuance of the Unsecured SPA Notes. The terms of the Secured SPA Notes and Unsecured SPA Notes are generally the same, however, the Secured SPA Notes are secured by the grant of a second lien upon substantially all of the personal and real property of the Company and its subsidiaries, as well as guarantee by substantially all of the Company’s domestic subsidiaries. The SPA Notes are generally subject to an original issue discount of 10 %, and are convertible, along with any interest accrued, into shares of Class A Common Stock at the Conversion Price (as defined in each SPA Note), subject to full ratchet anti-dilution price protection. The conversion price for the SPA Notes is $ 1.64 as of September 30, 2023, which represents an amended and reduced conversion price due-to the full ratchet price protections, as described below. The SPA Notes bear interest at 10 % per annum (or 15 % if interest or settlement is paid in shares) payable on each conversion date and on the maturity date in cash or in shares of Class A Common Stock. Unless earlier paid, the SPA Notes entitle the purchasers, at each conversion date, to an interest make-whole (“Make-Whole Amount”), in a combination of cash or Class A Common Stock, at the Company’s discretion, in the amount of the interest that would have been payable if such converted amount was held to maturity. The conversion price for the Make-Whole Amount is the greater of (a) the floor price, which is $ 3.63 as of September 30, 2023 or (b) 90 % of the lowest volume-weighted average price (“VWAP”) for the five consecutive trading days. When calculating the shares issuable upon conversion, the Make-Whole Amount shall be decreased by 50 % of the original issue discount pertaining to such amount. Total commitments under the initial Secured SPA were not to exceed $ 300.0 million, however, each original Secured SPA Purchaser has the option within 12 months from November 12, 2022 to purchase additional Secured SPA Notes under similar terms (the “Tranche B Notes”) (see Note 2, Liquidity and Capital Resources , for detailed discussion on commitments to fund additional Secured SPA Notes). In connection with the issuance of the SPA Notes, the Company also granted to each Secured SPA Purchaser and Unsecured SPA Purchaser a warrant (the “SPA Warrants”) to purchase shares of Class A Common Stock equal to 33 % of the shares issuable upon conversion of the aggregate principal amount under the SPA Notes funded. The Company elected the fair value option afforded by Accounting Standards Codification (“ASC”) 825, Financial Instruments , with respect to the SPA Notes because the notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative. The Company expenses transaction costs to Changes in fair value of notes 20 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements payable and warrant liabilities or Changes in fair value of related party notes payable and warrant liabilities, as applicable, in the Condensed Consolidated Statement of Operations and Comprehensive Loss. First Secured SPA Amendment On September 23, 2022, the Secured SPA was amended (the “First Secured SPA Amendment”), pursuant to which the existing Secured SPA Purchasers agreed to accelerate their funding obligations. The First Secured SPA Amendment modified the conversion price to $ 84.00 per share. All of the other terms and conditions of the Secured SPA Notes were unchanged. The Company evaluated the First Secured SPA Amendment in accordance with ASC 470-50, Debt–Modifications and Extinguishments , and determined that it constitutes an extinguishment because the change in the fair value of the conversion feature is substantial. Accordingly, the Company recognized a loss on extinguishment in Loss on settlement of notes payable in the Condensed Consolidated Statements of Operations and Comprehensive Loss in the amount of $ 7.7 million, calculated as the difference between the reacquisition price of the debt and the net carrying amount of the Secured SPA Notes. Joinder and Amendment Agreement with Senyun International Ltd (“Senyun”). On September 25, 2022, the Company entered into a Joinder and Amendment Agreement (the “Joinder”) with Senyun, the Agent, as administrative agent, collateral agent, and purchaser, and RAAJJ Trading LLC (“RAAJJ”), pursuant to which Senyun agreed to purchase Secured SPA Notes in an aggregate principal amount of up to $ 60.0 million in installments. Third and Fourth Secured SPA Amendments On October 24, 2022, the Company entered into a Limited Consent and Third Amendment to the Secured SPA (the “Third Secured SPA Amendment”) with the existing Secured SPA Purchasers, pursuant to which the maturity date for the Secured SPA Notes was extended from August 14, 2026 to October 27, 2028. In addition, pursuant to the Third Secured SPA Amendment, each Secured SPA Purchaser and the Agent (as defined in the First Secured SPA Amendment) waived certain defaults and events of default under the Secured SPA, any notes issued pursuant to the Secured SPA, and other related documents. The Third Secured SPA Amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors , because the Company was experiencing financial difficulty and the extension of the maturity date following the restructuring results in a reduced effective borrowing rate for the Company. The Third Secured SPA Amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022. On November 8, 2022, the Company entered into a Limited Consent and Amendment to the Secured SPA (the “Fourth Secured SPA Amendment”), pursuant to which the parties agreed that (i) in no event will the effective conversion price of any interest or interest Make-Whole amount payable in shares of Class A Common Stock be lower than $ 16.80 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 $ 16.80 per share on any trading day during the preceding seven trading day period, and (y) the total volume of the Class A Common Stock does not drop below $ 1.5 million on any trading day during the same period (in each case, as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions). The Fourth Secured SPA Amendment was accounted for as a troubled debt restructuring under ASC 470-60, Debt – Troubled Debt Restructurings by Debtors , because the Company was experiencing financial difficulty and the addition of a floor price on the conversion of the convertible notes is assessed as a concession to the Company. The Fourth Secured SPA Amendment was accounted for prospectively with no gain or loss recorded in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022. Senyun Amendment On December 28, 2022, the Company entered into a Letter Agreement and Amendment to the Secured SPA (the “Senyun Amendment”) with Senyun pursuant to which the conversion rate of notes totaling $ 19.0 million was lowered from $ 84.00 to $ 71.40 and future funding timeframes were renegotiated. As a result of the new conversion rate, the Company was obligated for the year then ended to issue additional shares to Senyun based on the lower conversion rate. The Company accounted for this obligation by crediting Other current liabilities in the Consolidated Balance Sheet for $ 0.9 million, which represents the fair value of the additional shares owed to Senyun. In addition, the $ 0.9 million was recognized as a Loss on settlement of notes payable in the Consolidated Statement of Operations and Comprehensive Loss as the underlying debt 21 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements instruments were extinguished on the date the Senyun Amendment was entered into. The Company remitted the shares to Senyun in March 2023. Sixth Secured SPA Amendment On February 3, 2023, the Company entered into Amendment No. 6 to the Secured SPA (the “Sixth Secured SPA Amendment”) with certain Secured SPA Purchasers, in which the Company agreed to sell up to $ 135.0 million in aggregate principal (the “Tranche C Notes”) with terms largely congruent to prior issuances and a $ 84.00 base conversion price subject to full ratchet anti-dilution price protection. Each applicable Secured SPA Purchaser has the option to purchase additional Secured SPA Notes on the same terms as the Tranche C Notes in an amount not to exceed 50 % of the initial principal amount of the Tranche C Notes issued to each applicable Secured SPA Purchaser (the “Tranche D Notes”). Pursuant to the Sixth Secured SPA Amendment, certain outstanding Secured SPA Notes issued by the Company to Secured SPA Purchasers with an aggregate outstanding principal amount of $ 31.0 million were replaced by the same principal amount of new notes with a $ 71.40 base conversion price. In accordance with ASC 470-50, Debt— Modifications and Extinguishments , the change in conversion price qualifies as an extinguishment because the change in the fair value of the conversion feature was substantial. Accordingly, the Company recognized a Loss on settlement of notes payable in the Condensed Consolidated Statements of Operations and Comprehensive Loss in the amount of $ 3.0 million, calculated as the difference between the reacquisition price of the debt and the net carrying amount of the Secured SPA Notes. Pursuant to the Sixth Secured SPA Amendment, the Company entered into an agreement with certain Secured SPA Purchasers (the “Exchange Agreement”) holding a total of 2,476,625 warrants to exchange them for an aggregate 1,131,117 warrants and principal convertible notes (the “Exchange Notes”) totaling $ 41.0 million. The issued warrants have terms that limit down-round ratchet clauses to price adjustments only. The Exchange Notes mature on February 3, 2025, bear interest at 11 % per annum, have no original issuance discount, do not have a fixed price conversion, and convert using a VWAP calculation as described in the Exchange Agreement. The remainder of the terms of the Exchange Notes are largely congruent to the existing Secured SPA Notes, including most-favored nation rights. In connection with the Exchange Agreement, equity-classified warrants were exchanged for warrants which satisfy liability classification per ASC 480, Distinguishing Liabilities from Equity , and were reclassified from equity to Warrant liabilities during the period in an amount totaling $ 6.8 million (the “Warrant Exchange”). As a result of the transaction the Company did not recognize a gain or loss in the Condensed Consolidated Statements of Operations and Comprehensive Loss, as the fair value of the instruments exchanged and received were approximately the same. Seventh Secured SPA Amendment On March 23, 2023, the Company entered into an Amendment No. 7 to the Secured SPA (the “Seventh Secured SPA Amendment”) with FFSV, as administrative agent, collateral agent and purchaser, Senyun, and FF Prosperity Ventures LLC (“FF Prosperity”), pursuant to which the parties agreed to accelerate the funding timeline of Tranche C Notes in the amount of $ 40.0 million, and FFSV agreed to purchase additional Tranche B Notes 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. As part of the agreement, the Company agreed that the original issuance discount related to $ 25.0 million in principal amount of Tranche C Notes and Tranche B Notes was 14 % and 16 %, respectively. Eighth Amendment to the Secured SPA On May 8 and 9, 2023, the Company entered into an eighth amendment to the Secured SPA (the “Eighth Secured SPA Amendment”) with certain Secured SPA Purchasers. Pursuant to the Amendments the parties agreed to amend the floor price of all outstanding Secured SPA Notes, including the Exchange Notes, from $ 16.80 to $ 8.00 and to change the exercise price of the Secured SPA Notes and SPA Warrants from $ 84.00 to $ 71.40 . In accordance with ASC 470-50, Debt— Modifications and Extinguishments , the change in conversion price qualifies as an extinguishment because the change in the fair value of the conversion feature was substantial. Accordingly, the Company recognized a Loss on settlement of notes payable in the Condensed Consolidated Statements of Operations and Comprehensive 22 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Loss in the amount of $ 11.4 million, calculated as the difference between the reacquisition price of the debt and the net carrying amount of the notes. Unsecured SPA On May 8, 2023, the Company entered into the Unsecured SPA. The Unsecured SPA Notes are subject to an original issue discount of 10 %, and are convertible, along with any interest accrued, into shares of Class A Common Stock at a conversion price equal to $ 71.40 , subject to anti-dilution protection. When calculating the shares issuable upon conversion, the converted amount shall be decreased by 50 % of the original issue discount pertaining to such amount. Unless earlier paid, the Unsecured SPA Notes entitle the Unsecured SPA Purchasers, at each conversion date, to a Make-Whole Amount, in a combination of cash or Class A Common Stock at the Company’s discretion, in the amount of the interest that would have been payable if such converted amount was held to maturity based on an interest rate of 15 % per annum. The conversion price of interest is the greater of (a) the floor price, $ 8.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the date hereof) and (b) 90 % of the lowest VWAP for the five consecutive trading days ending immediately prior to the conversion date. Each Unsecured SPA Purchaser has the option within 12 months from the closing date to purchase additional Unsecured SPA Notes under similar terms for a total potential commitment of up to $ 50.0 million or with the consent of the Company a total of $ 100.0 million. The Company elected the fair value option afforded by ASC 825, Financial Instruments , with respect to the Unsecured SPA Notes because the notes include features, such as a contingently exercisable put option, which meets the definition of an embedded derivative. The Company expenses the transaction costs to Changes in fair value of notes payable and warrant liabilities in the Condensed Consolidated Statement of Operations and Comprehensive Loss. As part of the Unsecured SPA the Unsecured SPA Purchasers also received warrants consistent with the rights, terms and privileges of the warrants afforded to the holders of the Secured SPA Notes. First Amendment to the Unsecured SPA On June 26, 2023, the Company entered into the First Unsecured SPA Amendment. The First Unsecured SPA Amendment enabled the Unsecured SPA Purchasers to postpone or cancel any closing of their commitment to purchase the Unsecured SPA Notes if the Company has not issued a press release or other public announcement confirming that the second phase of the Company’s Delivery Plan has begun on or prior to August 31, 2023, within 15 calendar days of such date. The First Unsecured SPA Amendment did not change the cash flows of the Unsecured SPA and is accounted for prospectively with no gain or loss recognized. On August 9, 2023, the Company announced that it had completed the relevant processes and steps that are needed for the second phase of delivery to begin. Joinder Agreements On June 26, 2023, the Company entered into a Joinder and Amendment Agreement (the “FFVV Joinder”) with FF Vitality Ventures LLC (“ FFVV”), pursuant to which FFSV agreed to exercise its option to purchase $ 20.0 million of Secured SPA Tranche B Notes, subject to certain closing conditions, including the delivery of a warrant to purchase shares of Class A Common Stock equal to 33 % of FFSV’s conversion shares with an exercise price equal to $ 71.40 . In addition, If FFSV exercises its option to invest another $ 10.0 million of Tranche B Notes in accordance with the terms of the Secured SPA on or prior to the later of (x) August 1, 2023 or (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, then the Company agrees to subsequently amend the Unsecured SPA whereby FFVV would invest another $ 20.0 million in new unsecured notes subject to terms substantially identical to those provided in the Unsecured SPA. Pursuant to the FFVV Joinder, FFVV agreed to purchase, Unsecured SPA Notes up to $ 40.0 million in eight installments. The floor price of the FFVV Unsecured SPA Notes and for each of the notes issued to FFSV (or its affiliates) under the Secured SPA, shall be $ 4.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring thereafter). The funding at each closing is subject to various closing conditions, including: (a) an effective registration statement with respect to the shares of Common Stock issuable upon exercise of the warrants issuable under the Unsecured SPA and the shares of Common Stock issuable pursuant to the FFVV Unsecured SPA Notes and 23 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements (b) the Company shall have reserved the Required Reserve Amount (as defined in the FFVV Joinder) in full. In addition, FFVV has the option, for 12 months from June 25, 2023, to purchase Unsecured SPA Notes. FFVV agreed, on behalf of its affiliates, that FFSV may exchange any Tranche B Notes for either (x) Tranche D Notes, and/or (y) any Unsecured SPA Notes. The Company agreed to pay FFVV a one-time $ 0.3 million working fee and legal fees not to exceed $ 0.4 million, which shall be paid by netting the purchase price for any new notes with the amount of such fees. 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 Secured SPA Notes in accordance with the terms of the Secured SPA Notes. If Senyun exercises its option to invest another $ 10.0 million of Secured SPA Notes in accordance with the terms of the Secured SPA Notes on or prior to the later of (x) August 1, 2023 or (y) four business days after the meeting of the Company’s stockholders for the Stockholder Approval (as defined below), then the Company agrees to subsequently amend the Unsecured SPA Notes whereby Senyun would invest another $ 20.0 million. Senyun did not exercise this option. Pursuant to the Senyun Joinder, Senyun agreed to purchase, under the Unsecured SPA Notes, unsecured notes in an aggregate principal amount of up to $ 30.0 million in eight installments. The floor price, for each note issued to Senyun (or its affiliates) under the SPA Notes, is $ 3.63 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring thereafter). The Company agreed to pay Senyun a one-time $ 0.2 million working fee and legal fees not to exceed $ 0.3 million, which shall be paid by netting the purchase price for any new notes with the amount of such fees. The FFVV and Senyun Joinders do not trigger any adjustment to the conversion or exercise price of the notes and warrants under the SPA Notes, and Senyun and FFSV waived any such rights to any adjustment to the conversion or exercise price in each of the Secured SPA and/or the Unsecured SPA, as applicable, and the related warrants. Amendment to Joinder and Amendment Agreement On August 4, 2023, the Company entered into a Waiver and Amendment Agreement to the FFVV Joinder, pursuant to which FFVV agreed to waive any and all requirements of the Company to reserve shares of Common Stock for issuance pursuant to the SPA Notes or SPA Warrants and defers any obligations of the Company to deliver any shares of Common Stock for issuance pursuant to the SPA Notes or SPA 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. Further, if FFVV exercises its option to invest another $ 10.0 million of Tranche B Notes in accordance with the terms of the Secured SPA 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 Nasdaq Stock Market LLC (“Nasdaq”) Listing Rule 5635 (to the extent needed) (the “Stockholder Approval”), and (z) six business days after the Company has filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, then FFVV shall have the right, at any time prior to the 30 th day after the date of consummation of such funding, to invest another $ 20.0 million in Unsecured SPA Notes, subject to terms substantially identical to those provided for in the Unsecured SPA. FFVV did not exercise this option. Ninth and Tenth Secured SPA Amendments On August 4, 2023, the Company entered into Amendment No. 9 to the Secured SPA (the “Ninth Secured SPA Amendment”) with FFVV, as purchaser, and Amendment No. 10 to Secured SPA (the “Tenth Secured SPA Amendment”) with Senyun, as purchaser, pursuant to which, the Company, FFVV, and Senyun agreed to amend the definition of Required Minimum 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. 24 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Unsecured Securities Purchase Agreement – Streeterville Capital, LLC (“Streeterville”) On August 4, 2023, the Company entered into the Unsecured Streeterville SPA, for $ 16.5 million aggregate principal amount of the Company’s senior unsecured promissory notes (the “Streeterville Note”) and a common stock purchase warrant (the “Streeterville Warrant”) to purchase up to 76,261 shares of Common Stock with an exercise price equal to $ 71.40 per share, subject to full ratchet anti-dilution protection and other adjustments, and are exercisable for seven years on a cash or cashless basis. The Streeterville Note is subject to an original issue discount of $ 1.5 million. 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 Streeterville Note is convertible into shares of Class A Common Stock, at a conversion price equal to $ 71.40 , plus an interest make-whole amount as described above for the Unsecured SPA, subject to certain adjustments including full ratchet anti-dilution price protection. The Streeterville Note matures on August 4, 2029 and is subject to the same repayment conversion, and most-favored nation terms and conditions as described above for the Unsecured SPA. Streeterville has the option, from time to time for 12 months after the date of the Unsecured 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 and warrants on the same terms as the Streeterville Note and Streeterville Warrant. Additionally, from the date of the Unsecured Streeterville SPA until the date that is the five-year anniversary of the date of the Unsecured Streeterville SPA, upon any issuance by the Company or any of its subsidiaries of Class A Common Stock or Class A Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (subject to certain exceptions set forth in the Unsecured 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 Unsecured Streeterville SPA. 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 Class A Common Stock in excess of 19.99 % of the issued and outstanding shares of Class A Common Stock (the “Issuance Cap”), of the Conversion Shares (as defined in the Streeterville Note), the Warrant Shares (as defined in the Unsecured Streeterville SPA), and subject to any applicable Nasdaq rules, any shares Common Stock issuable pursuant to the note and warrant issuable in connection with the reinvestment right set forth in the Unsecured Streeterville SPA in excess of the Issuance Cap 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 is to be included. Amendment to Joinder and Amendment Agreement On September 21, 2023, in accordance with the FFVV Joinder, the Company entered into an amendment agreement with FFVV to the Unsecured SPA, pursuant to which FFVV agreed to purchase Unsecured SPA Notes in an aggregate principal amount of up to $ 20.0 million, subject to terms substantially identical to those provided in the FFVV Joinder, in installments. The funding of each installment is subject to various closing conditions. End of Period Secured and Unsecured SPA Information The Company received cash proceeds, net of original issue discounts, of $ 47.9 million and $ 228.4 million in exchange for the issuance of the SPA Notes and incurred approximately $ 0.3 million and $ 2.5 million in transaction costs during the three and nine months ended September 30, 2023, respectively. During the nine months ended September 30, 2023, the Company issued to the Secured SPA Purchasers and Unsecured SPA Purchasers a total of 2,225,118 warrants pursuant to both the Secured SPA and Unsecured SPA arrangements and in connection with the Warrant Exchange. As of September 30, 2023 the warrants had an exercise price of $ 1.64 per share, subject to anti-dilution ratchet price protection, exercisable for seven years from the date of issuance (see Note 10, Stockholders' Equity ). The Company may repurchase certain warrants for $ 0.01 per share if and to the extent the VWAP of the Class A Common Stock during 20 out of 30 trading days prior to the repurchase is greater than $ 15.00 per share, subject to certain additional conditions. During the nine months ended September 30, 2023, the Secured SPA Purchasers exercised warrants to 25 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements purchase 639,109 shares of Class A Common Stock issued pursuant to the SPA Notes, via both cash and cashless exercise. As of September 30, 2023, there were 1,654,726 warrants outstanding issued pursuant to the SPA Notes. On September 30, 2023 the Company determined that the fair value of the SPA Notes and warrants was $ 95.4 million and $ 1.7 million, respectively. The Company recorded a gain in Change in fair value of notes payable and warrant liabilities in the Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 in the amount of $ 22.3 million and $ 95.1 million, respectively, for the SPA Notes and warrants. During the nine months ended September 30, 2023, total SPA Notes principal of $ 200.4 million with a fair value of $ 125.3 million was converted to Additional paid-in capital. In connection with the conversions of the SPA Notes the Company recognized a Loss on settlement of notes payable for the three and nine months ended September 30, 2023 in the amount of $ 32.1 million and $ 207.7 million, respectively. Anti-dilution adjustments During the three months ended September 30, 2023 the Company entered into multiple dilutive stock sale and purchase transactions, as discussed in Note 2, Liquidity and Capital Resources above that triggered the full ratchet anti-dilution price protections embedded in the SPA Notes and SPA Warrants. As a result, the fixed-price conversion price of the SPA Notes and exercise price of the SPA Warrants outstanding prior to such financings was reduced to a price equal to the price per share paid in the dilutive financings. As of September 30, 2023 the SPA Note conversion and SPA Warrant exercise price equals $ 1.64 . Fair Value of Notes Payable Not Carried at Fair Value The estimated fair value of the Company’s notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, approximated their carrying value as of September 30, 2023 and December 31, 2022, respectively. Schedule of Principal Maturities of Notes Payable The future scheduled principal maturities of notes payable as of September 30, 2023 are as follows: (in thousands) Due on demand $ 4,847 2023 — 2024 — 2025 41,000 2026 82 2027 Thereafter 89,126 $ 135,055 8. Related Party Transactions Related Party Notes Payable The Company receives funding via notes payable from various parties, including related parties. These related parties include employees as well as affiliates of employees, affiliates, and other companies controlled or previously controlled by the Company’s founder and Chief Product and User Ecosystem Officer. 26 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Related party notes payable consists of the following as of September 30, 2023: (in thousands) Contractual Maturity Date Contractual Interest Rates Net Carrying Value Related party notes – China December 31, 2023 12.0 % $ 5,071 Related party notes – Unsecured SPA August 2029 10 % - 15 % 2,945 Related party notes – China various other Due on Demand — % 3,759 11,775 Less: Related party notes payable, current ( 8,830 ) Total: Related party notes payable, less current $ 2,945 Related party notes payable consists of the following as of December 31, 2022: (in thousands) Contractual Maturity Date Contractual Interest Rates Net Carrying Value Related party notes – China December 31, 2023 12.0 % $ 5,209 Related party notes – China various other Due on Demand — % 3,755 $ 8,964 27 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Unsecured SPA MHL is the anchor investor in the Unsecured SPA and has committed $ 80.0 million of such funding. MHL is a related party of the Company as MHL’s investors include a subsidiary of FF Global Partners LLC (“FF Global”). FF Global has control over the Company’s management, business and operations. See Note 7, Notes Payable , for details on the Unsecured SPA. The Company elected the fair value option afforded by ASC 825, Financial Instruments , with respect to the Unsecured SPA Notes because the notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative. The Company expensed the original issue discount and transaction costs to Changes in fair value of related party notes payable and warrant liabilities in the Condensed Consolidated Statement of Operations and Comprehensive Loss. Subsequent to the issuance of the Unsecured SPA, MHL funded, net of original issue discounts, $ 19.8 million in exchange for the issuance of the Unsecured SPA Notes and related warrants. In connection with the Unsecured SPA, the Company issued MHL warrants to purchase 101,588 shares of the Class A Common Stock at an exercise price of $ 71.40 per share, subject to anti-dilution ratchet price protection, exercisable for seven years from the date of issuance (see Note 10, Stockholders' Equity and Note 7, Notes Payable). During the nine months ended September 30, 2023 MHL converted $ 18.7 million of gross principal balances in exchange for 72,353,608 shares of the Class A Common Stock. In connection with the conversion of Unsecured SPA Notes, the Company recognized a $ 17.2 million Loss on settlement of related party notes payable, during the nine months ended September 30, 2023, for the difference between the fair value of the shares issued and the fair value of the debt instrument. Related party notes payable issued pursuant to the Unsecured SPA consist of the following as of September 30, 2023: (in thousands) Contractual Maturity Date Contractual Interest Rates Unpaid Principal Balance Fair Value Measurement Adjustments Original Issue Discount and Proceeds Allocated to Warrants Net Carrying Value MHL - Unsecured SPA Note August 2029 10 % - 15 % $ 3,323 $ 223 $ ( 601 ) $ 2,945 Related Party Notes - China As of April 1, 2023, the Company has been in breach of its debt agreement with, and contractual obligation to make interest payments to, 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. The Company recorded $ 0.1 million and $ 0.1 million in interest expense in related party interest expense during the three and nine months ended September 30, 2023, respectively. Fair Value of Related Party Notes Payable Not Carried at Fair Value The estimated fair value of the Company’s related party notes payable not carried at fair value approximated their carrying value as of September 30, 2023 and December 31, 2022, respectively. Schedule of Principal Maturities of Related Party Notes Payable The future scheduled principal maturities of related party notes payable as of September 30, 2023 were as follows: (in thousands) Due on demand $ 3,759 2023 5,071 2029 3,323 $ 12,153 28 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements FF Global Partners LLC (“FFGP”) Expense Reimbursements and Consulting Fees On January 31, 2023, the Company entered into a supplemental agreement to a preliminary term sheet (the “Term Sheet” and with such supplemental agreement, the “Supplemental Agreement”) with FFGP, pursuant to which the parties agreed, due to the high amount of FFGP’s out-of-pocket legal fees and expenses incurred in connection with its financing efforts, to amend the Term Sheet to increase the cap for legal fees and expenses from $ 0.3 million to $ 0.7 million. The Company agreed to pay the remaining $ 0.4 million of the fees owed to FFGP as follows: (i) $ 0.2 million within one business day of execution of the Supplemental Agreement, and (ii) $ 0.2 million within one business day of consummation of new financing by the Company in an amount not less than $ 5.0 million or an earlier date approved by the Board. Pursuant to the Term Sheet, as amended by the Supplemental Agreement, the Company paid FFGP $ 0.2 million on each of February 1, 2023 and February 6, 2023. On April 8, 2023, the Company reimbursed FFGP for $ 0.2 million related to legal expenses incurred by FFGP in connection with the Sixth Secured SPA Amendment. In addition, on April 10, 2023 and May 31, 2023, the Company reimbursed FFGP for $ 0.1 million and $ 0.3 million related to legal expenses incurred by FFGP in connection with the Unsecured Financing. In early February 2023, FFGP requested from the Company legal expense reimbursement of $ 6.5 million for costs incurred related to the governance changes at the Company, which was not approved by the Board as of the date the Condensed Consolidated Financial Statements were issued. FFGP may in the future continue to request additional expense reimbursements and indemnification from the Company. On March 6, 2023, the Company entered into a consulting service agreement with an effective date of February 1, 2023 with FF Global (the “Consulting Services Agreement”), according to which the Company agreed to pay a monthly consulting fee of $ 0.2 million to FF Global for the following services: • Assistance in developing its funding strategy. • Assistance in developing its value return and management strategy. • Consultation on and integration of stockholder relations and stockholder resources. • Supporting communications regarding stockholders meetings. • Developing existing stockholder financing strategy, including with respect to retail investors and others. • Assistance in risk management strategy. • Assistance in capability build up and operation strategy. Either party may terminate the Consulting Services Agreement upon one month prior written notice to the other party. Upon any termination of the Consulting Services Agreement, the Company shall promptly pay FF Global any accrued but unpaid fees hereunder and shall reimburse FF Global for any unreimbursed expenses that are reimbursable hereunder. In addition, FF Global is entitled to reimbursement for all reasonable and documented out-of-pocket travel, legal, and other out-of-pocket expenses incurred in connection with their services, which expenses shall not exceed $ 0.1 million without the prior written consent of the Company. The Company paid $ 0.9 million and $ 1.4 million, respectively, to FF Global during the three and nine months ended September 30, 2023, pursuant to the Consulting Services Agreement. Advertising Services Payable to Leshi Information Technology Co., Ltd. (“LeTV”) The Company has recorded a payable to LeTV within Accrued expenses and other current liabilities in the amount of $ 7.0 million and $ 7.0 million as of September 30, 2023 and December 31, 2022, respectively, in connection with advertising services provided to the Company in prior years. LeTV is a Shanghai Stock Exchange-listed public company founded and controlled by Mr. Yueting Jia, the Company’s founder and Chief Product and User Ecosystem Officer. X-Butler previously known as Warm Time Inc. (“Warm Time”) and Ocean View Drive Inc. (“Ocean View”) Transactions The Company leased two real properties, located in Rancho Palos Verdes, California (the “Rancho Palos Verdes Properties”), from X-Butler from January 1, 2018 through March 31, 2022. X-Butler in turn leased the Rancho Palos Verdes Properties from Mr. Jia. The Rancho Palos Verdes Properties were used by the Company to provide long-term or temporary housing to employees of the Company (including Dr. Carsten Breitfeld, former Global Chief Executive Officer (“CEO”) of the 29 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Company). According to the agreement between the parties, the Company paid X-Butler for rent and certain services, including catering, room services and organization of meetings, external gatherings and events, for the Rancho Palos Verdes Properties. In each of the three and nine months ended September 30, 2023 X-Butler invoiced the Company approximately $ 0.1 million, for rent and business development services rendered to the Company and its executives. In each of the three and nine months ended September 30, 2022 the Company paid to X-Butler less than $ 0.1 million, for rent and business development services rendered to the Company and its executives. As part of its relationship with the Company, X-Butler also served as the conduit for certain loans from Ocean View, an entity formerly controlled by Mr. Jia and now wholly owned by the spouse of Mr. Ruokun Jia, who is the former Assistant Treasurer of the Company and Mr. Jia’s nephew. The loan principal was repaid to the Company in prior years and accrued interest on such loans remains outstanding as of September 30, 2023 and December 31, 2022 in the amount of $ 0.2 million and $ 0.2 million, respectively. In prior years, the Company advanced funding to Ocean View for various real estate purchases, including the Rancho Palos Verdes Properties, and related expenses. As of September 30, 2023 and December 31, 2022, the Company had a receivable in the amount of $ 0.9 million and $ 0.9 million, respectively, due from Ocean View recorded in Deposits in the Condensed Consolidated Balance Sheets. On February 9, 2023, the Company made a payment of approximately $ 0.2 million on behalf of Ocean View, an indemnified co-defendant, in connection with a seizure of funds related to the outstanding judgment in ongoing litigation, also involving Han’s San Jose Hospitality, LLC. Ocean View fulfilled its payment obligation under the settlement arrangement of such litigation, but the Company did not make its payment on the outstanding judgment which caused such seizure of funds of Ocean View. See Note 9, Commitments and Contingencies , for more information. Following such seizure, the Company paid the outstanding judgment and all accrued interest. The Company received the return of such indemnification payment in April 2023. Other Related Party Transactions The Company pays for a vehicle lease totaling less than $ 0.1 million annually on behalf of Mr. Jia, the Company’s founder and Chief Product and User Ecosystem Officer. The Company owes a total of $ 0.4 million and $ 0.1 million to various related parties as of September 30, 2023 and December 31, 2022, respectively, which is included in Accounts Payable within the Condensed Consolidated Balance Sheets. 9. Commitments and Contingencies Legal Proceedings The Company is, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, the outcome of any such claims and disputes cannot be predicted with certainty. As of September 30, 2023 and December 31, 2022, the Company had accrued legal contingencies of $ 21.8 million and $ 18.9 million, respectively, recorded within Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets for potential financial exposure related to ongoing legal matters, primarily related to breach of contracts and employment matters, which are deemed both probable of loss and reasonably estimable. For the legal matters involving third-party vendors, such as suppliers and equipment manufacturers, the Company recorded an accrual in Accounts payable in the Condensed Consolidated Balance Sheets based on the amount invoiced by such vendors, which represents the minimum amount of loss out of the range of potential outcomes in accordance with ASC 450-20-30-1, Liabilities – Contingencies – Loss Contingencies – General. Settlements In October 2023, the Company agreed, in principle, to settle a putative class action lawsuit alleging violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company denies all allegations but deemed a settlement to be in its best interest based on the facts and circumstances of the case and recommendation of a neutral mediator. The settlement agreement provides for a non-reversionary cash payment of $ 7.5 million for the benefit of the settlement class in exchange for the release of all claims asserted against the Company by the lead plaintiffs. On November 7, 2023, preliminary 30 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements approval for the settlement was granted, consequently, the Company and plaintiffs will move forward with the settlement process. Derivative Actions In March 2022, two putative derivative lawsuits alleging violations of the Exchange Act and various common law claims were filed in the United States District Court, Central District of California, and were subsequently consolidated (“California Federal Derivative Action”). The California Federal Derivative Action was stayed pending resolution of certain proceedings in the putative class action. The stay expired in February 2023 and plaintiffs filed a verified consolidated amended complaint on June 2, 2023. Defendants filed motions to dismiss on September 15, 2023. Plaintiffs must file any response in opposition to the motions to dismiss on or before November 22, 2023, and Defendants must file any reply in support of their motions to dismiss on or before December 21, 2023. Additionally, in April 2022, two putative derivative lawsuits alleging violations of the Exchange Act and various common law claims were filed in the United States District Court, District of Delaware (the “Delaware Federal Derivative Actions”). The Delaware Derivative Actions were stayed pending resolution of certain proceedings in the putative class action and currently remain stayed. In June 2023, an additional putative derivative lawsuit alleging common law claims was filed in the Court of Chancery of the State of Delaware (the “Court of Chancery”). Given the early stages of the legal proceedings in the above derivative actions, it is not possible to predict the outcome of the claims. Consolidated Delaware Class Action In June 2022, a verified stockholder class action lawsuit alleging breaches of fiduciary duties was filed in the Court of Chancery (the “Yun Class Action”). In September 2022, a verified stockholder class action lawsuit alleging breaches of contract and fiduciary duties, and aiding and abetting alleged breaches of fiduciary duties, in connection with disclosures and stockholder voting leading up to the Business Combination was filed in the Court of Chancery (the “Cleveland Class Action”). The Yun Class Action and Cleveland Class Action were consolidated and the complaint in the Cleveland Class Action was designated as the operative pleading (the “Consolidated Delaware Class Action”). On April 7 2023, the defendants filed opening briefs in support of their respective motions to dismiss the complaint. Plaintiffs filed an omnibus answering brief in opposition to defendants’ motions to dismiss on September 26, 2023. Defendants must file any reply in support of the motions to dismiss on or before December 5, 2023. Given the early stages of the legal proceedings in the Consolidated Delaware Class Action, it is not possible to predict the outcome of the claims. Palantir Technologies, Inc. (“Palantir”) In July 2023, Palantir filed a demand for arbitration against the Company alleging the Company has refused to make payments under the July 12, 2021 Master Subscription Agreement (“MSA”), asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment, for damages totaling $ 41.5 million. On August 4, 2023, the Company submitted its response to Palantir’s arbitration demand, including both a general denial of all allegations and affirmative defenses. Given the early stage of the legal proceeding, it is not possible to predict the outcome of the claims. Other Legal Matters In January 2023, Riverside Management Group, LLC (“Riverside”) filed a complaint seeking to enforce its alleged contractual right to the advancement of costs and expenses, including attorneys’ fees, it has and will incur as a named defendant in the Consolidated Delaware Class Action under its October 13, 2020 transaction services agreement with the PSAC Sponsor, LLC. The Company agreed to conditionally advance to Riverside the reasonable attorneys’ fees and costs it incurs in defense of the Consolidated Delaware Class Action, subject to, and in express reservation of, the Company’s right to recover all such fees and expenses following disposition of the Consolidated Delaware Class Action. Given the early stage of the legal proceeding, the Company is unable to evaluate the likelihood of an unfavorable outcome and/or the amount or range of potential loss. FF has received correspondence from each of Senyun, MHL and VW alleging that the Company had entered into oral agreements to compensate those investors for any losses in connection with converting their notes into shares of Class A 31 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements Common Stock in order to support the Company’s proposals at its August 2023 special stockholders meeting. The Company is unaware of any such oral agreements and is contesting these claims on multiple grounds. Given the early stage of the legal proceeding, the Company is unable to evaluate the likelihood of an unfavorable outcome and/or the amount or range of potential loss. Other than disclosed herein, as of the date hereof FF is not a party to any legal proceedings the outcome of which, if determined adversely to FF, would individually or in the aggregate be reasonably expected to have a material adverse effect on FF’s business, financial condition, or results of operations. Special Committee Investigation In November 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. 333-258993). The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist in its review. On February 1, 2022, FFIE announced that the Special Committee completed its review. On April 14, 2022, FFIE announced the completion of additional investigative work based on the Special Committee’s findings which were performed under the direction of the Executive Chairperson, reporting to the Audit Committee. In connection with the Special Committee’s review and subsequent investigative work, the following findings were made. In connection with the Business Combination, statements made by certain Company employees to certain investors describing the role of Mr. Jia, the Company’s founder and former CEO, within the Company were inaccurate and his involvement in the management of the Company post-Business Combination was more significant than what had been represented to certain investors. • The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 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. • Consistent with FFIE’s previous public disclosures regarding identified material weaknesses in its internal control over financial reporting, the Company’s internal control over financial reporting requires an upgrade in personnel and systems. • The Company’s corporate culture failed to sufficiently prioritize compliance. • Mr. Jia’s role as an intermediary in leasing certain properties which were subsequently leased to the Company was not disclosed in FFIE’s corporate housing disclosures. • In preparing FFIE’s related party transaction disclosures, the Company failed to investigate and identify the sources of loans received from individuals and entities associated with Company employees. In addition, the investigation found that certain individuals failed to fully disclose to individuals involved in the preparation of FFIE’s SEC filings their relationships with certain related parties and affiliated entities in connection with, and following, the Business Combination, and failed to fully disclose relevant information, including but not limited to, information in connection with related parties and corporate governance to FFIE’s former independent registered public accounting firm PricewaterhouseCoopers LLP. The investigation also found that certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation. Among such individuals were non-executive officers or members of the management team of FF, and remedial action was taken with respect to such individuals based on the extent of non-cooperation and/or withholding of information. The failure to cooperate with the investigation was taken into consideration in connection with the remedial actions outlined below with respect to Mr. Jiawei (“Jerry”) Wang, and Mr. Matthias Aydt. Based on the results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of inaccurate FF disclosures that it evaluated were not supported by the evidence reviewed. Although the 32 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements investigation did not change any of the above findings with respect to the substantive allegations of inaccurate FF disclosures, the investigation did confirm the need for remedial actions to help ensure enhanced focus on compliance and disclosure within FF. Based on the results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial actions designed to enhance oversight and corporate governance of the Company: • The appointment of Ms. Susan Swenson, a former member of the Board, to the then newly created position of Executive Chairperson of FF; • Dr. Carsten Breitfeld, FF’s former Global CEO, reporting directly to Ms. Swenson and receiving a 25 % annual base salary reduction; • The removal of Mr. Jia as an executive officer, although continuing in his position as Chief Product and User Ecosystem Officer of FFIE. Certain dual-reporting arrangements were eliminated with respect to Mr. Jia, and he was required to report directly to Ms. Swenson, a non-independent director nominated by FFGP. Mr. Jia also received a 25 % annual base salary reduction, and his role was limited from a policy-making position to focusing on (a) product and mobility ecosystem and (b) Internet, Artificial Intelligence (“I.A.I.”), and advanced research and development (“R&D”) technology. On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board approved Mr. Jia (alongside Mr. Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments reporting directly to Mr. Jia. The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr. Jia and Mr. Chen, subject to processes and controls to be approved 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. 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; • Mr. Aydt, former Senior Vice President, Business Development and Product Definition of FFIE, and current Global Chief Executive Officer and a director of FFIE, being placed on probation as an executive officer for a six-month period, during which period he remained a non-independent member of the Board, which probationary period has since ended; • The appointment of Mr. Jordan Vogel as Lead Independent Director; certain changes to the composition of Board committees, including Mr. 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; Mr. Jordan Vogel stepping down from the Nominating and Corporate Governance Committee; and Mr. Scott Vogel becoming the Chair of the Audit Committee and the Nominating and Corporate Governance Committee of the Board; • The suspension without pay of Mr. Wang, former Vice President, Global Capital Markets, who subsequently notified the Board of his decision to resign from FF on April 10, 2022; • The assessment and enhancement of FF’s policies and procedures regarding financial accounting and reporting and the upgrading of FF’s internal control over financial accounting and reporting, including by hiring additional financial reporting and accounting support, in each case at the direction of the Audit Committee; • The implementation of enhanced controls around FF’s contracting and related party transactions, including regular attestations by FF’s employees with authority to bind FF to contracts and related party transactions, for purposes of enabling FF to make complete and accurate disclosures regarding related party transactions; • The hiring of a Chief Compliance Officer, who reports on a dotted line to the Chair of the Audit Committee, and assessing and enhancing FF’s compliance policies and procedures. The Company hired a Compliance Officer with the title of Deputy General Counsel in March 2023, who reports on a dotted line to the Chair of the Audit Committee, and is actively looking to hire a Chief Compliance Officer; • The implementation of a comprehensive training program for all directors and officers regarding, among other things, internal FF policies; 33 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements • The separation of Mr. Jarret Johnson, FF’s Vice President, General Counsel and Secretary; and in other disciplinary actions and terminations of employment with respect to other FF employees (none of whom is an executive officer). As of September 30, 2023, FF is continuing to implement certain of the remedial actions approved by the Board. However, certain of these remedial actions are no longer in effect and no assurance can be provided that those remedial measures that continue to be implemented will be implemented in a timely manner or at all, or will be successful to prevent inaccurate disclosures in the future. Additionally, pursuant to the agreement between FF Global and FFGP, on September 23 2022, FF has implemented certain governance changes, including Board composition and leadership, that impact certain of the above-discussed remedial actions. SEC and DOJ Investigations As previously reported, the Company is subject to investigation by the SEC dealing with matters related to the Special Committee investigation, the Company’s transactions with Senyun, timing of the Company’s deliveries, and the consulting and sales agreements with the first three users of the FF 91 Futurist. FF is cooperating fully with the SEC’s investigation, including responding to multiple subpoenas and requests for information. The outcome of such an investigation is difficult to predict. FF has incurred, and may continue to incur, significant expenses related to legal, accounting and other professional services in connection with the SEC investigation. At this stage, FF is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss. In addition, in June 2022, FF received a preliminary request for information from the Department of Justice (“DOJ”) in connection with the matters that were the subject of the Special Committee investigation. FF has responded to that request and intends to fully cooperate with any future requests from the DOJ. The Palantir License In July 2021, the Company and Palantir entered into the MSA that sets forth the terms of the Palantir’s platform hosting arrangement. Under the MSA, the Company committed to pay a total of $ 47.0 million of hosting fees over a six-year term, $ 5.3 million of which was paid in 2021. The software is cloud hosted for the entirety of the subscription term and the Company cannot take possession of the software. Accordingly, the Company determined that the MSA represents a hosting arrangement that is a service contract. The Company recognizes hosting costs on a straight-line basis over the agreement term. In connection with the MSA, the Company has recorded $ 12.3 million and $ 2.5 million as of September 30, 2023 and December 31, 2022, respectively, in Accounts payable and recorded $ 3.0 million as of December 31, 2022 in Accrued expenses and other current liabilities. During the three months ended September 30, 2023 and 2022, the Company recognized expense of $ 2.0 million and $ 2.0 million, respectively, related to the MSA. During the nine months ended September 30, 2023 and 2022, the Company recognized expense of $ 5.9 million and $ 5.9 million, respectively, related to the MSA. 10. Stockholders’ Equity Amendments to the Company’s Certificate of Incorporation On the Closing Date of the Business Combination, the Company’s stockholders adopted the Company’s Second Amended and Restated Certificate of Incorporation. The amendment set forth the rights, privileges, and preferences of the Class A Common Stock and 6,562,500 shares of Class B common stock, par value $ 0.0001 per share (the “Class B Common Stock”). The amendment authorizes the issuance of 10,000,000 shares of preferred stock, par value $ 0.0001 per share (the “Preferred Stock”) with such designations, rights and preferences as may be determined from time to time by the Board. The Board is empowered, without stockholder approval, to issue the Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock; provided that any issuance of Preferred Stock with more than one vote per share will require the prior approval of the holders of a majority of the outstanding shares of Class B Common Stock. At a special meeting of the Company’s stockholders held on November 3, 2022, stockholders approved, among other things, an increase to the number of the Company’s authorized shares of Common Stock and Preferred Stock from 20,312,500 to 26,750,000 . On November 22, 2022, the Company filed an amendment to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the increase. 34 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements At a special meeting of the Company’s stockholders held on February 28, 2023, the Company’s stockholders approved a further increase to the number of the Company’s authorized shares of Class A Common Stock from 10,187,500 to 21,125,000 , increasing the Company’s total number of authorized shares of Common Stock and Preferred Stock from 26,750,000 to 37,687,500 . On March 1, 2023, the Company filed an amendment to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect such amendment. Additionally, 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 outstanding Common Stock at a range between 1-for-2 and 1-for-90 shares of outstanding Common Stock, and a proposal stating that 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. On August 22, 2023, the Board approved the Reverse Stock Split ratio. 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). 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 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 Class B Common Stock. No fractional shares of Common Stock were issued as a result of the Reverse Stock Split. Stockholders who would otherwise have received a fractional share were instead issued a full share in lieu of such fractional share. 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). 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. Series A Preferred Stock On June 16, 2023, in connection with a purchase agreement entered into with Mr. Chen, the Company’s Global CEO at that time, 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. The Series A Certificate of Designation designates one share of the Company’s Preferred Stock as Series A preferred stock, par value $ 0.0001 per share (the “Series A Preferred”) and establishes and designates the preferences, rights and limitations thereof. The closing of the sale and purchase of the share of Series A Preferred was completed on June 16, 2023 for a purchase price of $ 100.00 . 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. The share of Series A Preferred shall not be entitled to receive dividends. The holder of the Series A Preferred 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 (1/3 rd ) 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). The share of Series A Preferred will vote together with the Common Stock as a single class on any reverse stock split proposal. The Series A Preferred has no other voting rights, except as may be required by the General Corporation Law of the State of Delaware. 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 the 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 . 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. 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 35 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 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. The Series A Preferred was redeemed for $ 100.00 following the August 16, 2023 special meeting of the Company’s stockholders. Warrants Period End Warrant Information The number of outstanding warrants to purchase the Company’s Class A Common Stock as of September 30, 2023 are as follows: Number of Warrants Exercise Price Expiration Date SPA Warrants 1,654,726 $ 1.64 Various through September 30, 2030 Ares warrants 4,096,242 $ 1.64 August 5, 2027 Public Warrants 294,263 $ 920.00 July 21, 2026 Private Warrants 1,390 $ 920.00 July 21, 2026 Total 6,046,621 During the nine months ended September 30, 2023, 754,945 warrants were exercised to purchase 639,109 shares of Class A Common Stock for cash proceeds of $ 4.1 million. Certain of the warrants were exercised pursuant to a cashless exercise feature whereby 115,836 warrant shares were surrendered as the purchase price. The number of outstanding warrants to purchase Class A Common Stock as of December 31, 2022 were as follows: Number of Warrants Exercise Price Expiration Date SPA Warrants 4,330,664 $ 18.40 Various through September 23, 2029 ATW NPA Warrants (1) 960,056 $ 18.40 Various through August 10, 2028 Ares warrants 368,183 $ 18.20 August 5, 2027 Public Warrants 294,263 $ 920.00 July 21, 2026 Private Warrants 1,390 $ 920.00 July 21, 2026 Total 5,954,556 (1) The ATW NPA Warrants were fully exercised during the nine months ended September 30, 2023, through which the Company received aggregate proceeds of $ 0.3 million that was recorded as an increase to Additional paid-in capital. Insufficient Authorized Shares From time to time, certain of the Company’s equity-linked financial instruments may be classified as derivative liabilities under ASC 815, Derivatives and Hedging , due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. In such case, the Company applies a sequencing policy under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity , whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary due to the Company’s inability to demonstrate it has sufficient authorized shares to settle the equity-linked financial instrument in shares, the Company will reclassify contracts that have overlapping settlement dates with the latest inception date as derivative instruments. The contracts reclassified as derivative instruments are recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled or the Company has sufficient authorized, unissued shares to settle such contracts with shares. The Company has elected to apply the same sequencing policy for share-based compensation arrangements if the Company granted share-based payment arrangements where the Company may have insufficient shares to settle the contract. As of December 31, 2022, the Company reclassified the earnout shares from equity classification to liability classification as a result of the Company having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity . As a result of the 36 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements reclassification, the Company reclassified $ 2.3 million out of Additional paid-in capital into the Earnout liability, which is included in Other current liabilities in the Condensed Consolidated Balance Sheet as of December 31, 2022. As of December 31, 2022, the Company reclassified 672,758 shares of outstanding share-based payment arrangements from equity classification to liability classification as a result of the Company having insufficient authorized shares to settle the share-based payment arrangements when the awards vest or are exercised. As a result of the reclassification, the Company reclassified an amount of $ 4.0 million out of Additional paid-in capital into Share-based payment liability, which is included in Other current liabilities in the Condensed Consolidated Balance Sheet as of December 31, 2022. 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. 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. As a result of the Reverse Stock Split and the related increase in the number of available authorized shares of Class A Common Stock, effective August 25, 2023 the Company has sufficient authorized shares of Class A Common Stock to fully settle its equity-linked financial instruments in shares. Accordingly, on August 25, 2023, the Company reclassified the fair value of the Earnout liability of $ 1.4 million and the fair value of the Share-based payment liability of $ 2.0 million into Additional paid-in capital. Refer to the table summarizing the activity of Level 3 fair value measurements in Note 12 for the changes in fair value of the Earnout liability and the Share-based payment liability recognized in periods when they were thus classified. Salary Deduction and Stock Purchase Agreement On September 21, 2023, certain executive officers of the Company entered into Salary Deduction and Stock Purchase Agreements (collectively, the “Purchase Agreement”) with the Company. Under the Purchase Agreement, on each payroll date after the receipt of stockholder approval of the Purchase Agreement, the officer has agreed to authorize the Company to deduct 50 % of the officer’s after-tax base salary. This deducted amount will be used to purchase a number of shares of Class A Common Stock determined using the VWAP (as defined in the Purchase Agreement) of Class A Common Stock per share on the applicable payroll date. Pursuant to the Purchase Agreement, the officer may decrease the amount of the deduction upon notice to the Board. No shares have been purchased under the Salary Deduction and Stock Purchase Agreements as of September 30, 2023. 11. Stock-Based Compensation 2021 Stock Incentive Plan (“2021 SI Plan”) In July 2021, the Company adopted the 2021 SI Plan. The 2021 SI Plan allows the Board to grant incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other stock-based awards for Class A Common Stock to employees, directors, and non-employees. At the special meeting held on August 16, 2023, the Company’s stockholders approved (among other proposals) an amendment to the 2021 SI Plan to increase the number of shares of Class A Common Stock available for issuance under the 2021 SI Plan by an additional 2,584,825 shares. As a result of the Reverse Stock Split, the number of shares of Class A Common Stock reserved for issuance under the 2021 SI Plan, the Company’s Equity Incentive Plan, and the Company’s Special Talent Incentive Plan (the “Plans”), as well as the number of shares subject to the then-outstanding awards under each of the Plans, were proportionately adjusted, using the 1-for-80 ratio, rounded down to the nearest whole share. In addition, the exercise price of the then-outstanding stock options under each of the Plans was proportionately adjusted, using the 1-for-80 ratio, rounded up to the nearest whole cent. As of September 30, 2023 and December 31, 2022, the Company had 3,352,775 and 303,156 shares of Class A Common Stock available for future issuance under its 2021 SI Plan. SOP/SOD Incentive Plan On February 23, 2023, the Board approved the Company’s SOP/SOD Incentive Plan (“Incentive Plan”) granting: (i) cash bonuses to all active employees of the Company that began employment at the Company prior to December 31, 2022 upon the commencement of the start of production of the Company’s FF 91 Futurist on or prior to March 31, 2023 and (ii) cash bonuses and equity incentive awards to all active employees of the Company that began employment at the Company prior to December 37 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements 31, 2022 upon the commencement of the start of delivery of the Company’s FF 91 Futurist on or prior to April 30, 2023 (“Delivery Condition”). On August 17, 2023, the Board approved an amendment to the Incentive Plan (“Incentive Plan Amendment”) to reflect the updated timing of the previously announced FF 91 2.0 Futurist Alliance phase two of its Delivery Plan from the end of April 2023 to the end of the second quarter 2023 and subsequently to August 2023. The Incentive Plan Amendment is available to all active employees of the Company that began employment at the Company prior to July 1, 2023 and reduced the cash bonuses and milestone based restricted stock units (“RSUs”) by 10 % for the internal Company sign-off on requirements to commence phase two of the Company’s Delivery Plan on or prior to July 31, 2023 (“New Delivery Condition”). Pursuant to the Incentive Plan Amendment, RSU awards will be granted after the Company has sufficient additional shares available for such issuance (“Share Issuance Condition”) and cash bonuses will be paid once the Company has received an additional $ 15.0 million in financings. The Incentive Plan Amendment includes the grant of RSUs to certain executive officers of the Company upon the Company’s satisfaction of the New Delivery Condition and the Share Issuance Condition with a grant date fair market value of approximately $ 8.0 million, subject to vesting in three annual installments on the first three anniversaries of the grant date, generally subject to the applicable executive’s continuous employment through each applicable vesting date. In addition, subject to the Share Issuance Condition, upon the satisfaction of the New Delivery Condition and continuing for an eight-year period, certain executive officers will annually receive a grant of fully-vested RSUs with a grant date fair market value of $ 0.78 million, subject to their continued employment through each grant date of the award. During the three and nine months ended September 30, 2023, the Company recognized $ 0.7 million of cash bonus expense under the Incentive Plan. As a result of the Share Issuance Condition not yet being met, no RSUs have been granted under the Incentive Plan. Other than the above, during the nine months ended September 30, 2023, the Company granted: • 0.04 million stock options which had a weighted-average grant date fair value of $ 86.40 per share. 25,000 stock options vest ratably over eight years . 12,500 stock options commenced vesting on March 29, 2023 upon the start of production of the FF 91 Futurist Alliance at its FF ieFactory California, and 25 % of such stock options will vest on each of the first four one-year anniversaries of the vesting start date. As of September 30, 2023, the total remaining stock-based compensation expense for unvested stock options was $ 0.7 million, which is expected to be recognized over a weighted-average period of 2.85 years. • 0.08 million RSUs, which had a weighted-average grant date fair value of $ 75.52 per share, and 0.01 million performance share units (“PSUs”), which had a weighted-average grant date fair value of $ 86.40 per share. The substantial majority of the RSUs will vest ratably over four years . The PSUs will commence vesting upon the start of delivery of the FF 91 Futurist Alliance, and 25 % of such PSUs will vest on each of the first four one-year anniversaries of the vesting start date. As of September 30, 2023, the total remaining stock-based compensation expense for unvested RSU’s was $ 1.7 million, which is expected to be recognized over a weighted-average period of 4.24 years. The following table presents stock-based compensation expense included in each respective expense category in the Condensed Consolidated Statements of Operations and Other Comprehensive Loss: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Research and development $ ( 358 ) $ 1,831 $ 6,616 $ 6,532 Sales and marketing ( 33 ) 236 786 861 General and administrative ( 79 ) 603 1,504 1,751 $ ( 470 ) $ 2,670 $ 8,906 $ 9,144 Included in stock-based compensation expense for the three months ended September 30, 2023 is a $ 0.7 million gain related to when the Company’s share-based payment awards were classified as liabilities from July 1, 2023 through August 25, 2023. Included in stock-based compensation expense for the nine months ended September 30, 2023 is $ 4.1 million related to 38 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements when the Company’s share-based payment awards were classified as liabilities from time to time during the nine months ended September 30, 2023. 12. Fair Value of Financial Instruments Fair Value Measurements The Company applies the provisions of ASC 820, Fair Value Measurement , which defines a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurements. The provisions of ASC 820, Fair Value Measurement relate to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds. Level 2 Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. Government and agency debt securities and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds. Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models or similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial or nonfinancial asset or liability. Notes Payable The Company has elected to measure certain notes payable and related party notes payable at fair value. Specifically, the SPA Notes as they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 7, Notes Payable ). The Company used a binomial lattice model and discounted cash flow methodology to value the SPA Notes. The significant assumptions used in the models include the volatility of the Class A Common Stock, the Company’s expectations around the full ratchet trigger, the Company’s debt discount rate based on a CCC rating, annual dividend yield, and the expected life of the instrument. Fair value measurements associated with the notes payable represent Level 3 valuations under the fair value hierarchy. The fair value adjustments related to notes payables were recorded in Change in fair value measurements on the Condensed Consolidated Statements of Operations and Comprehensive Loss. SPA Warrants The Company has elected to measure the SPA Warrants at fair value. The Company uses a Monte Carlo simulation model to measure the fair value of the SPA Warrants, where the significant assumptions used include the volatility of the Company’s Class A Common Stock, the Company’s expectations around the full ratchet trigger, the contractual term of the SPA Warrants, the risk-free rate and annual dividend yield. Fair value measurements associated with the liability-classified warrants represent Level 3 valuations under the fair value hierarchy. 39 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements SEPA Since November 14, 2022, the Company has had the right, but not the obligation, to issue and sell to Yorkville up to $ 200.0 million in shares of Class A Common Stock. The Company determined that SEPA represents a derivative financial instrument under ASC 815, Derivatives and Hedging , which should be recorded at fair value at inception and each reporting date thereafter. The financial instrument was classified as a derivative asset with a fair value of zero as of September 30, 2023 and December 31, 2022. Liabilities due to Insufficient Authorized Shares From time to time, certain of the Company’s equity-linked financial instruments may be classified as derivative liabilities under ASC 815, Derivatives and Hedging , due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. See Note 10, Stockholders' Equity . Recurring Fair Value Measurements Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables present financial liabilities remeasured on a recurring basis by level within the fair value hierarchy: September 30, 2023 (in thousands) Level 1 Level 2 Level 3 Liabilities: Warrant liabilities 1 $ — $ — $ 1,730 Notes payable 1 — — 95,445 1 Includes both related party and non-related party balances for the Company’s notes payable and warrant liabilities. December 31, 2022 (in thousands) Level 1 Level 2 Level 3 Liabilities: Warrant liabilities $ — $ — $ 92,833 Notes payable — — 26,008 Earnout shares liability — — 2,250 Share-based payment liabilities — — 3,977 There were not any transfers of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy during the nine months ended September 30, 2023. The carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, accounts payable, accrued liabilities and current notes payable approximate fair value because of their short-term nature or contractually defined value. 40 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements The following table summarizes the activity of Level 3 fair value measurements: (in thousands) Warrant Liabilities 1 Notes Payable 1 Earnout Shares Liability Liability for Insufficient Authorized Shares Related to Stock Options and RSUs Balance as of December 31, 2022 $ 92,833 $ 26,008 $ 2,250 $ 3,977 Additions 41,068 211,088 — — Net disposal pursuant to Warrant Exchange ( 16,506 ) — — — Exercises ( 47,202 ) — — — Debt extinguishments 1,317 13,078 — — Change in fair value measurements ( 69,780 ) ( 28,235 ) 2,033 — Payments of notes payable, including periodic interest — ( 1,167 ) — — Stock-based compensation expense — — — 4,067 Reclassification from liability to equity on February 28, 2023 — — ( 5,014 ) ( 8,979 ) Reclassification from equity to liability on April 21, 2023 — 2,112 2,978 Reclassification from liability to equity on August 25, 2023 ( 1,381 ) ( 2,043 ) Conversions of notes to Class A Common Stock — ( 125,327 ) — — Balance as of September 30, 2023 $ 1,730 $ 95,445 $ — $ — 1 Includes both related party and non-related party balances for the Company’s notes payable and warrant liabilities. 13. Net Loss per Share Net Loss Per Share Attributable to Common Stockholders Basic net loss per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares to be issued under the commitment to issue shares, as these shares are issuable for no consideration. Diluted net loss per share attributable to common stockholders adjusts the basic net loss per share attributable to common stockholders and the weighted-average number of shares issued and shares to be issued under the commitment to issue shares for potentially dilutive instruments. For purposes of presentation of basic and diluted net loss per shares, the Company includes shares to be issued in the denominator in accordance with ASC 710-10-54-4 and ASC 260-10-45-48, Earnings Per Share - Overall - Other Presentation Matters - Contingently Issuable Shares , as if they had been issued on the date of the Business Combination (see Note 1, Nature of Business and Organization and Basis of Presentation ), as such shares are non-contingent and are issuable for no consideration. The net loss per common share was the same for the Class A Common Stock and Class B Common Stock because they are entitled to the same liquidation and dividend rights and are therefore combined in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Because the Company reported net losses for all periods presented, all potentially dilutive Common Stock equivalents were determined to be antidilutive for those periods and have been excluded from the calculation of net loss per share. 41 Faraday Future Intelligent Electric Inc. Notes to Unaudited Condensed Consolidated Financial Statements The following table presents the potentially dilutive shares that were excluded from the computation of diluted net loss per share of Common Stock attributable to Common Stock stockholders because their effect was anti-dilutive: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Shares issuable upon conversion of SPA Notes and settlement of make-whole provisions 89,569,362 1,110,705 89,569,362 1,110,705 Shares issuable upon exercise of SPA Warrants 1,654,726 884,681 1,654,726 884,681 Other warrants 4,096,242 17,863 4,096,242 17,863 Stock-based compensation awards – Options 428,081 473,659 428,081 473,659 Stock-based compensation awards – RSUs 177,650 — 177,650 — Public warrants 294,263 292,200 294,263 292,200 Private warrants 1,390 3,452 1,390 3,452 Total 96,221,714 2,782,560 96,221,714 2,782,560 14. Subsequent Events The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the Condensed Consolidated Financial Statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial Statements. Conversion of Notes Payable into Class A Common Stock Between October 2, 2023 and November 9, 2023, the Purchasers converted portions of the aggregate principal amount of $ 9.4 million notes payable into 10,570,266 shares of Class A Common Stock including aggregate principle amount of $ 1.5 million of related party notes payable (MHL) into 1,781,682 shares of Class A Common Stock. Sale Leaseback Transaction On October 19, 2023, Faraday&Future Inc. (the “Tenant”), a subsidiary of FFIE, entered into a sale leaseback transaction whereby it has exercised its option to purchase the FF ieFactory California and simultaneously completed a sale leaseback to Ocean West Capital Partners (“Landlord”) pursuant to that certain Lease Agreement, dated as of October 19, 2023, by and between the Tenant and 10701 Idaho Owner, LLC (the “Lease Agreement”). The Lease Agreement also allows the Tenant to access to up to $ 12.0 million of tenant improvement allowance for the FF ieFactory California. The new lease will be for a term of five years , with a monthly lease rate of $ 0.4 million, with a five-year extension option, and the Tenant has an option to purchase the fee interest in the FF ieFactory California at any time after the second year of the lease term. Furthermore, the Tenant has a right of first offer to purchase the FF ieFactory California in the event Landlord desires to sell the FF ieFactory California. Unsecured SPA Funding In October 2023, VW and MHL funded an additional portion of Unsecured SPA Notes. The Company received net proceeds of $ 1.8 million in exchange for such issuance. At-the-Market Funding Pursuant to the Sales Agreement, the Company has sold 14,273,045 shares of Class A Common Stock for a total gross proceeds of $ 16.6 million. The Company pays a fee of 3.5 % of the gross sales price, to the Sales Agents and received $ 16.1 million net of this fee. 42