1 unchanged sentence
The following discussion and analysis is intended to help the reader understand FF’s results of operations and financial condition.
−Removed: This discussion and analysis is provided as a supplement to, and should be read in conjunction with FF’s Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K (this “Report”).
−Removed: Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to FF’s plans and strategy for FF’s business, includes forward-looking statements that involve risks and uncertainties.
−Removed: FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the section entitled “Risk Factors” above and “Cautionary Note Regarding Forward Looking Statements” below.
+Added: This discussion and analysis is provided as a supplement to, and should be read in conjunction with FF’s Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”).
+Added: Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to FF’s plans and strategy for FF’s business, include forward-looking statements that involve risks and uncertainties.
+Added: FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the section titled “Risk Factors” in Item 1A above and “Cautionary Note Regarding Forward Looking Statements” below.
The objective of this section is to provide investors an understanding of the financial drivers and levers in FF’s business and describe the financial performance of the business.
2 unchanged sentences
Cautionary Note Regarding Forward-Looking Statements
−Removed: This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
+Added: This Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology.
2 unchanged sentences
These statements are based on management's current expectations, but actual results may differ materially due to various factors.
−Removed: The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us.
+Added: The forward-looking statements contained in this Form 10-K are based on our current expectations and beliefs concerning future developments and their potential effects on us.
Future developments affecting us may not be those that we have anticipated.
7 unchanged sentences
In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.
−Removed: Faraday Future Intelligent Electric, Inc.
−Removed: (together with its consolidated subsidiaries, “FF,” “the Company,” “we,” “us” or “our”) is a California-based, global, shared, intelligent, mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry.
−Removed: On July 21, 2021, Faraday Future Intelligent Electric Inc.
−Removed: (f/k/a Property Solutions Acquisition Corp.
−Removed: (“PSAC”)), a Delaware corporation, consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of January 27, 2021 (as amended, the “Merger Agreement”), by and among PSAC, PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and Legacy FF.
−Removed: 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”).
−Removed: Upon the consummation of the Business Combination, PSAC changed its name from Property Solutions Acquisition Corp.
−Removed: to Faraday Future Intelligent Electric Inc., and FF’s Class A Common Stock and Public Warrants began trading on The Nasdaq Global Select Market (“Nasdaq”) under the ticker symbols “FFIE” and “FFIEW,” respectively.
+Added: The Company is a California-based, global, shared, intelligent, mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry.
+Added: The Company’s Class A Common Stock and Public Warrants trade on The Nasdaq Capital Market (“Nasdaq”) under the ticker symbols “FFIE” and “FFIEW,” respectively.
With headquarters in Los Angeles, California, FF designs and engineers next-generation intelligent, connected, electric vehicles.
−Removed: FF intends to manufacture vehicles at its ieFactory California production facility in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing agreement with Myoung Shin Co., Ltd.
+Added: FF manufactures vehicles at its production facility in Hanford, California (the “FF ieFactory California”), with additional future production capacity needs addressed through a contract manufacturing agreement with Myoung Shin Co., Ltd.
(“Myoung Shin”), an automotive manufacturer headquartered in South Korea.
−Removed: FF has additional engineering, sales, and operational capabilities in China and is exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangement.
+Added: FF has additional engineering, sales, and operational capabilities in China and is exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangements.
Since its founding, FF has created major innovations in technology, products, and a user-centered business model.
FF believes these innovations will enable FF to set new standards in luxury and performance that will redefine the future of intelligent mobility.
−Removed: FF’s innovations in technology include its proprietary Variable Platform Architecture (“VPA”), propulsion system, and Internet Artificial Intelligence (“I.A.I.”) system.
−Removed: We believe the following combination of capabilities of FF’s products, technology, the recent upgrade to PT Gen 2.0, team, and business model distinguish FF from its competitors:
−Removed: ● FF has designed and developed a breakthrough mobility platform — its proprietary VPA.
+Added: We believe the following combination of capabilities of FF’s products, technology, the upgrade to FF Product and Technology Upgrade Generation 2.0 (PT Gen 2.0), team, and business model distinguish FF from its competitors:
+Added: ● FF has designed and developed a breakthrough mobility platform — its proprietary Variable Platform Architecture (“VPA”).
● FF’s propulsion system provides a competitive edge in acceleration and range, enabled by an expected industry-leading inverter design, and propulsion system.
−Removed: ● FF’s advanced I.A.I.
−Removed: technology offers high-performance computing, high speed internet connectivity, Over the Air (“OTA”) updating, an open ecosystem for third-party application integration, and a Level 3 autonomous driving-ready system, in addition to several other proprietary innovations that enable FF to build an advanced, highly-personalized user experience.
−Removed: ● Since inception, FF has developed a portfolio of intellectual property, established its proposed supply chain, and assembled a global team of automotive and technology experts and innovators to achieve its goal of redefining the future of the automotive industry.
−Removed: As of February 27, 2023, FF has been granted approximately 660 patents globally.
−Removed: ● FF’s B2C (business-to-customer) passenger vehicle pipeline over the next five years includes the FF 91 series, the FF 81 series, and the FF 71 series.
−Removed: ● FF believes that the FF 91 will be the first ultra-luxury EV to offer a highly-personalized, fully-connected user experience for driver and passengers.
−Removed: Based on certain management assumptions, including the timely receipt of $38.4 million to $58.4 million of additional funding, which commitments have been secured as part of the Sixth Amendment, and approval by stockholders of the proposal to increase FFIE’s authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000, increasing the total authorized shares from 900,000,000 to 1,775,000,000, which approval was obtained during the special meeting of stockholders held on February 28, 2023, timely completion of key equipment installation and commissioning work at the ieFactory California in Hanford, California, suppliers meeting our supply chain requirements, the implementation and effectiveness of certain expense reduction and payment delay measures, and timely and successful testing and certification, FF expects start of production of the FF 91 Futurist at the end of March 2023, coming off the line in early April, and deliveries to users anticipated to begin before the end of April 2023.
−Removed: ● Subject to future financing, FF plans to produce and deliver its second passenger vehicle, the FF 81, which will be a premium, mass-market electric vehicle positioned to compete against the Tesla Model S, Tesla Model X, the BMW 5-series, and the Nio ES8.
+Added: ● FF’s advanced Internet Artificial Intelligence (“I.A.I.”) technology offers high-performance computing, high speed internet connectivity, Over-the-Air (“OTA”) updating, an open ecosystem for third-party application integration, and an advanced autonomous driving-ready system, in addition to several other proprietary innovations that enable FF to build an advanced, highly-personalized user experience.
+Added: ● Since inception, FF has developed a portfolio of intellectual property, established its supply chain, and assembled a global team of automotive and technology experts and innovators to achieve its goal of redefining the future of the automotive industry.
+Added: As of December 31, 2023, FF has been granted approximately 660 patents globally.
+Added: ● FF believes that the FF 91 Futurist ( the “FF 91,” “FF 91 Futurist,” or “FF 91 2.0 Futurist Alliance”) is the first ultra-luxury electric vehicle to offer a highly-personalized, fully-connected user experience for driver and passengers.
+Added: FF started production on the first FF 91 futurist and delivered the first FF 91 2.0 Futurist Alliance in 2023.
+Added: ● FF’s planned B2C passenger vehicle pipeline includes the FF91 series, the FF81 series, and the FF71 series.
+Added: ● Subject to future financing, FF plans to produce and deliver its second passenger vehicle, the FF 81, which is expected to be designed to be a premium, mass-market electric vehicle positioned to compete against the Tesla Model S, Tesla Model X, the BMW 5-series, the Range Rover Sport and similar vehicles.
● Subject to future financing, FF plans to develop a mass-market passenger vehicle, the FF 71.
FF expects to start production and deliveries of the FF 71 subsequent to production and deliveries of the FF 81.
−Removed: The FF 71 will integrate full connectivity and advanced technology into a smaller vehicle size and is positioned to compete against the Tesla Model 3, Tesla Model Y, and the BMW 3-series.
+Added: The FF 71 is expected to be designed to integrate full connectivity and advanced technology into a smaller vehicle size and is positioned to compete with vehicles such as the Tesla Model 3, Tesla Model Y, and the BMW 3-series.
● Subject to future financing, FF plans to develop a Smart Last Mile Delivery (“SLMD”) vehicle to address the high-growth, last-mile delivery opportunity, particularly in Europe, China and the U.S.
FF’s modular VPA facilitates entry into the last-mile delivery segment, allowing FF to expand its total addressable market and avenues of growth.
−Removed: FF has adopted a hybrid manufacturing strategy consisting of its refurbished manufacturing facility in Hanford, California and a collaboration with Myoung Shin in South Korea.
−Removed: FF is also exploring other potential contract manufacturing options in addition to the contract manufacturing agreement in South Korea along with the possibility of manufacturing capacity in China through a joint venture or other arrangements.
−Removed: All passenger vehicles as well as the SLMD vehicle are expected to be available for sale in the U.S.
−Removed: and China, with potential expansion to European markets.
+Added: All FF vehicles are expected to be available for sale in the U.S., China and the Middle East, with potential expansion to European markets.
Emerging Growth Company Status
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
−Removed: The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies.
+Added: The JOBS Act provides that a company can choose not to take advantage of the extended transition
+Added: period and comply with the requirements that apply to non-emerging growth companies.
Any such election to not take advantage of the extended transition period is irrevocable.
−Removed: FF is an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.
+Added: FF is an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.
FF expects to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.
1 unchanged sentence
Segment Information
−Removed: FF has determined that FF operates as one reportable segment, which is the design, development, manufacture, engineering, sale, and distribution of electric vehicles and related products in the global market.
−Removed: Impact of COVID-19 on FF’s Business
−Removed: The residual effects of the COVID-19 pandemic continue to impact global and domestic economic conditions, which have affected our operations, our suppliers and other business partners.
−Removed: The impact of COVID-19 includes changes in consumer and business behavior, pandemic fears, market downturns, restrictions on business, and individual activities have created significant volatility in the global economy and have led to reduced economic activity.
−Removed: Consequently, we have experienced increased levels of overall cost inflation and challenges within our supply chain.
−Removed: Such residual impact also continue to create a disruption in the manufacture, delivery, and overall supply chain of vehicle manufacturers and suppliers and has led to a global decrease in vehicle sales in markets around the world.
−Removed: The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans, restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns.
−Removed: For example, FF’s employees based in California have been subject to stay-at-home orders from state and local governments.
−Removed: The extent of the continuing impact of the COVID-19 pandemic on FF’s operational and financial performance is uncertain and will depend on many factors outside FF’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic;
−Removed: the availability, distribution and effectiveness of vaccines;
−Removed: the imposition of protective public safety measures;
−Removed: and the impact of
−Removed: the pandemic on the global economy, including FF’s supply chain, and on the demand for consumer products.
−Removed: Future measures taken by government authorities in response the COVID-19 pandemic could adversely affect FF’s construction and manufacturing plans, sales and marketing activities, and business operations.
−Removed: In response to the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the United States Small Business Administration (“SBA”).
−Removed: In 2020, Legacy FF received a Paycheck Protection Program (“PPP”) loan in the amount of $9.2 million.
−Removed: The Company was notified by East West Bank that a principal amount of $9.0 million as well as accrued interest of $0.2 million relating to the PPP loan had been forgiven as of December 31, 2021.
−Removed: The Company paid an amount of $0.2 million in April 2022 to settle the PPP loan.
−Removed: The extent of the residual impact of the COVID-19 pandemic on FF’s operational and financial performance is uncertain and will depend on many factors outside FF’s control, including, emergence of new variants and mitigation measures imposed to control outbreaks as a result of such new variants;
−Removed: the availability, distribution and effectiveness of vaccines;
−Removed: and the impact of the outbreak of new variants and any mitigation measures imposed as a result of such variants on the global economy, including FF’s supply chain, FF’s construction and manufacturing plans, sales and marketing activities, and business operations and on the demand for consumer products.
−Removed: Such residual impact may further slowdown FF’s ability to ramp-up FF’s production program on time to satisfy investors and potential customers.
−Removed: Any further delay to production will delay FF’s ability to produce and deliver the FF 91 and begin generating revenue.
−Removed: FF does not currently anticipate any material impairments as a result of COVID-19;
−Removed: however, FF will continue to evaluate conditions on an ongoing basis.
−Removed: Even after the COVID-19 pandemic has subsided, FF may continue to experience an adverse impact to its business as a result of the global economic impact and any lasting effects on the global economy, including any recession that has occurred or may occur in the future.
−Removed: Refer to the section titled “Risk Factors” in Item 1A of this Annual Report on Form 10-K for a full discussion of the risks associated with the COVID-19 pandemic.
−Removed: Business Combination
−Removed: On June 24, 2021, the registration statement on Form S-4 (File No.
−Removed: 333-255027), initially filed with the U.S.
−Removed: Securities and Exchange Commission (“SEC”) on April 5, 2021 (as amended, the “Registration Statement”), relating to the Business Combination was declared effective by the SEC, and (ii) PSAC established a record date of June 24, 2021 and a meeting date of July 21, 2021 for its special meeting of stockholders, where the Business Combination was approved.
−Removed: For purposes of the discussions in this section related to conversion on the closing of the Business Combination of all issued and outstanding Legacy FF Ordinary Stock into shares of Common Stock of FFIE in accordance with the terms and conditions of the Merger Agreement and the settlement of liabilities in conjunction with the closing of the Business Combination, we refer to that parties’ right to receive Class A and Class B Common Stock.
−Removed: Recent Developments
−Removed: The following major milestones and events took place during the year ended December 31, 2022:
−Removed: ● Announced that Mathias Hofmann, Head of Global Supply Chain, would assume the additional position of Head of Manufacturing Operations, on an interim basis.
−Removed: ● Announced its sponsorship and attendance at the 2022 Pebble Beach Concours d’Elegance taking place from August 18-21, 2022.
−Removed: FF’s flagship FF 91 EV was available for demo rides and made a special appearance on the Concept Lawn on August 21, 2022.
−Removed: ● Announced the FF 91 Futurist, the Ultimate Intelligent TechLuxury EV, was officially certified to have a robust rating of 381 miles of EV range from the U.S.
−Removed: Environmental Protection Agency (“EPA”).
−Removed: ● Announced that PricewaterhouseCoopers LLP (“PwC”) notified Faraday Future Intelligent Electric Inc.
−Removed: (the “Company”) that it would not stand for re-election as the Company’s independent registered public accounting firm for the year ending December 31, 2022 and, effective August 23, 2022, was no longer the Company’s independent registered public accounting firm.
−Removed: ● Announced that a thorough independent external investigation found that allegations that certain directors were conspiring to pursue an unnecessary bankruptcy of the Company were without merit.
−Removed: ● Announced an agreement relating to its governance dispute with FF Top.
−Removed: See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments –Recent Governance Developments ” for more information.
−Removed: ● Announced the resignation of Becky Roof, the Company’s former Interim Chief Financial Officer, effective October 12, 2022.
−Removed: Roof’s departure from the Company followed the successful completion of key milestones in the Company’s SEC reporting and fundraising activities, and was not a result of any disagreement with the Company’s former independent auditors or any member of Company management on any matter of accounting principles or practices, financial statement disclosure, or internal controls.
−Removed: ● Appointed Yun Han as Chief Accounting Officer and Interim Chief Financial Officer, effective October 25, 2022.
−Removed: Yun Han was most recently Senior Vice President and Chief Accounting Officer of Romeo Power, Inc., and spent over 13 years with PwC.
−Removed: Yun Han is a Certified Public Accountant licensed in the State of California.
−Removed: ● Appointed Mazars USA LLP as the Company’s independent registered public accounting firm as of and for the year ending December 31, 2022, effective as of October 28, 2022.
−Removed: ● Announced the achievement of Production Milestone #6, completion of construction and equipment installation in final vehicle manufacturing areas at FF’s Hanford, California manufacturing facility (“ieFactory California”).
−Removed: ● Announced the California Air Resources Board (CARB) has certified the FF 91 Futurist as a zero-emissions vehicle (ZEV).
−Removed: The ZEV program is part of CARB’s Advanced Clean Cars package of coordinated standards that control smog-causing pollutants and greenhouse gas emissions of passenger vehicles in California.
−Removed: ● Announced senior management changes as it continues to bolster its leadership team and ready the FF 91 Futurist for full-scale production:
−Removed: Matthias Aydt named Global Senior Vice President, Product Execution.
−Removed: Xiaoyang Ning to assume acting head of Business Development.
−Removed: Xiao Ma becomes acting head of Product and Mobility Ecosystem.
−Removed: ● Hosted a Global Investor Business Update meeting on December 15, 2022 announcing plans to start production of FF 91 Futurist in March 2023 (subject to various management assumptions disclosed elsewhere in), financing progress and completion of product upgrades.
−Removed: ● Announced that the FFIE Board of Directors has appointed FF China CEO Xuefeng (“XF”) Chen as Global CEO of Faraday Future.
−Removed: Chen replaced Carsten Breitfeld, who was removed as Global CEO by the FFIE Board of Directors following a comprehensive evaluation of the Company’s performance since it went public in July 2021.
−Removed: ● Announced the selection of Innovusion’s Falcon LiDAR to power the FF 91’s autonomous driving system.
−Removed: Subsequent to December 31, 2022, these additional milestones and events took place:
−Removed: ● Announced 356 non-binding, fully refundable pre-orders as of February 27, 2023.
−Removed: Pre-orders are fully refundable, non-binding, paid deposits for the FF 91 Futurist vehicles available initially for sale to customers in the U.S.
−Removed: FF 91 Futurist pre-orders require a $5,000 or $1,500 deposit, depending on the edition selected, for customers in the U.S.
−Removed: and up to CNY 50,000 or CNY 20,000 deposit, depending on the edition selected, for customers in China.
−Removed: ● Announced Faraday Future’s return to the Consumer Electronics Show, CES 2023, in Las Vegas, NV.
−Removed: ● Announced that the Company and the China Huanggang Government (“City of Huanggang”) have also reached the non-binding Cooperation Framework Agreement for promoting its U.S.-China dual-home market strategy.
−Removed: ● Announced the shipment of one of the latest production-intent FF 91 Futurist testing vehicles to China for market testing and validation, including charging and infrastructure compatibility along with other hardware and software applications.
−Removed: ● Announced that FF is targeting a start of production date for its flagship FF 91 Futurist of March 30, 2023, assuming timely receipt of funds from the Company’s investors, at the Company’s Hanford California manufacturing facility, “FF ieFactory California.”
−Removed: Recent Governance Developments
−Removed: ● As previously disclosed, from June to September 2022, FF and FF Global were party to a dispute over various terms of the Shareholder Agreement as then in effect, including relating to FF Global’s right to remove its designees from the Board of Directors.
−Removed: On September 23, 2022, the Company, FF Global and FF Top entered into a governance settlement with FF Top, the largest holder of the Company’s Common Stock, including with respect to the composition of the Board, resignation of Ms.
−Removed: Susan Swenson and Mr.
−Removed: Brian Krolicki, and the appointment of Adam (Xin) He to the Board.
−Removed: In connection with the Heads of Agreement, on September 23, 2022, the Company and FF Global entered into a mutual release agreement (the “Mutual Release”), pursuant to which, the Company and FF agreed to a mutual general release of claims and to settle fully and finally all differences between them, including any differences that arose out of the Company directors’ service as a director, employee, officer or manager of the Company up through and including the date of the Mutua l Release subject to customary exceptions.
−Removed: See “Management – Governance Agreement with FF Top and FF Global ” for more information.
−Removed: Pursuant to the Heads of Agreement, FF Top and FF Global caused all actions in the Court of Chancery of the State of Delaware, and any other forum, filed by FF Top, FF Global and/or any of their respective controlled affiliates as of the effective date of the Heads of Agreement, naming the Company or any of its directors or officers to be dismissed without prejudice as of September 27, 2022.
−Removed: Shortly following the execution of the Heads of Agreement, FF Global began making additional demands of the Company which were beyond the scope of the terms contemplated by the Heads of Agreement and pertained to, among other things, the Company’s management reporting lines and certain governance matters.
−Removed: On September 30, 2022, FF Global alleged that the Company was in material breach of the spirit of the Heads of Agreement.
−Removed: The Company believes it has complied with the applicable terms of the Heads of Agreement, and disputes any characterization to the contrary.
−Removed: Such disputes divert management and Board resources and are costly.
−Removed: There can be no assurance that this or any other dispute between the Company and FF Global will not result in litigation.
−Removed: See “ Risk Factors – Risks Related to FF’s Business and Industry – Disputes with our stockholders are costly and distracting.
−Removed: On October 3, 2022, Ms.
−Removed: Swenson and Mr.
−Removed: Scott Vogel, a member of the Board, tendered their resignation from the Board effective immediately.
−Removed: On October 3, 2022, Mr.
−Removed: Jordan Vogel also tendered his resignation from the Board effective on October 5, 2022 upon his receipt of a supplemental release pursuant to the Mutual Release.
−Removed: ● On October 14, 2022, FF Top delivered to the Company a “Notice of Nomination of Replacement FF Top Designees” stating, among other things, that FF Top was nominating Ms.
−Removed: Li Han to fill the vacancy on the Board left by Ms.
−Removed: Swenson’s resignation.
−Removed: FF Top asserted the right to nominate Ms.
−Removed: Li Han to fill the vacancy created by Ms.
−Removed: Swenson’s resignation because such resignation was not effected in accordance with the Heads of Agreement, and thus, the provision that Ms.
−Removed: Swenson’s seat would remain empty until the Annual Meeting did not apply.
−Removed: FF Top maintained that it believed that Ms.
−Removed: Swenson’s vacancy should be filled with a nominee of FF Top, notwithstanding the current level of FF Top’s beneficial ownership of the Company shares, in light of substantial dilution in its ownership of the Company shares based on recent financing transactions entered into by the Company.
−Removed: See “ Management – Governance Agreement with FF Top and FF Global ” for more information.
−Removed: ● On October 22, 2022, FFIE and FF Top entered into the FF Top Amendment to the FF Top Voting Agreement.
−Removed: Pursuant to the FF Top Amendment, FF Top (among other things) reaffirmed its commitment under the FF Top Voting Agreement, in light of the extension of the maturity date of the Bridge Notes under the Third Amendment, to vote all of its shares of the Company voting stock in favor of the proposal to approve (for purposes of the Nasdaq listing rules) the issuance, in the aggregate, of shares in excess of 19.99% of the total issued and outstanding shares of the Company Common Stock pursuant to the Financing Documents at the special meeting of the Company’s stockholders held on November 3, 2022.
−Removed: FF Top’s obligations pursuant to the FF Top Amendment are conditioned on (i) the appointment of Mr.
−Removed: Chad Chen (or a substitute nominee, as applicable), in lieu of Ms.
−Removed: Li Han, to the Board of Directors of the Company as the fourth FF Top designee no later than October 27, 2022 (provided that Mr.
−Removed: Chen or a substitute nominee, as applicable, is reasonably acceptable to the Nominating and Corporate Governance Committee of the Board with respect to the Nasdaq independence rules and legal compliance and criminal compliance) (provided that if Mr.
−Removed: Chen is not so reasonably acceptable to the Nominating and Corporate Governance Committee of the Board, then FF Top will be permitted to nominate another individual to the Board);
−Removed: and (ii) constructive engagement by Mr.
−Removed: Adam (Xin) He, the Chairman of the Board, directly with representatives of FF Top on certain additional governance and management matters and, to the extent the Chairman of the Board so determines, in his discretion, such matters will be put to a discussion and a vote of the full Board.
−Removed: On October 27, 2022, Mr.
−Removed: Chad Chen was appointed to the Board.
−Removed: On October 28, 2022, Mr.
−Removed: Brian Krolicki tendered his resignation from the Board effective immediately.
−Removed: See “Certain Relationships and Related Person Transactions – Certain Relationships and Related Person Transactions — the Company – Voting Agreements by FF Top Holding LLC and Season Smart Limited” for more information.
−Removed: ● On November 26, 2022, the Board appointed Mr.
−Removed: Xuefeng Chen as Global CEO, effective as of November 27, 2022.
−Removed: Xuefeng Chen replaced Dr.
−Removed: Carsten Breitfeld, who was removed from the Global CEO position by the Board on November 26, 2022.
−Removed: ● On November 29, 2022, Mr.
−Removed: Robert Kruse, FF’s former Senior Vice President, Product Execution, resigned from the Company.
−Removed: On December 13, 2022, Mr.
−Removed: Matthias Aydt took on the role of Senior Vice President, Product Execution, effective immediately.
−Removed: ● On December 15, 2022, Mr.
−Removed: Lee Liu tendered his resignation from the Board, which resignation was effective on December 18, 2022.
−Removed: On December 18, 2022, Mr.
−Removed: Jie Sheng was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On December 25, 2022, Mr.
−Removed: Edwin Goh tendered his resignation from the Board, which resignation was effective on December 26, 2022.
−Removed: On December 27, 2022, Ms.
−Removed: Ke Sun was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: Sheng and Ms.
−Removed: Sun are designees of FF Top pursuant to the Amended Shareholder Agreement.
−Removed: On December 26, 2022, Dr.
−Removed: Carsten Breitfeld tendered his resignation from the Board, which resignation was effective immediately.
−Removed: On December 27, 2022, Mr.
−Removed: Xuefeng Chen was appointed to the Board, effective immediately, following the resignation of Dr.
−Removed: On January 20, 2023, Mr.
−Removed: Qing Ye tendered his resignation from the Board, which resignation was effective immediately.
−Removed: Ye remains a consultant of the Company as an independent contractor until November 18, 2023, at which time both parties will mutually reassess the relationship.
−Removed: On January 25, 2023, Mr.
−Removed: Chui Tin Mok was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: ● On February 26, 2023, after an assessment by the Board of FF’s management structure, the Board approved Mr.
−Removed: Yueting Jia (alongside Mr.
−Removed: Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments reporting directly to Mr.
+Added: On February 26, 2023, after an assessment by the Board of the Company’s management structure, the Board approved Mr.
+Added: Yueting Jia, FF’s founder and Chief Product and User Ecosystem Officer (alongside the then Chief Executive Officer, Mr.
+Added: Xuefeng Chen) reporting directly to the Board, as well as FF’s product, mobility ecosystem, I.A.I., and advanced research and development (“R&D”) technology departments reporting directly to Mr.
The Board also approved FF’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments reporting to both Mr.
−Removed: Xuefeng Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
−Removed: The Company’s remaining departments continue to report to Mr.
−Removed: Xuefeng Chen.
+Added: Chen, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
Based on the changes to his responsibilities within the Company, the Board determined that Mr.
Jia is an “officer” of the Company within the meaning of Section 16 of the Exchange Act and an “executive officer” of the Company under Rule 3b-7 under the Exchange Act.
−Removed: ● On January 13, 2023, the Company entered into an Amended and Restated Shareholder Agreement (the “Amended Shareholder Agreement”) with FF Top and, solely for purposes of certain amendments to the Heads of Agreement, FF Global, which amended and restated the Shareholder Agreement, as amended by the Heads of Agreement.
−Removed: Pursuant to the Amended Shareholder Agreement, (a) FF Top has the right to nominate certain designees to the Board, (b) the Company agreed not to elect to be treated as a “controlled company” as defined under Nasdaq rules, (c) the Company agreed to cooperate with any written requests by FF Top relating to any pledge, hypothecation or grant of shares of Common Stock, (d) FF Top informed the Company that FF Top expects certain proposals to be submitted to Company stockholders for approval to amend provisions of the Company’s Amended and Restated Charter related to voting power of Class B Common Stock, FF Top designees to the Board and written consent of stockholders, (e) the Company agreed not to enter into any transaction or series of related transactions that would require a shareholder vote under Nasdaq Listing Rule 5635(d) (without giving effect to Section 5635(f) thereof) without FF Top’s prior written consent, which written consent shall not be unreasonably withheld, conditioned or delayed, (f) the Company agreed that investors under the SPA shall have the right to enter into any voting agreement or grant a voting proxy, at any time and on any terms, with or to FF Top with respect to any shares of Common Stock held by such investors, (g) FF Top agreed (i) to vote all shares of Common Stock that it beneficially owns in favor of an increase in the Company’s authorized shares of Class A Common Stock from 815.0 million to 1.69 billion (as such number may be adjusted due to any stock split, reverse stock split or other similar corporate action after January 13, 2023) at the next meeting of the Company’s shareholders held to consider such proposal (as such meeting may be adjourned or postponed) and (ii) not to transfer, convert or otherwise take any action that would result in the conversion of any shares of Class B Common Stock into Class A Common Stock of the Company prior to the Company’s receipt of shareholder approval for an increase in the number of authorized shares of Class A Common Stock in accordance with the foregoing, (h) (i) FF Top released and waived claims it or any other “FF Top Parties” (i.e., FF Top, FF Peak Holding LLC, a Delaware limited liability company, Pacific Technology Holding LLC, a Delaware limited liability company, FF Global and each of their affiliates, and their respective successors and assigns) may have had against the Company and the Company Parties (described below;
−Removed: such claims, the “FF Top Claims”) relating to matters occurring at any time after September 23, 2022 but prior to the execution of the Amended Shareholder Agreement (the “FF Top Release”), and (ii) the Company released and waived any and all claims it or any other “Company Parties” (i.e., the Company and each of the Company’s controlled affiliates, each individual currently serving as a director or on the management team of the Company or any of its controlled affiliates, and the respective successors and assigns of any of the foregoing) may have against FF Top Parties relating to any matters occurring at any time after September 23, 2022 but prior to the execution of the Amended Shareholder Agreement, and (i) the Company, FF Top and FF Global agreed that certain conditions in the Heads of Agreement have been satisfied, that there are no Definitive Documents (as such term is defined in the Heads of Agreement) beyond the Heads of Agreement and the Amended Shareholder Agreement, and to certain other amendments of the Heads of Agreement.
−Removed: See “ Management – Governance Agreement with FF Top and FF Global ” for more information.
−Removed: Recent Financing Developments
−Removed: ● On August 14, 2022, FFIE entered into a definitive Securities Purchase Agreement with FF Simplicity and RAAJJ Trading LLC for $52.0 million of committed near-term convertible senior secured notes financing and the potential for an additional $248.0 million of incremental senior secured convertible notes financing to be funded within 90 days after the initial closing.
−Removed: ● On September 23, 2022, FFIE entered into Amendment No.
−Removed: 1 to the SPA and Convertible Senior Secured Promissory Notes, to amend, among other things (a) the SPA, (b) that certain Convertible Senior Secured Promissory Note in favor of FF Simplicity in the principal amount of $25.0 million, dated as of August 15, 2022, and (c) that certain Convertible Senior Secured Promissory Note in favor of FF Simplicity in the principal amount of $10.0 million, dated as of September 14, 2022.
−Removed: ● On September 25, 2022, FFIE entered into a Joinder and Amendment Agreement with Senyun, FF Simplicity and RAAJJ Trading LLC, for the purchase of up to $60.0 million under the SPA, subject to the completion of due diligence by the Company of Senyun and its financing sources.
−Removed: ● On October 24, 2022, FFIE entered into a Limited Consent and Third Amendment to the SPA (the “Third Amendment”) with FF Simplicity as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ Trading LLC as purchaser.
−Removed: ● On November 8, 2022, FFIE entered into a Limited Consent and Amendment to the SPA (the “Fourth Amendment”) with FF Simplicity as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ Trading LLC as purchaser.
−Removed: ● On December 28, 2022, FFIE entered into a Letter Agreement and Amendment to the SPA (the “Senyun Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser.
−Removed: ● On January 25, 2023, FFIE entered into a Limited Consent and Amendment No.
−Removed: 5 to the SPA (the “Fifth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser.
−Removed: ● On February 3, 2023, FFIE entered into an Amendment No.
−Removed: 6 to Securities Purchase Agreement (The “Sixth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun, FF Top, FF Simplicity, FF Prosperity, Acuitas and other purchasers.
−Removed: ● Beginning on August 16, 2022, FF Aventuras SPV XI, LLC, FF Adventures SPV XVIII LLC, FF Ventures SPV IX LLC and FF Venturas SPV X LLC, entities affiliated with ATW Partners LLC (the “ATW Investors”), converted portions of the aggregate principal amount of the outstanding convertible notes issued by the Company in a private placement pursuant to a Second Amended and Restated Note Purchase Agreement, dated as of October 9, 2020 (as amended from time to time, the “NPA,” and such convertible notes issued under the NPA, the “ATW NPA Notes”), into shares of Class A Common Stock, as follows below:
−Removed: Conversion Period Total Principal
−Removed: ATW NPA Notes
−Removed: ( in thousands )
−Removed: Price Total Number of Shares
−Removed: of Class A Common
−Removed: August 16, 2022 to September 14, 2022 $67,218 $0.84 to $2.29 64,843,850
−Removed: ● On September 26, 2022, the ATW Investors exercised 2,687,083 ATW NPA Warrants, each with an exercise price of $0.64 per share, into an equivalent number of shares of Class A Common Stock, resulting in net cash exercise proceeds to FFIE of $1.7 million.
−Removed: ● On September 27, 2022, the ATW Investors exercised 29,158,364 ATW NPA Warrants, each with an exercise price of $0.50 per share, on a cashless basis into 14,339,110 shares of Class A Common Stock.
−Removed: ● On September 27, 2022, the Board approved the issuance of 3,169,822 stock option awards, each exercisable into one share of Class A Common Stock, as part of the Company’s 2021 Stock Incentive Plan.
−Removed: Vesting terms include annual vesting in 25% increments from the vesting start date, 100% vesting as of the vesting start date, and vesting upon the start of FF 91 production.
−Removed: ● On October 10, 2022, FFIE entered into an exchange agreement with the ATW Investors, pursuant to which, on October 10, 2022, the ATW Investors exchanged $4.0 million in aggregate principal amount of the outstanding ATW NPA Notes for 6,269,031 newly issued shares of Class A Common Stock, reflecting a price per share of Class A Common Stock of $0.64.
−Removed: ● On October 19, 2022, FFIE and the ATW Investors entered into an exchange agreement, pursuant to which, on October 19, 2022, the ATW Investors exchanged $2.7 million in aggregate principal amount of the outstanding ATW NPA Notes for 5,227,837 newly issued shares of the Class A Common Stock, reflecting a price per share of Class A Common Stock of $0.51.
−Removed: Following the completion of such exchange, there were no outstanding ATW NPA Notes.
−Removed: ● Between November 22, 2022 and February 28, 2023, FF Simplicity, Senyun and RAAJJ Trading LLC converted portions of the aggregate principal amount of the outstanding convertible notes of $68.9 million issued by the Company pursuant to the SPA at a conversion price of $0.23 to $1.05 per share into 258,909,938 shares of Class A Common Stock.
−Removed: ● Between November 22, 2022 and February 7, 2023, FF Simplicity, Senyun and RAAJJ Trading LLC exercised 43,874,615 SPA Warrants using exercise prices of $0.28 to $0.2275 per share into 39,647,862 shares of Class A Common Stock.
−Removed: Between December 15, 2022 and February 6, 2023, the ATW Investors exercised 28,597,331 NPA ATW Warrants using an exercise price of $0.2275 per share into 23,557,189 shares of Class A Common Stock.
−Removed: ● On November 14, 2022, FFIE announced entry into the SEPA with Yorkville, with an initial commitment of $200.0 million.
−Removed: Under the terms of the SEPA, FFIE has the right, but not the obligation, to issue and sell to Yorkville up to $200.0 million in shares Class A Common Stock subject to customary conditions including an effective registration statement for the resale of such shares.
−Removed: FFIE has the right to increase the $200.0 million commitment by up to $150.0 million in one or more installments.
−Removed: The shares will be sold to Yorkville at a discounted price of 97% of the three-day VWAP at the time of funding, and generally limited to one-third of FFIE’s trading volume during such time period.
−Removed: On December 8, 2022, FFIE filed with the SEC a registration statement on Form S-1 (File No.
−Removed: 333-268722) to register shares of Class A Common Stock to be issued under the SEPA.
−Removed: Special Committee Investigation
−Removed: As previously disclosed on November 15, 2021, the Board established a special committee of independent directors (“Special Committee”) to investigate allegations of inaccurate Company disclosures, including those made in an October 2021 short seller report and whistleblower allegations, which resulted in FFIE being unable to timely file its third quarter 2021 Quarterly Report on Form 10-Q, Annual Report on Form 10-K for the year ended December 31, 2021, first quarter 2022 Quarterly Report on Form 10-Q and amended Registration Statement on Form S-1 (File No.
−Removed: The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist with its review.
−Removed: On February 1, 2022, FFIE announced that the Special Committee completed its review.
−Removed: On April 14, 2022, FFIE announced the completion of additional investigative work based on the Special Committee’s findings which were performed under the direction of the Executive Chairperson, reporting to the Audit Committee.
−Removed: In connection with the Special Committee’s review and subsequent investigative work, the following findings were made:
−Removed: In connection with the Business Combination, statements made by certain Company employees to certain investors describing the role of Mr.
−Removed: Yueting Jia, the Company’s founder and former CEO, within the Company were inaccurate and his involvement in the management of the Company post-Business Combination was more significant than what had been represented to certain investors.
−Removed: ● The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest.
−Removed: ● Consistent with FFIE’s previous public disclosures regarding identified material weaknesses in its internal control over financial reporting, the Company’s internal control over financial reporting requires an upgrade in personnel and systems.
−Removed: ● The Company’s corporate culture failed to sufficiently prioritize compliance.
−Removed: Jia’s role as an intermediary in leasing certain properties which were subsequently leased to the Company was not disclosed in FFIE’s corporate housing disclosures.
−Removed: ● In preparing FFIE’s related party transaction disclosures, the Company failed to investigate and identify the sources of loans received from individuals and entities associated with Company employees.
−Removed: In addition, the investigation found that certain individuals failed to fully disclose to individuals involved in the preparation of FFIE’s SEC filings their relationships with certain related parties and affiliated entities in connection with, and following, the Business Combination, and failed to fully disclose relevant information, including but not limited to, information in connection with related parties and corporate governance to FFIE’s former independent registered public accounting firm PricewaterhouseCoopers LLP.
−Removed: The investigation also found that certain individuals failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.
−Removed: Among such individuals were non-executive officers or members of the management team of FF, and remedial action was taken with respect to such individuals based on the extent of non-cooperation and/or withholding of information.
−Removed: The failure to cooperate with the investigation was taken into consideration in connection with the remedial actions outlined below with respect to Jerry Wang, and withholding of information also affected the remedial action taken with respect to Matthias Aydt.
−Removed: Based on the results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of inaccurate FF disclosures that it evaluated, were not supported by the evidence reviewed.
−Removed: Although the investigation did not change any of the above findings with respect to the substantive allegations of inaccurate FF disclosures, the investigation did confirm the need for remedial actions to help ensure enhanced focus on compliance and disclosure within FF.
−Removed: Based on the results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial actions designed to enhance oversight and corporate governance of the Company:
−Removed: ● the appointment of Susan Swenson, a former member of the Board, to the then newly created position of Executive Chairperson of FF.
−Removed: Carsten Breitfeld, FF’s former Global CEO, reporting directly to Ms.
−Removed: Swenson and receiving a 25% annual base salary reduction;
−Removed: ● the removal of Mr.
−Removed: Jia as an executive officer, although continuing in his position as Chief Product & User Ecosystem Officer of FFIE.
−Removed: Certain dual-reporting arrangements were eliminated with respect to Mr.
−Removed: Jia, and he is required to report directly to Ms.
−Removed: Swenson, a non-independent director nominated by FF Top.
−Removed: Please see “ Risk Factors – Risks Related to FF’s Business and Industry – Yueting Jia and FF Global, over which Mr.
−Removed: Jia exercises significant influence, have control over the Company’s management, business and operations, and may use this control in ways that are not aligned with the Company’s business or financial objectives or strategies or that are otherwise inconsistent with the Company’s interests.
−Removed: Such significant influence may increase if and to the extent the current members of the Board and management are removed and replaced with individuals who are aligned with Mr.
−Removed: Jia and/or FF Global.
−Removed: Jia also received a 25% annual base salary reduction, and his role was limited from a policy-making position to focusing on (a) Product and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology;
−Removed: ● Matthias Aydt, then Senior Vice President, Business Development and Product Definition and a director of FFIE, and currently Senior Vice President, Product Execution and a director of FFIE, being placed on probation as an executive officer for a six-month period, during which period he remained a non-independent member of the Board, which probationary period has since ended;
−Removed: ● the appointment of Jordan Vogel as Lead Independent Director;
−Removed: certain changes to the composition of Board committees, including Brian Krolicki stepping down from his role as Chairman of the Board and Chair of the Nominating and Corporate Governance Committee and becoming a member of the Audit and Compensation Committees of the Board;
−Removed: Jordan Vogel stepping down from the Nominating and Corporate Governance Committee;
−Removed: and Scott Vogel becoming the Chair of the Audit Committee and the Nominating and Corporate Governance Committee of the Board;
−Removed: ● the suspension without pay of Jiawei (“Jerry”) Wang, FFIE’s former Vice President, Global Capital Markets, who subsequently notified the Board of his decision to resign from FF on April 10, 2022;
−Removed: ● the assessment and enhancement of FF’s policies and procedures regarding financial accounting and reporting and the upgrading of FF’s internal control over financial accounting and reporting, including by hiring additional financial reporting and accounting support, in each case at the direction of the Audit Committee;
−Removed: ● the implementation of enhanced controls around FF’s contracting and related party transactions, including regular attestations by FF’s employees with authority to bind FF to contracts and related party transactions, for purposes of enabling FF to make complete and accurate disclosures regarding related party transactions;
−Removed: ● the implementation of a comprehensive training program for all directors and officers regarding, among other things, internal FF policies;
−Removed: ● the separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary;
−Removed: ● certain other disciplinary actions and terminations of employment with respect to other FF employees (none of whom is an executive officer).
−Removed: As of February 27, 2023, FF is continuing to implement certain of the remedial actions approved by the Board.
−Removed: However, certain of these remedial actions are no longer in effect.
−Removed: For instance, Ms.
−Removed: Swenson resigned from the Board on October 3, 2022.
−Removed: Moreover, effective on February 26, 2023, certain departments within the Company report to both Mr.
−Removed: Xuefeng Chen, including the Company’s user ecosystem, capital markets, human resources and administration, corporate strategy and China departments, subject to processes and controls to be determined by the Board after consultation with the Company’s management.
−Removed: The Company’s product, mobility ecosystem, I.A.I., and advanced R&D technology departments report directly to Mr.
−Removed: Jia, while the remaining departments continue to report to Mr.
−Removed: Xuefeng Chen.
−Removed: Further, based on the changes to his responsibilities within FF, the Board determined that Mr.
−Removed: Jia is an “officer” of the Company within the meaning of Section 16 of the Exchange Act, and an “executive officer” of the Company under Rule 3b-7 under the Exchange Act.
−Removed: In addition to the above, the Company strengthening its compliance policies and procedures, including the hiring of a Compliance Officer with the title of Deputy General Counsel (hired in March 2023), who will report on a dotted line to the Chair of the Audit committee, and a Director of Risks and Internal Controls.
−Removed: However there is no assurance can be provided that the remedial measures that continue to be implemented and additional actions by the Company to enhance its compliance policies and procedures will be implemented in a timely manner or at all, or will be successful to prevent inaccurate disclosures in the future.
−Removed: Please see “Risk Factors – Risks Related to FF’s Business and Industry – FF is taking remedial measures in response to the Special Committee findings.
−Removed: There can be no assurance that such remedial measures will be successful.
−Removed: In addition, there can be no assurance that such remedial measures will be fully implemented in light of the recent corporate governance agreements with FF Top and FF Global.” However, pursuant to the Heads of Agreement, FF has implemented certain governance changes that impact certain of the above-discussed remedial actions.
−Removed: On October 3, 2022, Ms.
−Removed: Swenson tendered her resignation from her role as both Executive Chairperson and member of the Board effective immediately.
−Removed: In addition, on October 3, 2022, Mr.
−Removed: Scott Vogel resigned from the Board effective immediately and Mr.
−Removed: Jordan Vogel resigned effective on October 5, 2022 upon his receipt of a supplemental release pursuant to the Mutual Release.
−Removed: On October 28, 2022, Mr.
−Removed: Brian Krolicki tendered his resignation from the Board effective immediately.
−Removed: On December 15, 2022, Mr.
−Removed: Lee Liu tendered his resignation from the Board, which resignation was effective on December 18, 2022.
−Removed: On December 18, 2022, Mr.
−Removed: Jie Sheng was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: On December 25, 2022, Mr.
−Removed: Edwin Goh tendered his resignation from the Board, which resignation was effective on December 26, 2022.
−Removed: On December 27, 2022, Ms.
−Removed: Ke Sun was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: Sheng and Ms.
−Removed: Sun are designees of FF Top pursuant to the Amended Shareholder Agreement.
−Removed: On December 26, 2022, Dr.
−Removed: Carsten Breitfeld tendered his resignation from the Board, which resignation was effective immediately.
−Removed: On December 27, 2022, Mr.
−Removed: Xuefeng Chen was appointed to the Board, effective immediately, following the resignation of Dr.
−Removed: On January 20, 2023, Mr.
−Removed: Qing Ye tendered his resignation from the Board, which resignation was effective immediately.
−Removed: Ye remains a consultant of the Company as an independent contractor until November 18, 2023, at which time both parties will mutually reassess the relationship.
−Removed: On January 25, 2023, Mr.
−Removed: Chui Tin Mok was appointed to the Board, effective immediately, following the resignation of Mr.
−Removed: See “ Management – Governance Agreement with FF Top and FF Global ” for more information.
−Removed: Subsequent to FFIE announcing the completion of the Special Committee investigation on February 1, 2022, FFIE, certain members of the management team and employees of FFIE received a notice of preservation and subpoena from the staff of the SEC stating that the SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation.
−Removed: FFIE, which had previously voluntarily contacted the SEC in connection with the Special
−Removed: Committee investigation in October 2021, is cooperating fully with the SEC’s investigation.
−Removed: The outcome of such an investigation is difficult to predict.
−Removed: FF has incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation.
−Removed: At this stage, FF is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss.
−Removed: In addition, in June 2022, FF received a preliminary request for information from the DOJ in connection with the matters that were the subject of the Special Committee investigation.
−Removed: FF has responded to that request and intends to fully cooperate with any future requests from the DOJ.
−Removed: South Korea Contract Manufacturing
−Removed: In February 2022, the Company entered into a definitive contract manufacturing and supply agreement with Myoung Shin Co., Ltd.
−Removed: (“Myoung Shin”), a South Korea-based automotive manufacturer and parts supplier, to manufacture the Company’s second vehicle, the FF 81.
−Removed: The agreement has an initial term of nine years from the start of production of the FF 81, which is scheduled as early as 2024.
−Removed: Pursuant to the agreement, Myoung Shin shall maintain sufficient manufacturing capabilities and capacity to supply FF 81 vehicles to the Company in accordance with the Company’s forecasts and purchase orders.
−Removed: The Company and Myoung Shin will each manufacture and supply certain FF 81 parts that Myoung Shin will use in the manufacture and assembly of FF 81 vehicles.
−Removed: Financing Discussions and New Convertible Note and Warrant Financings
−Removed: The Company has received financing commitments for the funds required for the start of production of the FF 91 assuming timely receipt of funds, but might need to raise additional capital in the event such financing commitments are not received in a timely manner.
−Removed: Although FF has successfully obtained commitments since August 2022 from several investors totaling $267.0 million in convertible note financing, subject to certain conditions, and continues financing discussions with multiple parties, FF has experienced delays in securing additional funding commitments, which have exacerbated the supply chain pressures on FF’s business.
−Removed: These factors, in addition to the continued rise in inflation and other challenging macroeconomic conditions, have led FF to take steps to preserve its current cash position, including implementing headcount reductions and other expense reduction and payment delay measures.
−Removed: Further efforts, including additional headcount reductions, may be undertaken in response to FF’s financial condition and market conditions.
−Removed: Based on certain management assumptions, including the timely receipt of $38.4 to $58.4 million of additional funding, which commitments have been secured as part of the Sixth Amendment, and approval by stockholders of the proposal to increase FFIE’s authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000, increasing the total authorized shares from 900,000,000 to 1,775,000,000, which approval was obtained during the special meeting of stockholders held on February 28, 2023, timely completion of key equipment installation and commissioning work at the ieFactory California in Hanford, California, suppliers meeting our supply chain requirements, the implementation and effectiveness of certain expense reduction and payment delay measures, and timely and successful testing and certification, FF expects start of production of the FF 91 Futurist at the end of March 2023, coming off the line in early April, and deliveries to users anticipated to begin before the end of April 2023.
−Removed: There is no assurance FF will be able to timely receive sufficient funding under existing financing commitments to produce and deliver the FF 91 Futurist on that timeline or at all.
−Removed: If unable to receive sufficient funding, FF will be required to obtain new financing commitments, which may not be available to it under reasonable commercial terms.
−Removed: Further, there cannot be any assurance that FF will be able to develop the manufacturing capabilities and processes, or secure reliable sources of component supply to meet the quality, engineering, design or production standards, or the required production volumes to successfully grow into a viable business.
−Removed: There is also no assurance that FFIE stockholder approval of an authorized share increase will be obtained in a timely manner or at all.
−Removed: On August 14, 2022, FF entered into a definitive Securities Purchase Agreement (the “SPA”) with FF Simplicity Ventures LLC, an entity affiliated with ATW Partners LLC, and RAAJJ Trading LLC for $52.0 million of committed near-term convertible senior secured notes financing subject to certain conditions (which was increased on September 23, 2022 to $57.0 million, which increase was subsequently terminated upon the funding of the initial $10.0 million tranche of SPA Notes to Senyun, which occurred on October 27, 2022, another $10.0 million on November 15, 2022, and another $10.0 million in December 2022), and the potential for an additional $243.0 million of incremental senior secured convertible notes financing to be funded within 90 days after the initial closing.
−Removed: A committed amount of $52.0 million ($43.3 million net of original issue discount and transaction costs) has been funded to date.
−Removed: On September 23, 2022, FF and certain investors affiliated with ATW Partners LLC entered into a Warrant Exercise Agreement (the “Warrant Exercise Agreement”), pursuant to which, subject to the satisfaction of certain minimum trading price, minimum trading volume and certain other Equity Conditions (as described below), FF will have the right, exercisable on one or more occasions prior to January 23, 2023, to require the ATW Investors to exercise on a cash basis (each, a “Forced Exercise”) certain warrants held by the ATW Investors, in part, in exchange for newly issued shares of Class A Common Stock in an amount not to exceed (a) for any single Forced Exercise, $7.0 million in
−Removed: aggregate exercise price, and (b) for all Forced Exercises in the aggregate, the difference of (x) the maximum exercise price amount allowed under the Warrant Exercise Agreement (which is approximately $20.0 million) less (y) the aggregate exercise price of any voluntary exercises of the same warrants held by the ATW Investors after the date of the Warrant Exercise Agreement.
−Removed: The “Equity Conditions” are defined in the Warrant Exercise Agreement to include (among others):
−Removed: (a) the effectiveness of one or more registration statements under the Securities Act, (b) the availability of the Annual Report on Form 10-K contained in such registration statement(s) for the resale of the applicable Warrant shares, (c) the continued listing of shares of the Company’s Class A Common Stock on a national securities exchange, (d) no occurrence of any “Price Failure” ( i.e.
−Removed: , the VWAP of the Class A Common Stock failing to exceed $0.85 per share (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions) on any two (2) trading days during the ten (10) trading day measurement period immediately preceding the relevant determination date), subject to certain permitted adjustments, and (e) no occurrence of any “Volume Failure” ( i.e.
−Removed: , the aggregate daily dollar trading volume (as reported on Bloomberg) falling below $10.0 million on any two (2) trading days during the ten (10) trading day measurement period immediately preceding the relevant determination date).
−Removed: On September 25, 2022, FFIE entered into a Joinder and Amendment Agreement with Senyun, FF Simplicity and RAAJJ Trading LLC, for the purchase of up to $60.0 million under the SPA (with potential increase to $90.0 million), of which $35.6 million (net of original issue discount and transaction costs) has been funded to date.
−Removed: The initial $10.0 million tranche was funded on October 27, 2022, the second $10.0 million tranche was funded on November 15, 2022, and the third $10.0 million tranche was funded in parts on different dates in December 2022.
−Removed: On October 24, 2022, FFIE entered into a Limited Consent and Third Amendment to the SPA with FF Simplicity as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ Trading LLC as purchaser.
−Removed: On November 8, 2022, FFIE entered into a Limited Consent and Amendment to the SPA (the “Fourth Amendment”) with FF Simplicity as administrative and collateral agent and purchaser, Senyun as purchaser, and RAAJJ Trading LLC as purchaser.
−Removed: On December 28, 2022, FFIE entered into a Letter Agreement and Amendment to the SPA (the “Senyun Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser.
−Removed: On January 25, 2023, FFIE entered into a Limited Consent and Amendment No.
−Removed: 5 to the SPA (the “Fifth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun as purchaser.
−Removed: On February 3, 2023, FFIE entered into an Amendment No.
−Removed: 6 to Securities Purchase Agreement (The “Sixth Amendment”) with FF Simplicity as administrative and collateral agent and Senyun, FF Top, FF Simplicity, FF Prosperity, Acuitas and other purchasers.
−Removed: As of the date this Annual Report on Form 10-K is filed, we have received $70.0 million ($62.2 net of original issue discount and transaction costs) under the Sixth Amendment.
−Removed: FF is actively engaged in confidential discussions and negotiations with entities affiliated with FF Top and other potential investors with respect to purchasing incremental convertible senior secured notes and/or convertible junior secured notes on the same terms as FF Simplicity Ventures LLC under the SPA.
−Removed: There can be no assurance that FF will be able to successfully obtain additional incremental convertible senior secured note purchasers under the SPA or other debt or equity financing in a timely manner or on acceptable terms, if at all.
−Removed: In particular, the Company is currently conducting due diligence on potential financing sources.
−Removed: This process has been time consuming and may result in the Company not being able to consummate any financing from these or other financing sources on a timely basis or at all.
−Removed: If we are unable to raise sufficient additional funds in the near term, we may be required to further delay our production and delivery plans for the FF 91, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, and/or cease operations.
−Removed: FF’s cash needs after the start of production of the FF 91 will depend on the extent to which FF’s actual costs vary from FF’s estimates and FF’s ability to control these costs and raise additional funds.
−Removed: Any challenges in supplier engagements, delays in ramping capacity or labor at the Hanford facility or for sales and service engagements, rising prices of materials, or ongoing global supply chain disruptions may further increase the need for additional capital to produce and deliver the FF 91 series.
−Removed: In particular, recently, some suppliers have threatened to terminate their relationship with the Company because of late payments or requested accelerated payments and other terms and conditions as a result of our past payment history and concerns about the Company’s financial condition, leading to less favorable payment terms than the Company had anticipated, and delaying or putting at risk certain deliveries.
−Removed: FF is in active negotiations with these suppliers to minimize these risks.
−Removed: Apart from the FF 91 series, substantial additional capital will be required to fund operations, research, development, and design efforts for future vehicles.
+Added: On September 16, 2023, Mr.
+Added: Chen notified the Company of his decision to resign from his position as Global Chief Executive Officer (“Global CEO”) and as a member of the Board effective September 29, 2023.
+Added: On September 21, 2023, the Board appointed Mattias Aydt to succeed Mr.
+Added: Chen as Global CEO and as a member of the Board, effective September 29, 2023.
+Added: The Company has determined that its co-“Chief Operating Decision Maker (“CODM”) are both its Global CEO and Chief Product and User Ecosystem Officer.
+Added: The Company has determined that it operates in one operating segment and one reportable segment, as the co-CODM’s review financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
+Added: Substantially all of the Company’s consolidated operating activities, including its long-lived assets, are located within the U.S.
+Added: Given the Company’s early-revenue operating stage, it currently has no concentration exposure to products, services or customers.
+Added: Recent Developments
+Added: Recent Governance Developments
+Added: • On October 10, 2023, Ke Sun, a member of the Board notified the Company of her decision to resign as a director of the Company effective immediately.
+Added: On October 16, 2023, Li Han, a member of the Board, was deemed to be an independent director as defined by Nasdaq Listing Rule 5605.
+Added: In addition, the Board voted to reduce the size of the Board from seven to six members, effectively immediately.
+Added: • Effective November 7, 2023, Scott Graziano, the Company’s General Counsel, was appointed Corporate Secretary.
+Added: • On February 5, 2024, the Company filed an amendment to the Company’s Third Amended and Restated Certificate of Incorporation with the office of the Secretary of the State of Delaware to effect an increase in the authorized shares of Common Stock from 154,437,500 to 1,389,937,500.
+Added: • At a special meeting of the Company’s stockholders held on February 5, 2024, the Company’s stockholders approved an amendment to the Company’s Third Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of the Common Stock by a ratio of 1-for-3, with such action to be effected at such time and date, if at all, as determined by the Board within one year after the conclusion of the special meeting and a corresponding reduction in the total number of shares of Common Stock the Company is authorized to issue.
+Added: On February 23, 2024, the Company filed a second amendment to the Company’s Third Amended and Restated Certificate of Incorporation, asa amended with the Secretary of State of the State of Delaware to effect this reverse stock split and to set the number of authorized shares of Common Stock to 463,312,500 (which is 1,389,937,500 divided by 3).
+Added: Pursuant to the Certificate of Amendment, effective as of 5:00 p.m., Eastern Time, on February 29, 2024 (the “Effective Time”), every three shares of the issued and outstanding Common Stock was automatically converted into one share of Common Stock, without any change in par value per share and the number of authorized shares of Common Stock was reduced to 463,312,500.
+Added: At the Effective Time, the number of shares of Common Stock reserved for issuance under the Company’s Amended and Restated 2021 Stock Incentive Plan, the Company’s Smart King Ltd.
+Added: Equity Incentive Plan, and the Company’s Smart King Ltd.
+Added: Special Talent Incentive Plan (collectively, 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-3 ratio, rounded down to the nearest whole share.
+Added: In addition, the exercise price of the then-outstanding options under each of the Plans was proportionately adjusted, using the 1-for-3 ratio, rounded up to the nearest whole cent.
+Added: Proportionate adjustments were made to the number of shares of Common Stock issuable upon exercise or conversion of the Company’s outstanding warrants and convertible securities, as well as the applicable exercise or conversion prices.
+Added: The Company’s Class A Common Stock began trading on The Nasdaq Capital Market on a split-adjusted basis at the opening of trading on March 1, 2024.
+Added: The Class A Common Stock continues trading on Nasdaq under the symbol “FFIE” with a new CUSIP number (307359 703).
+Added: The Class B Common Stock also has a new CUSIP number (307359 802).
+Added: The Company’s publicly traded warrants continue to be traded on Nasdaq under the symbol “FFIEW” and the CUSIP number for the warrants remains unchanged.
+Added: However, under the terms of the applicable warrant agreement, the number of shares of Class A Common Stock issuable on exercise of each warrant has been proportionately decreased.
+Added: Specifically, following the effectiveness of the reverse stock split, every three shares of Class A Common Stock that may be purchased pursuant to the exercise of public warrants now represents one share of Class A Common Stock that may be purchased pursuant to such warrants.
+Added: Accordingly, for the Company’s warrants trading under the symbol “FFIEW”, every three warrants are now exercisable for one share of Class A Common Stock at an exercise price of $2,760.00 per share of Class A Common Stock.
+Added: No fractional shares of Common Stock were issued as a result of the reverse stock split.
+Added: Stockholders who would otherwise receive a fractional share were instead issued a full share in lieu of such fractional share.
+Added: The reverse stock split affected all record holders of the Common Stock uniformly and did not affect any record holder’s percentage ownership interest in the Company, except for de minimis changes as a result of the elimination of fractional shares.
+Added: Holders of Common Stock who hold in “street name” in their brokerage accounts did not have to take any action as a result of the reverse stock split.
+Added: Their accounts were automatically adjusted to reflect the number of shares owned.
+Added: Stockholders of record received information from Continental Stock Transfer & Trust Company regarding their stock ownership following the reverse stock split.
+Added: • Effective February 26, 2024, Mr.
+Added: Chen, transitioned from his role as China Chief Executive Officer to Senior Vice President and no longer served as a Section 16 officer of Faraday Future Intelligent Electric Inc.
+Added: Chen has subsequently resigned from the Company.
Components of FF’s Results of Operations
Key Factors Affecting Operating Results
−Removed: FF’s performance and future success depend on several factors that present significant opportunities but also pose risks and challenges including those discussed below and in the section titled “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
−Removed: Faraday Future Vehicle Production and Delivery
−Removed: FF expects to derive revenue from sales of the FF 91.
−Removed: Based on certain management assumptions, including the timely receipt of $38.4 million to $58.4 million of additional funding, which commitments have been secured as part of the Sixth Amendment, and approval by stockholders of the proposal to increase FFIE’s authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000, increasing the total authorized shares from 900,000,000 to 1,775,000,000, which approval was obtained during the special meeting of stockholders held on February 28, 2023, timely completion of key equipment installation and commissioning work at the ieFactory California in Hanford, California, suppliers meeting their commitments on program deliverables including parts, the implementation and effectiveness of certain expense reduction and payment delay measures, and timely and successful testing and certification, FF expects start of production of the FF 91 Futurist at the end of March 2023, coming off the line in early April, and deliveries to users anticipated to begin before the end of April 2023.
−Removed: The FF 81, FF 71, and SLMD electric vehicle models are in various stages of planning or development and expected to be released after the FF 91 depending on availability of adequate funding and other strategic factors.
+Added: FF’s performance and future success depend on several factors that present significant opportunities but also pose risks and challenges including those discussed below and in the section titled “Risk Factors” in Item 1A of this Form 10-K.
Production and Operations
−Removed: FF expects to continue to incur significant operating costs that will impact its future profitability, including research and development expenses as it introduces new models and improves existing models;
+Added: FF expects to continue to incur significant operating costs that will impact its future profitability, including R&D expenses as it introduces new models and improves existing models;
capital expenditures for the expansion of its manufacturing capacities;
3 unchanged sentences
interest expense from debt financing activities;
−Removed: and selling and distribution expenses as it builds its brand and markets its vehicles.
−Removed: FF may incur significant costs in connection with its services once it delivers the FF 91, including servicing and warranty costs.
+Added: and selling and distribution
+Added: expenses as it builds its brand and markets its vehicles.
+Added: FF may incur significant costs in connection with its services as it delivers at scale the FF 91 Futurist, including servicing and warranty costs.
FF’s ability to become profitable in the future will depend on its ability to successfully market its vehicles and control its costs.
−Removed: To date, FF has not yet sold any electric vehicles.
+Added: As of December 31, 2023 , FF has sold four and leased six vehicles.
As a result, FF will require substantial additional capital to develop products and fund operations for the foreseeable future.
−Removed: Until FF can generate sufficient revenue from product sales, FF will fund its ongoing operations through a combination of various funding and financing alternatives, including equipment leasing and construction financing of the Hanford, California, ieFactory California, manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options.
+Added: Until FF can generate sufficient revenue from product sales, FF will fund its ongoing operations through a combination of various funding and financing alternatives, including equipment financing of the FF ieFactory California, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options.
The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time.
−Removed: Any delays in the successful completion of its ieFactory California manufacturing facility will impact FF’s ability to generate revenue.
−Removed: For additional discussion of the substantial doubt about FF’s ability to continue as a going concern, see Note 2 , Liquidity and Capital Resources in the notes to the Consolidated Financial Statements for the year ended December 31, 2022 included elsewhere in this Annual Report on Form 10-K and for further details on liquidity, please see the “ – Liquidity and Capital Resources ” section below.
−Removed: FF is a development stage company and has not generated any revenue to date.
−Removed: FF’s anticipated introduction of the FF 91, its first vehicle, is expected to generate FF’s future revenue while other vehicles are in development.
+Added: Any delays in the successful completion of its FF ieFactory California will impact FF’s ability to generate revenue.
+Added: For additional discussion of the substantial doubt about FF’s ability to continue as a going concern, see Note 2, Liquidity and Capital Resources and Going Concern in the notes to the Consolidated Financial Statements and for further details on liquidity, please see the “Liquidity and Capital Resources” section below.
+Added: Revenue Recognition
+Added: Automotive Sales Revenue
+Added: We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023 and have sold four and leased six vehicles for the year ended December 31, 2023.
+Added: Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, twenty-four-seven roadside assistance, OTA software updates, internet connectivity and destination fees.
+Added: We recognize revenue on automotive sales upon delivery to the customer, which is when control of a vehicle transfers.
+Added: Payments are typically received at the point control transfers or in accordance with payment terms customary to the business and as indicated in the sales contract.
+Added: 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.
+Added: For obligations related to automotive sales, we estimate standalone selling price by considering costs used to develop and deliver the good or service, third-party pricing of similar options and other information that may be available.
+Added: The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations.
+Added: Vehicle contracts do not contain a significant financing component.
+Added: Revenue from immaterial promises are combined with the vehicle performance obligation and recognized when the product has been transferred.
+Added: We accrue costs to transfer these immaterial goods and services regardless of whether they have been transferred.
+Added: In certain circumstances, we provide customers with a residual value guarantee which may or may not be exercised in the future.
+Added: The impact of such residual value guarantees was immaterial to the our Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023.
+Added: The Company has entered into and may continue to enter into co-creator consulting agreements with its customers under which customers share feedback, driving data, ideas, experiences with its engineers, social media posts and other promotions in exchange for specified fees.
+Added: The Company considers these arrangements consideration payable to a customer.
+Added: The consideration paid to the customer relates to marketing and R&D services that are distinct and could be purchased by the Company from a separate third-party.
+Added: The Company performs an analysis in which it maximizes the use of observable market inputs to ascribe a fair value to these services and record the fair value of these services to sales and marketing expense or R&D expense, as applicable.
+Added: Any consideration payable to a customer that is above the fair value of the distinct services being provided is treated as a reduction of revenue.
+Added: Automotive Leasing Revenue
+Added: Revenue from Operating Leasing Program
+Added: We have outstanding leases under our vehicle operating leasing program in the U.S.
+Added: Qualifying customers are permitted to lease a vehicle for up to 36 months.
+Added: At the end of the lease term, customers are generally required to return the vehicles to us.
+Added: We account for these leasing transactions as operating leases.
+Added: We record leasing revenues to automotive leasing revenue on a straight-line basis over the contractual term, and we record the depreciation of these vehicles to cost of automotive leasing revenue.
+Added: As of December 31, 2023, deferred lease-related upfront payments which will be recognized on a straight-line basis over the contractual terms of the individual leases were immaterial.
+Added: Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts.
+Added: Revenue from Sales-Type Leasing Program
+Added: We have outstanding leases accounted for as sales-type leases under accounting standards codification (“ASC”) 842, Leases (“ASC 842”).
+Added: Customers have the right to purchase the vehicle at the end of the lease term, which is usually 36 months.
+Added: A customer qualifies under this program if the purchase option is reasonably certain to be exercised, and we therefore expect the customer to take title to the vehicle at the end of the lease term after making all contractual payments.
+Added: We recognize all revenue and costs associated with the sales-type lease as automotive leasing revenue and automotive leasing cost of revenue, respectively, upon delivery of the vehicle to the customer when collectability of lease payments is probable at lease commencement.
+Added: If collectability of lease payments is not probable at commencement, we recognize the lease payments as deposit liability and do not derecognize the leased vehicle until such point that collectability of lease payments becomes probable.
+Added: Customer Deposits and Deferred Revenue
+Added: Our customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time.
+Added: Refundable deposits, for vehicle reservations and services, received from customers prior to an executed vehicle purchase agreement are recorded as customer deposits (Accrued expenses and other current liabilities).
+Added: Customer deposits were $3.2 million and $3.4 million as of December 31, 2023 and 2022, respectively.
+Added: When vehicle purchase agreements are executed, the consideration for the vehicle and any accompanying products and services must be paid in advance prior to the transfer of products or services by the Company.
+Added: Such advance payments are considered non-refundable, and the Company defers revenue related to any products or services that are not yet transferred.
+Added: 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.
+Added: Deferred revenue related to products and services w as immaterial a s of December 31, 2023, and 2022.
+Added: We provide a manufacturer’s warranty on all vehicles sold.
+Added: The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components.
+Added: The warranty does not cover any item where failure is due to normal wear and tear.
+Added: This assurance-type warranty does not create a performance obligation separate from the vehicle.
+Added: Management tracks warranty claims by vehicle ID, owner, and date.
+Added: As we continue to manufacture and sell more vehicles we will reassess and evaluate our warranty claims for purposes of our warranty accrual.
+Added: Cost of Automotive Sales Revenue
+Added: Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, and reserves for estimated warranty expenses.
+Added: Cost of automotive sales revenues also includes adjustments to warranty expense.
+Added: Cost of Automotive Leasing Program
+Added: Cost of automotive leasing revenue includes the depreciation of operating lease vehicles, cost of goods sold associated with direct sales-type leases and warranty expense related to leased vehicles.
Operating Expenses
Research and Development
−Removed: Research and development activities represent a significant part of FF’s business.
−Removed: FF’s research and development efforts focus on the design and development of FF’s electric vehicles and continuing to prepare its prototype electric vehicles to exceed industry standards for compliance, innovation, and performance.
−Removed: Research and development expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on research and development activities, other related costs, depreciation, and an allocation of overhead.
−Removed: FF expects research and development expenses to increase as FF continues to develop its vehicles.
−Removed: FF anticipates an increase in activities in the U.S.
−Removed: and China, where FF’s research and development operations are primarily located.
+Added: R&D activities represent a significant part of our business.
+Added: Our R&D efforts focus on the design and development of our electric vehicles and continuing to prepare our prototype electric vehicles to exceed industry standards for compliance, innovation, and performance.
+Added: R&D expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on R&D activities, other related costs, depreciation, R&D services provided by co-creators, and an allocation of overhead.
+Added: We expect R&D expenses to decrease in the near future as we substantially have completed R& D activities related to the FF 91.
Sales and Marketing
−Removed: Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on sales and marketing, costs associated with sales and marketing activities, and an allocation of overhead.
−Removed: Marketing activities are those related to introducing FF’s brand and its electric vehicle prototypes to the market.
−Removed: FF expects selling and marketing expenses to continue to increase as FF brings its electric vehicles to market and seeks to generate sales.
+Added: Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on sales and marketing, costs associated with sales and marketing activities, marketing services provided by co-creators, and an allocation of overhead.
+Added: Marketing activities are those related to introducing our brand, our electric vehicles, and our electric vehicle prototypes to the market.
+Added: We expect selling and marketing expenses to continue to increase as we bring our electric vehicles to market and seek to generate additional sales.
General and Administrative
−Removed: General and administrative expenses consist primarily of personnel-related costs, (including salaries, bonuses, benefits, and stock-based compensation) for employees associated with administrative services such as legal, human resources, information technology, accounting and finance, other related costs, and legal loss contingency expenses, which are FF’s estimates of future legal settlements.
+Added: General and administrative expenses consist primarily of personnel-related costs, (including salaries, bonuses, benefits, and stock-based compensation) for employees associated with administrative services such as legal, human resources, information technology, accounting and finance, other related costs, and legal loss contingency expenses, which are our estimates of future legal settlements.
These expenses also include certain third-party consulting services, certain facilities costs, and any corporate overhead costs not allocated to other expense categories.
−Removed: FF expects its general and administrative expenses to increase as FF continues to grow its business.
−Removed: FF also anticipates that it will incur additional costs for employees and third-party consulting services now that it operates as a public company.
+Added: We expect our general and administrative expenses to increase as we continue to grow our business.
Loss on Disposal of Property and Equipment
−Removed: Loss on disposal of property and equipment relates to the abandonment of certain FF 91 program construction in progress assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation of FF’s cost reduction program.
+Added: Loss on disposal of property and equipment relates to the abandonment of certain FF 91 Futurist program construction in progress assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation of FF’s cost reduction program.
Charges associated with disposals are recognized within operating expenses in the Consolidated Statements of Operations and Comprehensive Loss.
+Added: Change in Fair Value of Earnout Liability
+Added: Our shareholders prior to the Business Combination, until its fifth anniversary, are entitled to contingent consideration of up to 104,167 additional shares of Class A Common Stock in the aggregate in two equal tranches upon the occurrence of each earnout triggering event (“Earnout Shares”).
+Added: We recognized the Earnout Shares at fair value upon the closing of the Business Combination and classified them in Stockholders’ Equity since the Earnout Shares were determined to be indexed to our own stock and meet the requirements for equity classification in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .
+Added: From time to time subsequent to the closing of the Business Combination, the Earnout Shares may be classified as derivative liabilities under ASC 815, Derivatives and Hedging , due to the us having insufficient authorized shares to fully settle the equity-linked financial instruments in shares.
+Added: The Earnout Shares 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 we have sufficient authorized, unissued shares to settle such contracts with shares.
Non-operating Expenses
−Removed: Change in Fair Value Measurements
−Removed: Change in fair value measurements consists of the losses and gains as a result of fair value measurements of certain financial instruments which FF records at fair value.
−Removed: Changes in fair value measurement of related party notes payable and notes payable have decreased following the Business Combination as the majority of the liabilities converted to equity or were paid in cash.
+Added: Change in Fair Value of (Related Party and Third Party) Notes Payable and Warrant Liabilities
+Added: Change in fair value measurements consists of the losses and gains as a result of fair value measurements of certain notes payable and warrant liabilities which we record at fair value.
+Added: Loss on Settlement of (Related Party and Third Party) Notes Payable
+Added: Loss on settlement of notes payable consists of losses resulting from the settlement of notes payable as part of our ongoing financing activities and losses incurred on modifications of our notes payable that qualify as an extinguishment pursuant to ASC 470-50, Debt–Modifications and Extinguishments .
Related Party Interest Expense
Related party interest expense consists of interest expense on notes payable with related parties.
−Removed: Related party interest expense has decreased relative to prior periods, as the majority of related party notes payable converted to equity upon completion of the Business Combination.
Interest Expense
−Removed: Interest expense primarily consists of interest on outstanding notes payable, capital leases, certain supplier payables, and vendor payables in trust.
−Removed: Interest expense decreased as the majority of notes payable and vendor payables in trust were either settled in cash or converted to equity upon completion of the Business Combination.
+Added: Interest expense primarily consists of interest on outstanding notes payable not marked to fair value, capital leases, certain supplier payables, and vendor payables in trust.
Other Expense, net
1 unchanged sentence
Foreign currency transaction gains and losses are generated by revaluation of debt and the settlements of invoices denominated in currencies other than the functional currency.
−Removed: FF expects other expense to fluctuate as FF continues to transact internationally.
−Removed: Loss on Extinguishment or Settlement of Related Party Notes Payable, Notes Payable and Vendor Payables in Trust, net
−Removed: Loss on extinguishment or settlement of related party notes payable, notes payable, and vendor payables in trust, net consists of losses resulting from the settlement of related party notes payable, notes payable, and vendor payables in trust.
+Added: We expect other expense to fluctuate as we continue to transact internationally
Results of Operations
−Removed: To date, FF has not generated any revenue from the design, development, manufacturing, engineering, sale or distribution of its electric vehicles.
−Removed: Please refer to Part I, Item 1A.
−Removed: Risk Factors for a full discussion on the risks and uncertainties related to costs.
−Removed: Comparison of the Years Ended December 31, 2022 and 2021
Year Ended December 31,
1 unchanged sentence
Consolidated Statements of Operations
+Added: Auto sales $ 784 $ —
+Added: Cost of revenues
+Added: Auto sales 42,607 —
+Added: Gross loss (41,823) —
Operating expenses
3 unchanged sentences
Loss on disposal of property and equipment 4,453 2,695
+Added: Change in fair value of earnout liability 2,033 —
Total operating expenses 244,231 437,144
Loss from operations (286,054) (437,144)
−Removed: Change in fair value measurements (69,671) (22,700)
+Added: Change in fair value of notes payable and warrant liabilities 89,860 (70,512)
+Added: Change in fair value of related party notes payable and related party warrant liabilities 7,101 —
+Added: Loss on settlement of notes payable (217,019) (73,204)
+Added: Loss on settlement of related party notes payable (20,045) —
Interest expense (2,288) (5,561)
1 unchanged sentence
Other expense, net (2,437) (11,878)
−Removed: Loss on settlement of related party notes payable, notes payable, and vendor payables in trust, net
−Removed: (7,690) (86,904)
Loss before income taxes (431,635) (602,178)
1 unchanged sentence
Net loss $ (431,744) $ (602,239)
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Revenue $ 784 $ — $ 784 — %
+Added: Automotive sales revenue was $0.8 million for the year ended December 31, 2023 .
+Added: We started vehicle delivery to our customers during the third quarter of 2023 and this amount is primarily driven by the four cars that were sold through December 31, 2023 .
+Added: There was no sales revenue for the year ended December 31, 2022.
+Added: Cost of Revenue
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Cost of revenue
+Added: $ 42,607 $ — $ 42,607 — %
+Added: Cost of revenue\ was $42.6 million for the year ended December 31, 2023 .
+Added: We started to recognize automotive sales revenue during the year ended December 31, 2023 and the corresponding cost of revenue.
+Added: Cost of revenue is primarily driven by higher costs of early-stage cost inefficiencies including lower fixed cost absorption largely due to depreciation of tooling and
+Added: To a lesser extent, cost of revenue includes higher initial manufacturing inefficiencies coupled with higher initial cost of parts resulting from lower volume associated with delivery of the FF 91 Futurist vehicles.
Research and Development
2 unchanged sentences
Research and development $ 132,021 $ 299,989 $ (167,968) (56.0) %
−Removed: The increase in research and development expense of $136.1 million for the year ended December 31, 2022, compared to the prior year, was primarily due to the increase in engineering, design and testing (ED&T) services of $120.8 million and professional services related expense of $9.1 million as the Company re-engaged suppliers and made significant purchases of ED&T services to progress the development of the FF 91;
−Removed: an increase in personnel and compensation related expenses and stock-based compensation expenses due to increased headcount of $37.6 million and $3.7 million, respectively;
−Removed: an increase in information technology related expense due to increases in business activities and headcount of $8.6 million, partially offset by a decrease in miscellaneous expenses of $54.1 million, primarily due to expensing a one-time amount of $50.0 million for a
−Removed: non-exclusive, perpetual, irrevocable, and sublicensable license to use a platform owned by Liankong, a subsidiary of Geely Holdings, and recognition stock-based compensation expense of $7.6 million related to restricted stock awards issued as a bonus to employees and other service providers in connection with the closing of the Business Combination during the year ended December 31, 2021 with no comparable activity in 2022.
+Added: The decrease in R&D expense is primarily due to the reduction in engineering, design, and testing services of $125.9 million as we substantially completed R&D activities related to the FF 91 Futurist vehicle in 2022.
+Added: Further, as we started production in March 2023, certain costs were recognized as cost of revenue and certain materials purchases were capitalized to inventory versus all being recognized as R&D expense.
+Added: In addition, there was a decrease in personnel and compensation expenses of $20.2 million due to a decrease in headcount and a decrease in professional services of $15.1 million as part of cost saving measures implemented by us in light of our financial position.
Sales and Marketing
2 unchanged sentences
Sales and marketing $ 22,836 $ 21,689 $ 1,147 5.3 %
−Removed: The increase of $3.7 million in sales and marketing expense for the year ended December 31, 2022, compared to the prior year, was primarily due to an increase in personnel and compensation related expenses of $4.7 million, and employee benefits relates expenses of $0.4 million due to an increase in headcount;
−Removed: an increase in marketing expenses due to an increase in marketing efforts of $2.9 million, partially offset by primarily restricted stock awards issued as a bonus to employees and other service providers in connection with the closing of the Business Combination during the year ended December 31, 2021, with no comparable activity in 2022 and other overhead expenses including IT dues and subscriptions of $5.2 million.
+Added: Sales and marketing expenses did not significantly fluctuate from the prior year.
+Added: These efforts remained consistent as we only began vehicle deliveries in the third quarter of 2023.
+Added: General and Administrative
Year Ended December 31, Change
1 unchanged sentence
General and administrative $ 82,888 $ 112,771 $ (29,883) (26.5) %
−Removed: The increase of $18.5 million in general and administrative expense for the year ended December 31, 2022, compared to the same period in the prior year, was primarily due to an increase in professional service expenses related to the Special Committee investigation in the amount of $49.3 million;
−Removed: an increase in personnel and compensation related expenses of $9.7 million due to headcount changes;
−Removed: an increase in insurance related expenses of $10.6 million, partially offset by legal expense of approximately $20.0 million related to additional accruals for contingent legal liabilities related to the year ended December 31, 2021, with no comparable activity in 2022;
−Removed: decrease in general expenses of $15.5 million primarily related to expenses recognized in connection with issuance of restricted stock awards as compensation for prior salary reductions during the year ended December 31, 2021 with no comparable activity in the year ended December 31, 2022;
−Removed: decrease in stock based compensation of $5.2 million due to a decrease in headcount specifically in G&A, a decrease in engineering, design and testing related expense and other overhead expenses primarily due to allocations of expenses to Research and development and Sales and Marketing of $5.1 million, a decrease of $1.4 million related to information technology related expenses, a $1.4 million decrease in depreciation and amortization expenses, a decrease of $1.2 million in rent and related expenses and a $0.7 million decrease in non-capitalizable equipment and furniture.
+Added: The decrease in general and administrative expense is primarily due to a decrease in compensation expense of $20.6 million and professional services expenses of $18.6 million due to our financial position;
+Added: partially offset by general costs of $12.2 million primarily related to an increase in property insurance and Director & Officer Insurance.
Loss on disposal of property and equipment
1 unchanged sentence
(dollars in thousands) 2023 2022 Amount %
−Removed: Loss on disposal of property and equipment $ 2,695 $ 64,191 $ (61,496) NM
−Removed: The decrease in loss on disposal of property and equipment during the year ended December 31, 2022, compared to the prior year is due to the write o ff of $64.2 million relating to the abandonment of certain construction in process assets including vendor tooling, machinery and equipment.
−Removed: This was due to the redesign of various FF 91 components and implementation of FF’s cost reduction program during the year ended December 31, 2022.
−Removed: Change in Fair Value Measurements
+Added: Loss on disposal of property and equipment $ 4,453 $ 2,695 $ 1,758 65.2 %
+Added: The increase in loss on disposal of property and equipment was the result of the sale of a property/equipment satisfying liquidity needs to fund short-term business activities.
+Added: Change in Fair Value of Earnout Liability
Year Ended December 31, Change
(dollars in thousands) 2023 2022 Amount %
−Removed: Change in fair value measurements $ (69,671) $ (22,700) $ (46,971) 206.9 %
−Removed: The increased loss in fair value measurements of $47.0 million for the year ended December 31, 2022, compared to the prior year, was primarily due to the issuances during the period of new notes, which contained significant original issue discounts, and warrants measured at fair value at each reporting period, resulting in a charge to fair value measurement expense
−Removed: due to their favorable conversion and exercise features, which was partially offset by notes payable, related party notes payable and warrant liabilities that were measured at fair value in the comparative period in 2021 and were converted during 2022.
+Added: Change in fair value of earnout liability $ 2,033 $ — $ 2,033 — %
+Added: 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 .
+Added: As of August 25, 2023, we reclassified the Earnout Shares from liability classification to equity classification as a result of us having sufficient authorized shares to share-settle the earnout, which was determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .
+Added: The $2.0 million decrease in the earnout liability was recognized as a change in fair value of earnout liability during the third quarter of 2023 and there was no comparable expense in the prior period .
+Added: Change in Fair Value of Notes Payable and Warrant Liabilities
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Change in fair value of notes payable and warrant liabilities $ 89,860 $ (70,512) $ 160,372 (227.4) %
+Added: The change in the fair value of notes payable and warrant liabilities is primarily due to notes payable and warrant liabilities revalued during 2023 at predominantly lower fair values due to pricing inputs that use the market price of the Company’s Common Stock and debt discount rate which have experienced large declines.
+Added: As of December 31, 2022 the Company had $41.7 million of notes payable outstanding, compared with $118.9 million outstanding as of December 31, 2023 , excluding the impact of mark to market valuation adjustments.
+Added: During the year ended December 31, 2023, we recognized a gain in the change in fair value of notes payable and warrant liabilities of $69.7 million, specific to the change in fair value of our warrant liabilities, which was driven by the significant decline in the Company’s stock price.
+Added: Change in Fair Value of Related Party Payable and Related Party Warrant Liabilities
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Change in fair value of related party payable and related party warrant liabilities $ 7,101 $ — $ 7,101 — %
+Added: We did not have any related party notes payable or warrants that were re-measured at fair value during the year ended December 31, 2022.
+Added: In May 2023,we entered into Unsecured SPA Notes (as defined in Note 6, Accrued Expenses and Other Current Liabilities, in the Notes to the Consolidated Financial Statements) with MHL, who is a related party, and V W Investment.
+Added: On December 31, 2023 , the related party Unsecured SPA Notes and warrant were revalued at a lower fair value than at their issuance due to pricing inputs that use the market price of the Class A Common Stock and debt discount rate which have experienced a decline.
+Added: Loss on Settlement of Notes Payable
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Loss on settlement of notes payable $ (217,019) $ (73,204) $ (143,815) 196.5 %
+Added: The increase in the Loss on settlement of notes payable during the year ended December 31, 2023 is primarily driven by a higher conversion volume during the period and a larger loss on settlement per dollar principal.
+Added: During the year ended December 31, 2023 note holders converted $200.6 million of notes payable, excluding the impact of mark to market valuation adjustments, compared with $119.3 million in the year ended December 31, 2022.
+Added: The increase in the loss on settlement per
+Added: dollar of principal is driven by the trailing-twelve-month trend of declines in the fair value of our notes payable driven by the change in the stock price over the period.
+Added: Loss on Settlement of Related Party Notes Payable
+Added: Year Ended December 31, Change
+Added: (dollars in thousands) 2023 2022 Amount %
+Added: Loss on settlement of related party notes payable $ (20,045) $ — $ (20,045) — %
+Added: We did not have any related party notes payable that settled during the year ended December 31, 2022.
+Added: In May 2023, we entered into Unsecured SPA Notes with MHL, who is a related party.
+Added: During the year ended December 31, 2023 , the related party converted Unsecured SPA Notes with prin cipal balanc es of $22.3 million in exchange for 5.0 million shares of Class A Common Stock.
+Added: We recognized a loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Interest Expense
2 unchanged sentences
Interest expense $ (2,288) $ (5,561) $ 3,273 (58.9) %
−Removed: The decrease in interest expense during the year ended December 31, 2022, compared to the prior year, was primarily due to notes payable with a principal amount of $85.2 million that were outstanding during a portion of 2021 and settled upon closing of the Business Combination in 2021, with no comparable charges in 2022.
−Removed: Further decreases resulted from the repayment of $85.0 million of Ares notes payable principal in the year ended December 31, 2022 and interest related to finance leases as a result of the successful sale leaseback transaction of the Company’s Gardena, California headquarters in the year ended December 31, 2021.
−Removed: These decreases were partially offset by increases in interest expense related to the ATW NPA Notes which bore interest in 2022 due to the triggering of interest clauses, interest expense related to new Bridge Notes in 2022 with principal balances of $44.5 million.
+Added: The decrease in interest expense was primarily due to our repayment of $85.0 million of Ares notes payable principal and the conversion of $73.9 million of ATW NPA notes payable principal into the Class A Common Stock in the year ended December 31, 2022.
+Added: The SPA Notes are carried at fair value and fluctuations in interest expense are included in the change in fair value of notes payable.
Related Party Interest Expense
2 unchanged sentences
Related party interest expense $ (753) $ (3,879) $ 3,126 (80.6 %)
−Removed: The decrease in related party interest expense for year ended December 31, 2022, compared to the prior year, was primarily due to the Company’s settlement of $91.4 million principal amounts of related party notes payable upon closing of the Business Combination in July 2021, which accrued interest from July 1, 2021, to July 21, 2021.
+Added: The decrease in related party interest expense was due to an agreement, dated December 27, 2022, with Chongqing Leshi Small Loan Co., Ltd, a related party, according to which it was agreed that a portion of principal and all outstanding accrued interest was waived.
Other Expense, net
2 unchanged sentences
Other expense, net $ (2,437) $ (11,878) $ 9,441 (79.5 %)
−Removed: The change in other expense, net was primarily due to change in unrealized loss driven by change in exchange rate.
−Removed: Loss at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in Trust, Net
−Removed: Year Ended December 31, Change
−Removed: (dollars in thousands) 2022 2021 Amount %
−Removed: Loss on settlement of related party notes payable, notes payable and vendor payables in trust, net
−Removed: $ (7,690) $ (86,904) $ 79,214 NM
−Removed: The loss in the year ended December 31, 2022, compared to the same period in the prior year, relates to a modification of the conversion price as part of an amendment to notes issued during the period, which was treated as extinguishment for accounting purposes.
−Removed: The loss in the year ended December 31, 2021 represents the conversion of certain related party notes payable, notes payable, and vendor payables in trust to equity at $10 per share which was below the fair value of the stock on the date of conversion in connection with the closing of the Business Combination.
+Added: The change in other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.
+Added: Dollars that are remeasured at the end of each period.
Liquidity and Capital Resources
−Removed: As described in the “ Overview ” section of this MD&A, the COVID-19 pandemic impacted FF’s ability to raise funds and may have a material adverse impact on future periods as FF prepares to bring its vehicles to market, including its cash flows from financing activities, which fund its operations.
−Removed: The extent of COVID-19’s impact on FF’s liquidity will depend upon, among other things, the duration and severity of the outbreak or subsequent outbreaks and related government responses, such
−Removed: as required physical distancing, restrictions on business operations and travel, the pace of recovery of economic activity and the impact to consumers, all of which are uncertain and difficult to predict.
−Removed: In addition, FF’s ability to raise additional funds is subject to a number of other material risks and assumptions.
−Removed: Refer to Part I, Item 1A.
−Removed: Risk Factors for a full discussion of the risks associated with the COVID-19 pandemic and other risks.
−Removed: As of December 31, 2022 , the Company’s principal source of liquidity was cash totaling $17.0 million, which was held for working capital and general corporate purposes.
−Removed: The Company has received financing commitments for the funds required for the start of production of the FF 91 assuming timely receipt of funds.
−Removed: Based on certain management assumptions, including the timely receipt of approximately $38.4 million to $58.4 million of additional funding, which commitments have been secured as part of the Sixth Amendment, and approval by stockholders of the proposal to increase FFIE’s authorized shares of Class A Common Stock from 815,000,000 to 1,690,000,000, increasing the total authorized shares from 900,000,000 to 1,775,000,000, which approval was obtained during the special meeting of stockholders held on February 28, 2023, timely completion of key equipment installation and commissioning work at the ieFactory California in Hanford, California, suppliers meeting their commitments on program deliverables including parts, the implementation and effectiveness of certain expense reduction and payment delay measures, and timely and successful testing and certification, FF expects to start production on the FF 91 Futurist at the end of March 2023, coming off the line in early April, with deliveries to users anticipated to begin before the end of April 2023.
−Removed: There is no assurance FF will be able to timely receive sufficient funding under existing financing commitments to produce and deliver the FF 91 Futurist on that timeline or at all.
−Removed: If unable to receive sufficient funding, FF will be required to obtain new financing commitments, which may not be available to it under reasonable commercial terms.
−Removed: Further, there cannot be any assurance that FF will be able to develop the manufacturing capabilities and processes, or secure reliable sources of component supply to meet quality, engineering, design or production standards, or to meet the required production volumes to successfully grow into a viable business.
−Removed: There is also no assurance that FFIE stockholder approval of an authorized share increase will be obtained in a timely manner or at all.
−Removed: Since August 14, 2022, the Company has obtained commitments from several investors totaling $267.0 million in new convertible note financing and in committed forced warrant exercise proceeds, subject to certain conditions.
−Removed: A total of $171.4 million under these commitments has been funded to date, through which the Company has received $150.4 million (net of original discount and transaction costs).
−Removed: The Company had the right to force the conversion of the warrants underlying the Warrant Reserve, as such term is defined in Note 14, Stockholders’ Equity , in the notes to the Consolidated Financial Statements for the years ended December 31, 2022 included elsewhere in this Annual Report on Form 10-K, for a total exercise price of $20.0 million in cash ($9.4 million of which has been funded to the Company), upon the completion of certain milestones and conditions.
−Removed: The right to force exercise of the Warrant Reserve expired upon the holders exercising their warrants during 2023.
−Removed: In February 2023, Senyun and a purchaser affiliated with ATW Partners LLC exercised 20% of their respective options to purchase additional senior secured notes and SPA Warrants of the Company under the same terms as the Incremental Notes.
−Removed: The Company received aggregated gross proceeds of $18.0 million ($16.2 million net of original issuance discount) in exchange for such issuances.
−Removed: The Company has continued financing discussions with multiple parties, but has experienced delays in securing additional funding commitments, which have exacerbated the supply chain pressures on FF’s business.
−Removed: These factors, in addition to the continued rise in inflation and other challenging macroeconomic conditions, have led FF to take steps to preserve its current cash position, including reducing spending, extending payment cycles and implementing other similar measures.
−Removed: If our ongoing capital raising efforts are unsuccessful or significantly delayed, or if we experience prolonged material adverse trends in our business, our production will be delayed or decreased, and our actual use of cash, production volume and revenue for 2023 will vary from our previously disclosed forecasts, and such variances may be material.
−Removed: While FF is actively engaged in negotiations with potential financing sources, there is no guarantee that it will be able to raise additional capital on terms acceptable to it or at all.
−Removed: In addition to the risk that FF’s assumptions and analyses may prove incorrect, the projections may underestimate the professional fees and other costs to be incurred related to the pursuit of various financing options currently being considered and ongoing legal risks.
−Removed: Incremental capital needs beyond March 2023 to fund development of the Company’s remaining product portfolio will be highly dependent on the market success and profitability of the FF 91 and the Company’s ability to accurately estimate and control costs.
−Removed: Apart from the FF 91 series, substantial additional capital will be required to fund operations, research, development, and design efforts for future vehicles.
−Removed: As described under “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments – Financing Discussions and New Convertible Note and Warrant Financing ,” on November 11, 2022, the Company entered into a SEPA with Yorkville, which provides the Company the sole right, but not the obligation, to direct Yorkville from time to time to purchase up to $200.0 million (“Commitment Amount”) of the Company’s shares of Class A Common Stock (“Commitment Shares”) during the commitment period ending November 11, 2025, at a 3% discount of the VWAP (as defined below) of the shares during the three preceding days of each issuance.
−Removed: The Company has the option to increase the Commitment Amount to up to $350.0 million during the commitment period.
−Removed: On November 23, 2022, the
−Removed: Company issued 789,016 Commitment Shares in satisfaction of the commitment fee agreed upon in the SEPA.
−Removed: As of the date the Consolidated Financial Statements were issued, the Company has not directed Yorkville to buy any shares of Class A Common Stock.
−Removed: The Company shall not have the ability to draw funds under the SEPA until the effectiveness of its registration statement on Form S-1, initially filed with the SEC on December 8, 2022 (File No.
−Removed: 333-268722), registering the resale by Yorkville of its shares of Class A Common Stock to be issued under the SEPA (including the 789,016 Commitment Shares) and the satisfaction of certain other conditions under the SEPA.
−Removed: Any purchase would be subject to certain limitations, including that Yorkville shall not purchase any shares that would result in it and its affiliates beneficially owning more than 9.99% of the then outstanding voting power or number of shares of Class A Common Stock or any shares that would exceed 19.99% of all shares of Class A Common Stock and Class B Common Stock of the Company outstanding on the date of the SEPA, unless Company shareholder approval was obtained allowing for issuances in excess of such amount (the “Exchange Cap”).
−Removed: The Exchange Cap will not apply under certain circumstances, including where the average price of all shares of Class A Common Stock equals or exceeds $0.62 per share.
−Removed: On February 28, 2023, the stockholders approved, as is required by the applicable Nasdaq rules and regulations, advances of Class A Common Stock to be issued under the SEPA, including the issuance of any shares in excess of 19.99% of the issued and outstanding shares of Common Stock.
−Removed: The proposal was approved on February 28, 2023.
−Removed: Despite the access to liquidity resulting from the SEPA when and if it shall become effective, the Warrant Reserve and the unfunded commitments from the SPA, the Company projects that it may require additional funds in order to continue operations and support the ramp-up of production of the FF 91 to generate revenues to put the Company on a path to cash flow break-even.
−Removed: Incremental capital needs beyond March 2023 to fund development of the Company’s remaining product portfolio will be highly dependent on the market success and profitability of the FF 91 and the Company’s ability to accurately estimate and control costs.
−Removed: Since its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering, design, and development of its electric vehicle platform, development of initial electric vehicle models, and capital raising.
−Removed: Since inception, the Company has incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $3,476.6 million as of December 31, 2022.
−Removed: After the closing of the Business Combination and the PIPE Financing on July 21, 2021, the Company received gross proceeds aggregating $991.0 million which it used to settle certain liabilities and the remainder of which management has used to finance the ongoing operations of the business.
−Removed: The Company has funded its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related party notes payable and notes payable (see Note 9, Related Party Notes Payable and Note 10, Notes Payable ), the sale of Preferred and Common Stock (see Note 14, Stockholders’ Equity ) and the net proceeds received from the Business Combination and the PIPE Financing (see Note 3, Business Combination ) in the notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
−Removed: The Company’s ongoing liquidity needs will depend on the extent to which the Company’s actual costs vary from the Company’s estimates and the Company’s ability to control these costs, as well as the Company’s ability to raise additional funds.
−Removed: The timely achievement of the Company’s operating plan as well as its ability to maintain an adequate level of liquidity are subject to various risks associated with the Company’s ability to continue to successfully close additional sources of funding, control and effectively manage its costs, as well as factors outside of the Company’s control, including those related to global supply chain disruptions, the rising prices of materials, potential impact of the COVID-19 pandemic, and general macroeconomic conditions.
−Removed: Refer to Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for a full discussion of the risks.
−Removed: The Company’s forecasts and projections of working capital reflect significant judgment and estimates for which there are inherent risks and uncertainties.
−Removed: The Company expects to continue to generate significant operating losses for the foreseeable future.
−Removed: The plans are dependent on the Company being able to continue to raise significant amounts of capital through the issuance of additional notes payable and equity securities.
−Removed: The Company has evaluated whether there are certain conditions and events, when considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements were issued.
−Removed: Based on its recurring losses from operations since inception and continued cash outflows from operating activities, 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 the Consolidated Financial Statements for the years ended December 31, 2022 were issued.
−Removed: 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
−Removed: manner or on acceptable terms, if at all or that the Company will be able to satisfy the closing conditions under its financing agreements.
−Removed: If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures.
−Removed: 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.
+Added: We have evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.
+Added: Based on our recurring losses from operations since inception and continued cash outflows from operating activities
+Added: (all as described below), we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that the Consolidated Financial Statements were issued.
+Added: The Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.
+Added: Accordingly, the Consolidated Financial Statements have been prepared on a basis that assumes we 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.
+Added: We had and will continue to devote substantial effort and, to the extent available, capital resources, to strategic planning, engineering, design, and development of its electric vehicle platform, development of vehicle models, optimizing the build out of the FF ieFactory, California, and capital raising.
+Added: We incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $3,958.5 million, an unrestricted cash balance of $1.9 million and a negative working capital position of $169.8 million as of December 31, 2023.
+Added: During 2023, we delivered our first vehicles but expect to continue to generate significant operating losses for the foreseeable future.
+Added: We have funded our operations and capital needs primarily through the issuance of related party notes payable and notes payable, convertible notes, and the sale of common stock.
+Added: See Note 7, Notes Payable and Note 8, Related Party Transactions , convertible notes, and the sale of common stock, of the notes to the Consolidated Financial Statements included in this Form 10-K..
+Added: Pursuant to the Secured SPA, Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder and the Senyun Joinder (collectively the “SPA Commitments”), we obtained commitments from several investors.
+Added: At December 31, 2023, commitments under the SPA Commitments totaled $554.5 million, of which $343.2 million was funded, $211.3 million remained to be funded, and $112.9 million was outstanding.
+Added: At December 31, 2023, Optional Commitments under the SPA Commitments totaled $366.0 million, of which $39.0 million was funded, $327.0 million remained to be funded, and $1.0 million was outstanding.
+Added: The remaining amounts to be funded as of December 31, 2023, is subject the achievement of delivery milestones, satisfaction of closing conditions, resolving disputes with investors, and satisfaction or waiver of other conditions, including for a portion of such financing an effective registration statement for the shares underlying the applicable notes.
+Added: We may be unable to satisfy the closing conditions under the SPA Commitments or obtain additional incremental convertible senior secured note purchasers under the SPA Commitments or other debt or equity financing in a timely manner, on acceptable terms, or at all.
+Added: On November 11, 2022, we entered into a three-year Standby Equity Purchase Agreement (the “SEPA”) with Yorkville.
+Added: Under terms of the SEPA, we may, at our option, issue and sell from time to time up to $200.0 million (which can be increased up to $350.0 million in the aggregate under the Company’s option) of common stock to an affiliate of Yorkville Advisors, subject to certain limitations.
+Added: As of December 31, 2023, we had the right to issue and sell up to an additional $192.5 million, or $342.5 million if we exercises our option under the SEPA.
+Added: On June 16, 2023, we 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.
+Added: As a result, we may from time-to-time issue up to $300.0 million of common stock and/or warrants in the aggregate.
+Added: As of December 31, 2023, we had the right to sell up to $271.9 million under the Shelf Registration.
+Added: Under applicable SEC rules and regulations, because FF failed to timely file this Form 10-K it is not S-3 eligible and the Shelf Registration Statement is no longer effective.
+Added: See Note 11, Stockholders’ Equity, of the notes to the Consolidated Financial Statements included in this Form 10-K.
+Added: In addition, on September 26, 2023, we also entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, B.
+Added: Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc.
+Added: and Maxim Group LLC, as sales agents, to sell shares of Class A Common Stock, from time to time, with aggregate gross sales proceeds of up to $90.0 million pursuant to the Registration Statement as an “at-the-market” offering under the Securities Act (the “ATM Program”).
+Added: The ATM Program has been the primary source of liquidity for us since September 2023.
+Added: Under applicable SEC rules and regulations, because FF failed to timely file this Form 10-K, it is not S-3 eligible and cannot access the ATM Program.
+Added: For additional information see “Risk Factors – Risks Related to FF’s Common Stock – FF is unable to utilize its “at-the-market” equity program.”
+Added: Our ability to issue and sell additional shares of common stock or warrants under the SEPA is constrained by the number of authorized shares.
+Added: We must consider shares issuable under convertible debt, warrants or other obligations with equity rights.
+Added: In addition, equity issuances can potentially trigger provisions under the SPA Commitments that increase the number of shares to be issued upon conversion and reduce the strike price of related warrants.
+Added: This could result in us having inadequate authorized shares to meet our outstanding commitments.
+Added: Despite the potential access to liquidity resulting from the SEPA and the unfunded commitments from the SPA Commitments, we project that we will require substantial additional funds to continue operations and support production of the FF 91.
+Added: If we are unable to find additional sources of capital, we will not have sufficient resources to fund our outstanding obligations and continue operations and we will likely have to file for bankruptcy protection and our assets will likely be liquidated.
+Added: Our equity holders would likely not receive any recovery at all in a bankruptcy scenario.
+Added: We continue to explore various funding and financing alternatives to fund our ongoing operations and to ramp up production.
+Added: The particular funding and financing mechanisms, terms, timing, and amounts depend on our assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time.
+Added: However, there have been delays in securing additional funding commitments, which have exacerbated supply chain pressures, among other things.
+Added: If our ongoing capital raising efforts are unsuccessful or significantly delayed, or if we experience prolonged material adverse trends in our business, production will be delayed or decreased, and actual use of cash, production volume and revenue for 2024 will vary from our previously disclosed forecasts, and such variances may be material .
+Added: While we are actively engaged in negotiations with potential financing sources, we may be unable to raise additional capital on terms acceptable to us or at all.
+Added: In addition to the risk that our 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 or may be considered in the future and ongoing legal risks.
+Added: Capital needs to fund development of our remaining product portfolio will highly depend on the market success and profitability of the FF 91 and our ability to accurately estimate and control costs.
+Added: Apart from the FF 91 series, substantial additional capital would be required to fund operations, research, development, and design efforts for future vehicles.
+Added: As of and since December 31, 2023, we were and have been in default on the Secured SPA Notes.
+Added: All of the related notes have been presented as current given any waivers received are not for a sufficient duration and the events of default are reasonably certain to continue.
+Added: Since April 2023, we have been in breach of our debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balance of $4.5 million.
+Added: 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.
+Added: Sources of Liquidity
+Added: As of December 31, 2023, our principal source of liquidity was cash on hand totaling $1.9 million, which was held for working capital and general corporate purposes.
+Added: We also have access to various sources of additional capital, including the SEPA and the SPA Commitments.
+Added: Our ability to access these sources of capital and further information on amounts available is discussed in Note 2, Liquidity and Capital Resources , of the notes to the Consolidated Financial Statements included in this Form 10-K.
Significant Related Party Notes Payable and Notes Payable Facilities
−Removed: The Company has been significantly funded by notes payable from related parties and third parties.
−Removed: The related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by the Company’s founder and Chief Product and User Ecosystem Officer.
−Removed: For more information on the outstanding related party notes payable and notes payable as well as the related schedules of maturities, see Note 9, Related Party Notes Payable , and Note 10, Notes Payable , of the notes to the consolidated financial statements included in this Annual Report on From 10-K.
−Removed: Related party notes payable consists of the following as of December 31, 2022 and December 31, 2021 (dollars in thousands):
−Removed: December 31, 2022
−Removed: Note Name Contractual
+Added: We have been significantly funded by notes payable from related parties and third parties.
+Added: The related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by our founder and Chief Product and User Ecosystem Officer.
+Added: For more information on the outstanding related party notes payable and notes payable as well as the related schedules of maturities, see Note 7, Notes Payable , and Note 8, Related Party Transactions , of the notes to the Consolidated Financial Statements included in this From 10-K.
+Added: Related party notes payable consists of the following as of December 31, 2023:
+Added: (in thousands) Contractual
Date Contractual
−Removed: Rates Balance
−Removed: as of December 31, 2022 Interest Expense for the Year Ended December 31, 2022 Interest Expense for the Year Ended December 31, 2021
−Removed: Related party notes - China (1)
−Removed: December 31, 2023 12.0% $ 4,651 $ 3,879 $ 3,369
+Added: Related party notes – China December 31, 2023 18.0% $ 5,103
+Added: Related party notes – Unsecured SPA August 2029 10% - 15% 542
Related party notes – China various other Due on Demand —% 3,789
−Removed: $ 8,406 $ 3,879 $ 3,369
−Removed: December 31, 2021
−Removed: Note Name Contractual
−Removed: Maturity Date Contractual
−Removed: Interest Rates Unpaid Balance Net Carrying
−Removed: Value at 12/31/21
−Removed: Related party notes - China
−Removed: Due on Demand 18.00% $ 9,411 $ 9,411
−Removed: Related party notes - China various other
−Removed: Due on Demand 0.00% 4,244 4,244
−Removed: Total related party notes payable $ 13,655 $ 13,655
−Removed: Schedule of Principal Maturities of Related Party Notes Payable
−Removed: The future scheduled principal maturities of related party notes payable as of December 31, 2022 and December 31, 2021 were as follows:
−Removed: Year ended December 31, 2022
−Removed: Due on demand $ 3,755
−Removed: Year ended December 31, 2021
−Removed: Due on demand $ 13,655
−Removed: Notes payable consists of the following as of December 31, 2022 and December 31, 2021:
−Removed: December 31, 2022
−Removed: Note Name Contractual
+Added: Related Party Notes- Other February, 2024 5.27% $ 326
+Added: Related party notes payable, current $ (9,760)
+Added: Related party notes payable, less current $ —
+Added: We have entered into notes payable agreements with third parties, which consist of the following as of December 31, 2023:
+Added: (in thousands) Contractual
Maturity Date Contractual
2 unchanged sentences
Adjustments Original Issue Discount and Proceeds Allocated to Warrants Net
−Removed: Value Interest Expense for the Twelve Months Ended December 31, 2022
−Removed: Bridge Notes (4)
−Removed: October 27, 2028 10% $ 36,622 $ 264 $ (10,878) $ 26,008 $ 1,676
+Added: Secured SPA Notes Various 10%-15% $ 100,052 $ (15,501) $ (10,319) $ 74,232
+Added: Unsecured SPA Notes *
+Added: Various dates in 2029 10%-15% 13,885 1,208 (2,613) 12,480
Notes payable – China other
2 unchanged sentences
$ 118,917 $ (14,293) $ (12,932) 91,692
−Removed: December 31, 2021
−Removed: Note Name Contractual
−Removed: Maturity Date Contractual
−Removed: Interest Rates Unpaid
−Removed: Balance Fair Value
−Removed: Adjustments Original issue discount and proceeds allocated to warrants Net
−Removed: March 1, 2021 Notes
−Removed: March 1, 2022 14.00 % $ 55,000 $ 7,692 $ (5,997) $ 56,695
−Removed: August 26, 2021 Notes
−Removed: March 1, 2022 14.00 % 30,000 1,011 (87) 30,924
−Removed: June 9, 2021 Note 1 and Note 2
−Removed: December 9, 2022 — % 40,000 8,503 (9,522) 38,981
−Removed: August 10, 2021 Optional Notes
−Removed: February 10, 2023 15.00 % 33,917 12,283 (11,518) 34,682
−Removed: Notes payable - China various other
−Removed: Due on demand — % 5,458 — — 5,458
−Removed: Notes payable April 17, 2022 1.00 % 193 — — 193
−Removed: Auto loans Various Various 121 — — 121
−Removed: Total notes payable $ 164,689 $ 29,489 $ (27,124) $ 167,054
−Removed: Schedule of Principal Maturities of Notes Payable
−Removed: The future scheduled principal maturities of notes payable as of December 31, 2022 and December 31, 2021 are as follows:
−Removed: Year ended December 31, 2022
−Removed: Due on demand $ 4,997
−Removed: Years ended December 31, 2021
+Added: Related party notes payable $ (542)
+Added: Notes payable, current portion (91,150)
+Added: Notes payable, less current portion $ —
+Added: * includes amounts attributed to the Unsecured Streeterville SPA
+Added: All notes are classified as current as of December 31, 2023.
Cash Flow Analysis
−Removed: Presented below is a summary of FF’s cash flows for the periods indicated (dollars in thousands):
For the Year Ended
5 unchanged sentences
Operating Activities
−Removed: FF continues to experience negative cash flows from operations as FF designs and develops its vehicles and builds its infrastructure both in the United States and China.
−Removed: FF’s cash flows from operating activities are significantly affected by FF’s cash investments to support the growth of FF’s business in areas such as research and development associated with FF’s electric vehicles, corporate planning, and general and administrative functions.
−Removed: FF’s operating cash flows are also affected by its working capital needs to support growth and fluctuations in personnel related expenditures, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.
−Removed: Net cash used in operating activities was $383.1 million and $339.8 million for the years ended December 31, 2022 and 2021, respectively.
−Removed: The largest components of FF’s cash used by operating activities during the year ended December 31, 2022 were professional and contracted services totaling $124.6 million, compensation, benefits and related expenses totaling $120.4 million and prepaid insurance totaling $21.7 million.
−Removed: Other movements were related to changes in working capital.
−Removed: The largest components of FF’s cash used by operating activities during the year ended December 31, 2021 were $90.0 million for wages and compensation related expenses;
−Removed: $50.0 million for a non-exclusive, perpetual, irrevocable, and sublicensable license to use a platform, the Geely License, owned by Liankong, a subsidiary of Geely Holding;
−Removed: $28.4 million for professional services and for prepayment of software hosting costs.
−Removed: Other movements were related to changes in working capital.
+Added: We continue to experience negative cash flows from operations as we design and develop our vehicles and build our infrastructure both in the U.S.
+Added: Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as R&D associated with our electric vehicles, corporate planning, and general and administrative functions.
+Added: Our operating cash flows are also affected by our working capital needs to support growth and fluctuations in personnel related expenditures, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.
+Added: Net cash used in operating activities was $278.2 million for the year ended December 31, 2023.
+Added: The largest components of our cash used in operating activities during the year ended December 31, 2023 were $286.1 million of operating losses, primarily driven by personnel and compensation expense of $98.0 million and professional services of $35.3 million as well as cost of goods sold of $42.6 million, and cash outflows related to increasing inventory of $29.8 million and decreases to accrued expenses and other current and non-current liabilities of $42.5 million
+Added: Net cash used in operating activities was $383.1 million for the year ended December 31, 2022.
+Added: The largest components of our cash used by operating activities during the year ended December 31, 2022 were professional and contracted services totaling $124.6 million, compensation, benefits and related expenses totaling $120.4 million and prepaid insurance totaling $21.7 million.
Investing Activities
−Removed: Net cash used in investing activities was $123.2 million and $95.7 million for the years ended December 31, 2022 and 2021 related to acquisition of property and equipment.
+Added: Net cash used in investing activities was $31.1 million and $123.2 million for the years ended December 31, 2023 and December 31, 2022, respectively, and is related to acquisition of property and equipment.
Financing Activities
−Removed: Net cash used in financing activities was $6.7 million for the year ended December 31, 2022 and net cash provided by financing activities was $966.6 million for the year ended December 31, 2021.
−Removed: Cash used in financing activities during the year ended December 31, 2022 primarily consists of cash payments of $87.3 million for settling notes payable and accrued interest, $0.5 million for settling related party notes payable and accrued interest, $3.8 million for settling vendor payables in trust, $1.9 million principal pay down for finance lease liabilities, and $0.8 million for repurchase and retirement of Class A Common Stock.
+Added: Net cash provided by financing activities was $291.4 million for the year ended December 31, 2023 and used in financing activities $6.7 million for the year ended December 31, 2022.
+Added: Net cash provided by financing activities during the year ended December 31, 2023 primarily consists of $210.5 million in proceeds from notes payable, $24.9 million in proceeds from a sale and lease back transaction, the proceeds from the issuance of Class A Common Stock of $34.5 million, $21.0 million in proceeds from related party notes payable, and the proceeds from exercise of warrants totaling $4.1 million, partially offset by issuance costs of $2.5 million.
+Added: Net cash used in financing activities during the year ended December 31, 2022 primarily consists of cash payments of $87.3 million for settling notes payable and accrued interest, $0.5 million for settling related party notes payable and accrued interest, $3.8 million for settling vendor payables in trust, $1.9 million principal pay down for finance lease liabilities, and $0.8 million for repurchase and retirement of Class A Common Stock.
These were partially offset by $73.8 million in proceeds from the issuance of notes payable net of original issuance discounts, $9.5 million from the exercise of stock options and $4.2 million in proceeds from the exercise of warrants.
−Removed: Cash provided from financing activities during the year ended December 31, 2021 primarily consists of $229.6 million in cash proceeds from the issuance of Class A Common Stock, net of $0.2 million redemptions of as a result of the Business Combination, $761.4 million in cash proceeds from the PIPE Financing, $172.0 million in proceeds from the issuance of notes payable net of original issuance discounts, and $10.6 million from the exercise of stock options.
−Removed: These were partially offset by cash payments of $61.1 million for PIPE Financing transaction costs, $48.2 million for settling notes payable and accrued interest, $38.2 million for settling related party notes payable and accrued interest, $27.7 million for settling vendor payables in trust, $23.1 million for Business Combination transaction costs, $3.4 million for debt transaction costs, and $3.2 million for capital lease obligations.
Effect of Exchange Rate Changes on Cash and Restricted Cash
−Removed: The exchange rates effect on Cash and Restricted Cash was negative for the years ended December 31, 2022 and 2021.
+Added: The exchange rates effect on cash and restricted cash was $3.4 million and $1.0 million for the years ended December 31, 2023 and 2022, respectively.
The effects of exchange rate changes on cash and restricted cash result from fluctuations on the translation of assets and liabilities denominated in foreign currencies, primarily Chinese Yuan.
Fluctuations in exchange rates against the U.S.
−Removed: dollar may positively or negatively affect FF’s operating results.
−Removed: The effect of exchange rate change was a favorable $1.0 million and an unfavorable $2.5 million for the years ended December 31, 2022 and 2021, respectively.
+Added: Dollar may positively or negatively affect our operating results.
Off-Balance Sheet Arrangements
−Removed: The Company did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
−Removed: Thus, the Company did not have any off-balance sheet arrangements as of December 31, 2022 and 2021.
+Added: We did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
+Added: Thus, we did not have any off-balance sheet arrangements as of December 31, 2023 and 2022.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S.
+Added: GAAPgenerally accepted accounting principles.
The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period.
2 unchanged sentences
Changes in the accounting estimates are reasonably likely to occur from period to period.
−Removed: Accordingly, actual results could differ significantly from the estimates made by FF’s management.
+Added: Accordingly, actual results could differ significantly from the estimates made by our management.
To the extent that there are material differences between these estimates and actual results, future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
−Removed: Given the global economic climate and unpredictable nature and unknown duration of the COVID-19 pandemic, estimates are subject to additional variability and volatility.
−Removed: For a description of FF’s significant accounting policies, see Note 1, Nature of Business and Organization, and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
−Removed: An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the Consolidated Financial Statements.
−Removed: Management believes the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of FF’s Consolidated Financial Statements.
+Added: Given the global economic climate and unpredictable nature, estimates are subject to additional variability and volatility.
+Added: For a description of our significant accounting policies, see Note 1, Nature of Business and Organization, and Summary of Significant Accounting Policies of the notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
+Added: An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the
+Added: Consolidated Financial Statements.
+Added: Management believes the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.
Description Judgements and Uncertainties Effect if Actual Results Differ from Assumptions
−Removed: Stock-Based Compensation
−Removed: The Company’s stock-based compensation awards consist of options granted to employees, directors and non-employees for the purchase of common stock.
−Removed: The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”).
−Removed: ASC 718 requires the measurement and recognition of compensation expense for all stock-based compensation awards based on the grant date fair values of the awards.
−Removed: The Company estimates the fair value of stock options using the Black-Scholes option pricing model.
−Removed: For options with service conditions, the value of the award is recognized as expense over the requisite service period on a straight-line basis.
−Removed: For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable.
−Removed: Fair value of Common Stock — Prior to the close of the Business Combination, there was no public market for Legacy FF’s Class A Ordinary Stock.
−Removed: Therefore, Legacy FF’s Board of Directors determined the fair value of Legacy FF’s Class A Ordinary Stock at the time of the grant of stock options by considering a number of objective and subjective factors.
−Removed: The fair value of the stock was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled, “Valuation of Privately Held Company Equity Securities Issued as Compensation”.
−Removed: Legacy FF’s Board of Directors granted stock options with exercise prices equal to the fair value of Legacy FF’s Class A Ordinary Stock on the date of grant.
−Removed: After the close of the Business Combination, the closing price of FF’s Class A Common Stock on the Nasdaq as reported will be used.
−Removed: FF estimates the fair value of stock options using the Black-Scholes option-pricing model.
−Removed: Determining the fair value of stock-based compensation awards under this model requires highly subjective assumptions, including the fair value of the underlying common share (when there is no public market for the share), the risk-free interest rate, the expected term of the award, the expected volatility of the price of FF’s common shares, and the expected dividend yield of FF’s common share.
−Removed: Expected term — The estimate of the expected term of awards was determined in accordance with the simplified method, which estimates the term based on an averaging of the vesting period and contractual term of the option grant for employee awards and the contractual term of the stock option award agreement for non-employees.
−Removed: Expected volatility — The Company determines the expected volatility by weighing the historical average volatilities of publicly traded industry peers and it own trading history.
−Removed: FF intends to continue to consistently apply this methodology using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own Class A Common Stock price becomes available, unless circumstances change such that the identified companies are no longer similar to FF, in which case more suitable companies whose stock prices are publicly available would be utilized in the calculation.
+Added: Fair Value of Warrants
+Added: FF has elected to measure certain warrants at fair value, mainly related to any related SPA notes.
+Added: These warrants are liability classified instruments.
+Added: Upon exercise, any difference between the fair value measurement and the exercise price would be recorded to the statement of operations.
+Added: FF estimates the fair value of warrants using a Monte Carlo simulation model where the significant assumptions used include the volatility of the FF’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.
+Added: Fair value measurements associated with the liability-classified warrants represent Level 3 valuations under the fair value hierarchy.
+Added: Expected volatility of the Class A Common Stock— FF determines the expected volatility by weighing the historical average volatilities of publicly traded industry peers and its own trading history.
+Added: FF intends to continue to consistently apply this methodology using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the its own Class A Common Stock price becomes available, unless circumstances change such that the identified companies are no longer similar to FF, in which case more suitable companies whose stock prices are publicly available would be utilized in the calculation.
+Added: Expectations around the full ratchet trigger — the warrants contain a provision to adjust the strike price if FF issues equity, under certain equity issuance mechanism, at a lower price.
+Added: Management estimates the probability of this based on the current stock price.
Risk-free interest rate — The risk-free interest rate used to value awards is based on the United States Treasury yield in effect at the time of grant for a period consistent with the expected term of the award.
Dividend yield — The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends for the foreseeable future.
−Removed: Forfeiture rate — Stock-based compensation expense is reduced for forfeitures, which the Company estimates based on an analysis of actual forfeitures.
−Removed: The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors.
−Removed: Changes in the estimated forfeiture rate can have a significant impact on the Company’s stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the estimated forfeiture rate is changed.
These estimates involve inherent uncertainties and the application of management’s judgment.
−Removed: If FF had made different assumptions, FF’s stock-based compensation expense and its net loss could have been materially different.
−Removed: An increase in risk-free interest rate will reduce the estimated fair value of a stock option grant, while decrease in these factors will have an opposite effect.
−Removed: Likewise, a decrease in volatility and expected term will decrease the estimated fair value of a stock option grant, while an increase in these factors will have an opposite effect.
+Added: If FF had made different assumptions, the fair value of warrants and effect on the statement of operations due to exercise could have been different.
+Added: An increase in the risk-free interest rate will reduce the estimated fair value of a stock option grant, while a decrease in these factors will have an opposite effect.
+Added: Likewise, a decrease in volatility will decrease the estimated fair value of a stock option grant, while an increase in this factor will have the opposite effect.
The Company does not expect to change the dividend yield assumption in the near future.
Description Judgements and Uncertainties Effect if Actual Results Differ from Assumptions
−Removed: Fair Value of Ordinary Shares
−Removed: Prior to the Business Combination, FF was required to estimate the fair value of the ordinary shares underlying FF’s stock-based awards.
−Removed: The fair value of the ordinary shares underlying FF’s stock-based awards had been determined in each case by FF’s Board, with input from management and contemporaneous third-party valuation expert.
−Removed: FF believes that its Board has the relevant experience and expertise to determine the fair value of FF’s ordinary shares.
−Removed: FF’s Board intends all stock options granted to be exercisable at a price per share not less than the fair value per share of the ordinary share underlying those stock options on the date of grant.
−Removed: In the absence of a public market for FF’s ordinary shares, the valuation of FF’s ordinary shares had been determined using a hybrid method, which incorporated a scenario-based method and an option pricing method.
−Removed: The valuation was performed in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation.
−Removed: FF considered various objective and subjective factors to determine the fair value of FF’s ordinary shares as of each grant date, including:
−Removed: • Contemporaneous valuations performed by unrelated third-party experts;
−Removed: • The progress of FF’s research and development;
−Removed: • FF’s stage of development and commercialization and FF’s business strategy;
−Removed: • Industry information, such as external market conditions affecting the electric car industry and trends within the electric car industry;
−Removed: • Lack of marketability of FF’s ordinary shares;
−Removed: • Likelihood of achieving a liquidity event, such as an initial public offering, SPAC merger, or strategic sale given prevailing market conditions and the nature and history of FF’s business;
−Removed: • Prices, privileges, powers, preferences, and rights of our convertible preferred stock relative to those of FF’s ordinary shares;
−Removed: • Forecasted cash flow projections for FF’s business;
−Removed: • Liquidity of stock-based awards involving securities in a private company;
−Removed: • Macroeconomic conditions.
−Removed: The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment.
−Removed: The probability of a liquidity event and the derived discount rate are significant assumptions used to estimate the fair value of FF’s ordinary shares.
−Removed: If FF had used different assumptions or estimates, the fair value of FF’s ordinary shares and FF’s stock-based compensation expense could have been materially different.
−Removed: During 2020 and 2021 (prior to the closing of the Business Combination), FF’s estimated fair value of its Class A Ordinary Shares remained relatively consistent, fluctuating between $2.449 per share as of March 31, 2020 (“March 2020 valuation”) and $2.767 per share as of January 20, 2021 (“January 2021 valuation”).
−Removed: As of April 20, 2021, FF’s estimated fair value of its Class A Ordinary Shares was $7.948 (“April 2021 valuation”).
−Removed: In order to estimate the fair value of FF’s Class A Ordinary Stock, FF utilized more than one valuation approach.
−Removed: The March 2020 valuation was completed prior to the contemplation of the Business Combination.
−Removed: As such, income and market approaches were utilized in estimating the fair value.
−Removed: The January 2021 valuation and April 2021 valuation used a Hybrid Method, applying a probability-weighted expected return method (“PWERM”) to weight the indicated equity value determined under the option pricing model, income, and market approaches for the scenario in which the Business Combination does not close, and the equity value implied by the planned Business Combination.
−Removed: During 2020, FF experienced financial hardship and was unable to satisfy its liabilities, including payables in vendor trust, notes payable, and related party notes payable.
−Removed: Further, given these financial hardships, FF was unable to successfully achieve its strategic plans, including completing its manufacturing facility in Hanford or generating revenues from the sale of FF 91.
−Removed: Please refer to Key Factors Affecting Operating Results and Liquidity and Capital Resources and Going Concern within FF’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for further details on FF’s operations, capital resources, and going concern.
−Removed: The increase in value between the January 2021 valuation and the April 20, 2021 was due to FF’s progress towards the Business Combination.
−Removed: During the latter half of 2020, FF started contemplating a SPAC merger and began taking the necessary steps to prepare for the Business Combination with PSAC.
−Removed: The necessary steps undertaken to prepare for the Business Combination included meeting with PSAC and investment bankers, discussing timing expectations, and negotiating the preliminary letter of intent between PSAC and FF.
−Removed: As FF’s ongoing negotiations related to the Business Combination reflected an increased likelihood of a near-term exit transaction and/or liquidity event, the valuation of FF’s equity as of the January 2021 valuation and April 2021 valuation took into consideration the indicated equity value implied by the negotiations as well as the uncertainty inherent in the future key milestones including execution of the Merger Agreement and PSAC’s stockholder vote.
+Added: Recognition and disclosure of contingent liabilities, including litigation reserves.
+Added: FF is, from time to time, subject to claims and disputes arising in the normal course of business.
+Added: In the opinion of management, the outcome of any such claims and disputes cannot be predicted with certainty.
+Added: As of December 31, 2023 and 2022, FF had accrued legal contingencies of $21.6 million and $18.9 million, respectively, recorded within Accrued expenses and other current liabilities for potential financial exposure related to ongoing legal matters, primarily related to breach of contracts and employment matters, which are deemed both probable of loss and reasonably estimable.
+Added: For the legal matters involving third party vendors, such as suppliers and equipment manufacturers, FF recorded an accrual in Accounts payable in the Consolidated Balance Sheets based on the amount invoiced by such vendors, which represents the minimum amount of loss out of the range of potential outcomes in accordance with ASC 450-20-30-1.
+Added: Contingent liabilities, including litigation reserves involve a significant amount of judgment in determining whether a loss is probable and reasonably estimable due to the uncertainty involved in determining the likelihood of future events and estimating the financial statement impact of such events.
+Added: If further developments or resolutions of a contingent matter are not consistent with our assumptions and judgments, we may need to recognize a significant charge in a future period related to an existing contingent matter.
Description Judgements and Uncertainties Effect if Actual Results Differ from Assumptions
4 unchanged sentences
FF has elected the fair value option for certain related party notes payable and notes payable with embedded derivatives.
−Removed: The fair value of certain related party notes payable and notes payable was determined using a yield method, probability weighted for the likelihood of a liquidity event prior to maturity that would result in the conversion of the notes payable into ordinary shares.
−Removed: The probability of a liquidity event and the derived discount rate are assumptions used to estimate the fair value of FF’s notes payable carried at fair value.
−Removed: For further discussion see Note 8, Fair Value of Financial Instruments in the Notes to FF’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K,
+Added: FF has elected to measure certain notes payable and related party notes payable at fair value.
+Added: Specifically, the SPA Notes as they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 7, Notes Payable, Note 8, Related Party Transactions and Note 13, Fair Value of Financial Instruments).
+Added: The Company used a binomial lattice model and discounted cash flow methodology to value the SPA Notes.
+Added: 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 measurement applies to financial assets and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis.
−Removed: 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.
+Added: Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
−Removed: 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:
−Removed: 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.
−Removed: Level 1 valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.
−Removed: 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.
+Added: When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which the Company would transact and assumptions that market participants would use when pricing the asset or liability.
+Added: The accounting guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
+Added: The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.
+Added: A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
+Added: The fair value hierarchy is as follows:
+Added: 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.
+Added: Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.
+Added: 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.
−Removed: Level 2 valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds.
−Removed: Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions.
+Added: Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds.
+Added: Level 3 - Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions.
Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
2 unchanged sentences
Description Judgements and Uncertainties Effect if Actual Results Differ from Assumptions
−Removed: FF recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
−Removed: Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
−Removed: The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the Consolidated Statements of Operations and Comprehensive Loss in the period that includes the enactment date.
−Removed: A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.
−Removed: In evaluating the need for a valuation allowance, management considers the weighting of all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and cumulative taxable income or losses, future projections of profitability, and the duration of statutory carryforward periods.
−Removed: FF recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
−Removed: The tax benefits recognized in FF’s Consolidated Financial Statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized.
−Removed: FF recognizes interest and penalties accrued with respect to uncertain tax positions, if any, in its provision for income taxes in the Consolidated Statements of Operations and Comprehensive Loss.
−Removed: The Company has recognized a full valuation allowance as of December 31, 2022 and 2021 since, in the judgment of management given the Company’s history of losses, the realization of these assets was not considered more likely than not.
−Removed: The valuation allowance was $366,349 and $256,413 as of December 31, 2022 and 2021, respectively.
−Removed: The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which the temporary timing differences become deductible.
+Added: Impairment of Long-Lived Assets
+Added: FF its long-lived assets, consisting primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an assets (or asset groups) may not be recoverable.
+Added: FF 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.
+Added: The recoverability of long-lived 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.
+Added: If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value.
+Added: These forecasted undiscounted cash flows represent management’s best estimates of the future outcomes.
+Added: Assumptions that are significant to estimate the cash flows utilized include but are not limited to management’s estimates of future production, sales revenue, lease revenue and all related costs as well as other assumptions such as future capital expenditures and volumetric growth rates.
+Added: Increases or decreases in cash flow assumptions could cause corresponding increases to or decreases to the estimates of undiscounted cash flow amounts.
+Added: Decreases in cash flow assumptions could cause management to incorrectly conclude that the assets (or asset groups) in question may not be recoverable and an asset impairment could be required.
Recent Accounting Pronouncements
−Removed: See Note 1 in the sections titled “ Recent Accounting Pronouncements” as referred to in FF’s Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a discussion about our recently adopted accounting pronouncements and the recently issued accounting pronouncements not yet adopted which are determined to be applicable to the Company.
−Removed: Quantitative and Qualitative Disclosures about Market Risk
−Removed: FF is exposed to market risks in the ordinary course of its business.
−Removed: Market risk represents the risk of loss that may impact FF’s financial position due to adverse changes in financial market prices and rates.
−Removed: FF’s market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
−Removed: Interest Rate Risk
−Removed: FF did not have any related party notes payable or notes payable outstanding in which fluctuations in the interest rates would affect FF as of December 31, 2022 and 2021.
−Removed: FF’s related party notes payable and notes payable are fixed rate instruments and are not subject to fluctuations in interest rates.
−Removed: FF did not enter into investments for trading for speculative purposes.
−Removed: FF has not been exposed, nor anticipates being exposed to material risk due to changes in interest rates on existing related party notes payable and notes payable.
−Removed: As of December 31, 2022 and 2021, FF had cash and restricted cash of $18.5 million and $530.5 million, respectively.
−Removed: Foreign Currency Exchange Risk
−Removed: FF’s reporting currency is the U.S.
−Removed: dollar, and the functional currency of each of FF’s subsidiaries is either its local currency or the U.S.
−Removed: dollar, depending on the circumstances.
−Removed: The assets and liabilities of each of FF’s subsidiaries are translated into U.S.
−Removed: dollars at exchange rates in effect at each balance sheet date and operations accounts are translated using the average exchange rate for the relevant period.
−Removed: Decreases in the relative value of the U.S.
−Removed: Dollar to other currencies may negatively affect operating results as expressed in U.S.
−Removed: Foreign currency translation adjustments are accounted for as a component of accumulated other comprehensive loss within stockholders’ equity (deficit).
−Removed: Gains or losses due to transactions in foreign currencies are reflected in the consolidated statements of operations and comprehensive loss under the line item “Other expense, net.” FF has not engaged in the hedging of foreign currency transactions to date, although FF may choose to do so in
−Removed: FF does not believe that an immediate 10% increase or decrease in the relative value of the U.S.
−Removed: dollar to other currencies would have a material effect on operating results.
−Removed: Financial instruments that potentially subject FF to credit risk consist of cash and restricted cash, notes receivable and deposits.
−Removed: FF maintains its cash with major financial institutions.
−Removed: At times, cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits ($250 per depositor per institution) and China Deposit Insurance Regulations limits (CNY 500 per depositor per institution).
−Removed: FF believes the financial institutions that hold FF’s cash and restricted cash are financially sound and, accordingly, minimal credit risk exists with respect to cash.
−Removed: The notes receivable balance relates to a third party note which is subject to credit risk.
−Removed: However, credit risk on the note is minimized by the borrower also being a lender to FF and the amount due to the lender from FF is greater than the note receivable balance.
−Removed: FF pays vendor deposits for tooling and equipment which are subject to credit risk.
−Removed: Historically, FF has written off any deposits which are determined to be unrecoverable and continues to monitor credit risk related to deposits.
−Removed: FF is dependent on a large number of suppliers, the majority of which are single source suppliers, and the inability of these suppliers to deliver specified components in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage the purchase and delivery of these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.
−Removed: FF currently has one manufacturing location, which is under construction, and a contract manufacturing agreement in South Korea, while producing production-intent models in a portion of the facility which has been made operational.
−Removed: While we are currently purchasing and receiving components from our suppliers for these pre-production vehicles, our ability to achieve production of salable cars depends, among other things, on the readiness and solvency of our suppliers and vendors, and FF, to manage through challenges resulting from the COVID-19 pandemic and related supply chain and production difficulties.
−Removed: Internal Control Over Financial Reporting
−Removed: FF management identified material weaknesses in FF’s internal control over financial reporting.
−Removed: The material weaknesses in FF’s internal control over financial reporting remained unremediated as of the years ended December 31, 2022 and 2021.
−Removed: See the section titled “Risk Factors — Risks Related to FF’s Business and Industry — Risks Related to FF’s Business and Industry — FF identified material weaknesses in its internal control over financial reporting.
−Removed: If FF is unable to remediate these material weaknesses, or if it identifies additional material weaknesses in the future or otherwise fails to maintain effective internal control over financial reporting, it may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect FF’s business and share price.”
+Added: See the sections titled “ Recent Accounting Pronouncements” in Note 1, Nature of Business and Organization, and Summary of Significant Accounting Policies in our Consolidated Financial Statements included elsewhere in this Form 10-K for a discussion about our recently adopted accounting pronouncements and the recently issued accounting pronouncements not yet adopted which are determined to be applicable to us.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.