What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-07-30 compared with 2023-11-13 · 53 added, 178 removed, 5 unchanged (98% of the section changed)

Other than the risk factors listed below, there have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K/A filed with the SEC on August 21, 2023 (the “Form 10-K/A”).

FF has identified material weaknesses in its internal control over financial reporting.

FF’s inability to remediate these material weaknesses, or identification of additional material weaknesses in the future or other failure to maintain effective internal control over financial reporting, has, and could further, result in material misstatements in FF’s consolidated financial statements and FF’s ability to accurately or timely report its financial condition or results of operations, which may adversely affect FF’s business and share price.

FF’s management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934 as amended.

A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As a result of these material weaknesses, FF’s management concluded that its internal control over financial reporting was not effective as of December 31, 2022.

FF is actively engaged in remediation efforts designed to address these material weaknesses.

As FF continues to evaluate and work to improve its internal control over financial reporting, FF may determine that additional measures or modifications to the remediation plan are necessary.

FF is working to remediate the material weaknesses as efficiently and effectively as possible and expect full remediation to potentially go beyond December 31, 2023.

At this time, we cannot predict the total costs expected to be incurred;

however, the remediation measures have been and will continue to be time consuming, costly, and a significant demand on our financial and operational resources.

While FF believes these efforts will remediate the material weaknesses, it will not be considered remediated until FF completes the design and implementation of the enhanced controls, the controls operate for a sufficient period of time, and FF has concluded, through testing, that these controls are effective.

FF may not be able to complete its evaluation, testing or any required remediation in a timely fashion, or at all.

FF cannot assure you that the measures it has taken to date and may take in the future, will be sufficient to remediate the control deficiencies that led to its material weaknesses in internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

The effectiveness of FF’s internal control over financial reporting is subject to various inherent limitations, including cost, judgments and assumptions, human error and the risk of fraud.

The material weaknesses, or a failure to promptly remediate them, may adversely affect our business, our reputation, our results of operations and the market price of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”).

If FF is unable to remediate the material weaknesses in a timely manner, our investors, customers and other business partners may lose confidence in our business or our financial reports, and our access to capital markets may be adversely affected.

In addition, our ability to record, process, and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and regulations of the Securities and Exchange Commission (“SEC”) and other regulatory authorities, could be adversely affected, which may result in violations of applicable securities laws, stock exchange listing requirements and the covenants under our debt and equity agreements.

Any such delays or deficiencies could penalize us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and hurt our reputation and could thereby impede our ability to implement our growth strategy.

We could also be exposed to lawsuits, investigations, or other legal actions.

The control deficiencies resulting in the material weaknesses, in the aggregate, has resulted, and may in the future result, in misstatements of accounts or disclosures that would result in a material misstatement of the annual or interim consolidated financial statements.

For example, in July 2023, the Company identified errors in its Annual Report on Form 10-K for the year

ended December 31, 2022 and Quarterly Report on Form 10-Q for the periods ended March 31, 2023 and September 30, 2022, determined these financial statements should no longer be relied upon, and subsequently restated them.

In addition, we cannot be certain that we will not identify additional control deficiencies or material weaknesses in the future.

If we identify future control deficiencies or material weaknesses, these may lead to adverse effects on our business, our reputation, our results of operations, and the market price of our Class A Common Stock.

Further, if our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate additional financial results.

Further, FF has recently experienced substantial turnover in key management personnel, including legal and compliance personnel, as well as substantial changes to the composition of the Board, and further changes may occur in the future.

See “– The composition of FF’s Board has changed, and may further change .” As a result these Board and management changes, there can be no guarantee that the Company’s board of directors (the “Board”) as composed in the future will agree with decisions made by the Board regarding the material weakness and the necessary remedial measures, that they will not identify other areas that require remediation or that they will continue to pursue the remediation measures.

Any turnover of personnel, particularly accounting, finance and legal personnel, may also negatively impact FF’s internal controls over financial reporting and other disclosures and our ability to prepare and make timely and accurate public disclosures.

FF needs to raise additional capital to support its operations.

FF operates in a capital-intensive industry which requires significant cash to fund its operations.

As of September 30, 2023, FF’s cash position was $8.6 million, including restricted cash of $1.9 million.

FF expects its capital expenditures to continue to be significant for the foreseeable future as it continues to develop and grow its business.

In response to the delay in obtaining funding commitments and negative macroeconomic trends in the industry in which FF operates, such as supply chain pressures, rising interest rates, and high inflation, FF has identified and implemented certain cost reduction and cash conservation measures, including headcount and temporary salary reductions and supplier payment deferrals.

FF expects to defer the completion of construction of certain areas in its manufacturing facility and for the ramp up of production to be slower relative to previous plans.

Despite having 330 non-binding, fully refundable pre-orders as of September 30, 2023, the Company has only recognized $0.6 million in revenue for the three and nine months ended of September 30, 2023.

Accordingly, FF relies on capital from investors to support its operations.

Currently, FF has several financing agreements, such as the Secured SPA, Unsecured SPA, the Unsecured Streeterville SPA, the SEPA, FFVV Joinder, and the Senyun Joinder (each as defined in Note 7, Notes Payable, in the Notes to Unaudited Condensed Consolidated Financial Statements in this Report).

However, certain investors under FF’s existing financing agreements may not fund their commitments if the volume-weighted average price for the Class A Common Stock is less than $8.00 for the five trading days prior to the closing date for the funding.

Furthermore, there can be no assurance that FF would be able to satisfy the closing conditions under certain of the existing financing agreements, or that FF will be able to successfully obtain additional purchasers under the certain of the agreements.

Accordingly, the Company needs additional financing agreements to support its operations, including the production and delivery of the FF 91 Futurist.

FF may raise additional funds through the issuance of equity, equity related or debt securities, or through obtaining credit from financial institutions or governmental organizations.

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.

If the Company is unable to obtain additional financing on acceptable terms, in a timely manner, or at all the Company’s business, liquidity and results of operations may be materially adversely affected.

Further, any additional financing is expected to dilute FF’s stockholder value, which would affect your investment in FF and/or adversely effect the market for FF’s shares.

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.

In addition the Company’s assumptions and analyses relating to its various financing options currently being considered, including professional fees and other cost, and ongoing legal risks related to these financing transactions may prove incorrect.

Incremental capital needs beyond the date hereof to fund development of the Company’s remaining product portfolio and ramp up production will be highly dependent on the market success and profitability of the FF 91 Futurist and the Company’s ability to

accurately estimate and control costs.

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

FF has significant unfunded commitments from its investors.

If FF is unable to satisfy the conditions to funding or if there is a dispute regarding the conversion requirements related to the unfunded commitments, FF may not have enough capital to support its business and could be subject to investor legal claims.

Pursuant to the Secured SPA, Unsecured SPA, the Unsecured Streeterville SPA, FFVV Joinder, and the Senyun Joinder, the Company has obtained commitments from several investors totaling $513.5 million in convertible note financing and $20.0 million in committed forced warrant exercise proceeds, subject to certain conditions.

A total of $300.2 under these commitments has been funded as of September 30, 2023 ($263.2 million net of original discount and transaction costs) with the remaining unfunded commitment of $213.3 million.

There can be no assurance that FF will be able to successfully satisfy the conditions to receive the additional funding.

Further, if FF fails to satisfy these funding conditions to receive the unfunded commitments, the Company may be required to further delay our production and delivery plans for the FF 91 Futurist, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, and/or cease operations.

In addition, during and after the third quarter of 2023, the Company temporarily suspended effecting the conversion requests from its noteholders.

While the Company has begun effecting these conversion requests, there can be no assurance that the Company will not again suspend effecting such requests in a manner that could result in an event of default and monetary penalties under the various securities purchase agreements.

Further, the Company may be subject to legal claims by the investors, which could have a material and adverse impact on FF’s reputation and financial condition.

FF may also be subject to legal claims arising from disagreement over the terms of its securities.

For example, FF previously issued certain convertible notes (the “Senyun Notes”) to Senyun.

The Senyun Notes are subject to a restriction that FF will not convert the Senyun Notes, and Senyun will not have the right to convert the Senyun Notes, to the extent that Senyun would own more than 9.99% of the Company’s outstanding common stock, par value $0.0001 per share (the “Common Stock”) of FF after giving effect to the conversion.

In May 2023, Senyun requested to convert the Senyun Notes into shares of Common Stock and FF converted a certain amount of the Senyun Notes.

FF did not convert the Senyun Notes that would have resulted in Senyun owning more than 9.99% of the Common Stock.

However, Senyun believes that the Senyun Notes should have been converted in full in accordance with its interpretation of conversion limitations in the Senyun Notes.

The Company disputes this interpretation.

In July 2023 and October 2023, Senyun sent the Company a letter outlining its position and reserving its rights under the Secured SPA.

Further, pursuant to the Senyun Joinder, Senyun agreed to exercise its option to purchase $15.0 million of Tranche A Notes (as defined in Note 7, Notes Payable, in the Notes to Unaudited Condensed Consolidated Financial Statements in this Report) in accordance with the terms of the Secured SPA, with funding of 75% of such amount within five business days of the date of the Senyun Joinder and the remaining 25% of such amount within three business days thereafter, subject to certain conditions which have been satisfied.

As of September 30, 2023, Senyun has funded $11.5 million of its obligation and has not funded the remaining $3.5 million until the disagreement described herein is resolved.

The Company is in active discussions to resolve the disagreement.

However, it is not possible at this time to predict the outcome of the disagreement with Senyun and if it is not resolved, Senyun may not fund its remaining obligation.

Further, any litigation, proceedings or dispute related to legal claims of the Company’s investors, even those without merit, may divert the Company’s financial and management resources that would otherwise be used to benefit the future performance of the Company’s operations.

Any adverse determination against the Company in any potential proceedings may also result in settlements, injunctions or damages that could have a material adverse effect on the Company’s business, financial condition and results of operations and investors or other financing sources may be unwilling to provide additional funding to FF on commercially reasonable terms, or at all, as a result of any legal claims.

If FF has insufficient reserves to cover future warranty claims, its business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.

As our vehicles are produced and delivered, we will need to maintain warranty reserves to cover warranty-related claims.

If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.

Additionally, estimating the necessary amount of warranty reserves is inherently uncertain, particularly in light of our limited operating history and limited field data available to us, and changes to such estimates based on real-world observations may cause material changes to our warranty reserves.

In the future, we may become subject to significant and unexpected warranty expenses.

There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

In addition, if future laws or regulations impose additional warranty obligations on us that go beyond our manufacturer’s warranty, we may be exposed to materially higher warranty expenses than we expect, and our reserves may be insufficient to cover such expenses .

FF might not obtain and maintain sufficient insurance coverage, which could expose FF to significant costs and business disruption.

FF may be subject to losses resulting from claims such as product liability, accidents, force majeure or other claims brought against the Company, for which it may have no or insufficient insurance coverage.

As FF commercializes its vehicles, it may not maintain as much insurance coverage as other OEMs, and in some cases, it may not maintain any at all.

Additionally, the policies that FF has may include significant deductibles or exclusions, and FF cannot be certain that its insurance coverage will be sufficient to cover all or any future claims.

A loss that is uninsured or exceeds existing policy limits may require FF to pay unexpected and substantial amounts, which could adversely affect FF’s financial condition and results of operations.

Further, insurance coverage may not continue to be available to FF or, if available, may be at a significantly higher cost, based on insurance market conditions or a change in FF’s risk profile.

This may require a change in FF’s insurance purchasing philosophy and strategy which can result in the assumption of greater risks to offset insurance market fluctuations.

FF is subject to legal proceedings, claims, and disputes arising both in and outside the ordinary course of business .

FF has been, continues to be, and may in the future be involved in legal proceedings and claims arising both in and outside the ordinary course of FF’s business.

We could also be subject to claims and litigation by investors based on the decline of the price of our Common Stock.

For example, FF has been involved in litigation with contractors and suppliers over past due payments and FF’s subsidiaries in the People’s Republic of China (the “PRC Subsidiaries”) are involved in multiple proceedings or disputes involving lease contracts, third-party suppliers or vendors, or labor disputes.

Additionally, FF has in the past been, and may in the future be, party to various disputes with our stockholders, such as the dispute with FF Global Partners LLC (“FF Global”), the California Federal Derivative Action, the Delaware Federal Derivative Actions, the Consolidated Delaware Class Action, and a putative class action (each as defined in Note 9, Commitments and Contingencies ).

See “Part I, Item 1.

Financial Statements – Note 9, Commitments and Contingencies” and “ Part II, Item 1.

Legal Proceedings ” for more information regarding the current proceedings the Company is involved in.

Such litigation and other legal proceedings or disputes are inherently uncertain, divert managements time and attention, and are costly.

Any adverse judgments or settlements in some of these legal disputes, or future proceedings or disputes, may result in adverse monetary damages, penalties or injunctive relief against FF, which could negatively impact its financial position, cash flows or results of operations.

Additionally, if one or more of those legal matters were resolved against FF in a reporting period for amounts above management’s expectations, FF’s business prospects, financial condition and operating results could be materially adversely affected.

Further, any claims or litigation, regardless of outcome or if fully indemnified or insured, could damage FF’s reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

Furthermore, while FF maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as retentions and caps on amounts recoverable.

Even if FF believes a claim is covered by insurance, insurers may dispute its entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of FF’s recovery.

In the event that the independent registered public accounting firm operating in China that FF uses as an auditor for its operations in China is not permitted to be subject to inspection by the Public Company Accounting Oversight Board (“PCAOB”), then investors may be deprived of the benefits of such inspection.

Under the Holding Foreign Companies Accountable Act (the “HFCA”), if the SEC determines that a company has filed audit reports by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.

The PCAOB provides a framework to use when determining, as contemplated under the HFCA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

Additionally, the SEC has disclosure requirements that apply to registrants that the SEC identifies as having filed an Annual Report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

Our current auditor, the independent registered public accounting firm that issued the audit report included the Form 10-K/A, is registered with the PCAOB, and is subject to laws in the U.S.

pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.

Accordingly, we have not been identified as a “Commission-Identified Issuer” by the PCAOB under the current framework of the HFCA.

However, prior to 2022, the

auditors of the PRC Subsidiaries were not subject to inspection by the PCAOB and any future determination by the PCAOB that the PRC Subsidiaries’ auditors are not subject to inspection could materially adversely affect the Company.

Our ability to retain an auditor subject to PCAOB inspection and investigation may depend on the relevant positions of U.S.

and Chinese regulators.

If the PCAOB is unable to inspect or investigate completely the Company’s auditor in China because of a position taken by the Chinese authorities, then such lack of inspection could cause trading in the Company’s securities to be prohibited under the HFCA, and ultimately result in a determination by the SEC to delist the Company’s securities.

Such a prohibition would substantially impair an investor’s ability to sell or purchase the Common Stock and negatively impact the price of the Common Stock.

Accordingly, the HFCA calls for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially non-U.S.

In addition, PCAOB inspections help improve future audit quality and effectiveness.

Without the benefit of PCAOB inspections, existing or potential investors could lose confidence in our reported financial information and the quality of our financial statements with respect to the PRC Subsidiaries.

There can be no assurance that FF will be able to comply with the continued listing standards of Nasdaq.

If the Nasdaq Stock Market LLC (“Nasdaq”) delists FF’s shares from trading on its exchange for failure to meet the applicable listing standards, we and our stockholders could face significant material adverse consequences including:

Other than the updates to the first two risk factors listed below and the addition to the third risk factor listed below, there have been no material changes from the risk factors previously described under Item 1A of the Form 10-K).

FF is not currently in compliance with the continued listing requirements for Nasdaq and may be delisted, which could affect the market price and liquidity for FF’s Common Stock and reduce FF’s ability to raise additional capital.

On December 28, 2023, FF received written notice from Nasdaq stating that FF has failed to maintain a minimum bid price of at least $1.00 per share for the prior 30-consecutive-trading-day period from November 9, 2023 to December 27, 2023.

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), FF was initially provided 180 calendar days from receipt of the notice from Nasdaq to regain compliance with the Minimum Bid Price Requirement.

On April 18, 2024, FF received a letter from Nasdaq indicating that FF was not in compliance with Nasdaq Listing Rule 5250(c)(1) as FF had not yet filed its Annual Report on Form 10-K for the year ended December 31, 2023.

On April 24, 2024, FF received an additional letter from Nasdaq indicating that FF was not in compliance with Nasdaq Listing Rule 5810(c)(3)(A)(iii), as FF’s Class A Common Stock had a closing bid price of $0.10 or less for ten consecutive trading days (the “Low Priced Stocks Rule”).

The letter indicated that, as a result of non-compliance with both the Low Priced Stocks Rule and the requirement to file the Form 10-K for the year ended December 31, 2023, the Nasdaq staff had determined to delist FF’s securities from The Nasdaq Capital Market (the “Delisting Determination”).

Further, on May 21, 2024, FF received an additional letter from Nasdaq indicating that FF is now delinquent in filing its Form 10-Q for the period ended March 31, 2024, and as such, the delinquency serves as an additional basis for delisting FF’s securities from The Nasdaq Capital Market.

On May 1, 2024, FF requested a hearing to appeal the Delisting Determination, which stayed the suspension of FF’s securities for 15 days.

FF also requested an extended stay of the suspension pending such hearing with Nasdaq’s Hearings Panel (the “Panel”), which Nasdaq granted on May 28, 2024.

On June 13, 2024, a hearing was held with the Panel at which FF requested an extension of the period to regain compliance with the Minimum Bid Price Requirement to August 30, 2024 and to cure the delinquency in filing the Form 10-Q for the period ended March 31, 2024 (the “Q1 10-Q”) to July 31, 2024.

On May 28, 2024, FF filed its Annual Report on Form 10-K for the year ended December 31, 2023 (as amended on May 30, 2024 and June 24, 2024).

On June 26, 2024, the Panel granted FF’s request for extension subject to FF filing this Form 10-Q on or before July 31, 2024, timely filing the Form 10-Q for the period ended on June 30, 2024, and demonstrating compliance with the Minimum Bid Price Requirement on or before August 31, 2024.

FF is taking definitive steps to timely satisfy the conditions set forth by the Panel, including filing a definitive proxy statement with a proposal for stockholders to approve a reverse stock split and [filing this Form 10-Q on or before July 31, 2024].

In addition, FF intends to timely file its second quarter Form 10-Q.

However, FF may be unable to timely satisfy the terms of the extension granted by the Panel.

FF will continue to monitor the closing bid price of its Class A Common Stock and seek to regain compliance with all applicable Nasdaq requirements within the allotted compliance periods and may, if appropriate, consider available options, including implementation of a reverse stock split if approved by stockholders, to regain compliance with the Minimum Bid Price Requirement.

If Nasdaq delists FF’s shares from trading on its exchange for failure to meet the applicable listing standards, we and our stockholders could face significant material adverse consequences including:

• a limited availability of market quotations for our securities;

3 unchanged sentences

• a decreased ability to issue additional securities or obtain additional financing in the future.

On October 31, 2022, we received written notice from Nasdaq that we were not in compliance with the Nasdaq requirement for the bid price for Class A Common Stock to be at least $1.00 per share (the “Minimum Bid Price Requirement”).

In order to comply with the Minimum Bid Price Requirement, in the third quarter of 2023, the Company, after stockholder approval, effected the Reverse Stock Split at a ratio of 1:80 and set the number of authorized shares of Class A Common Stock to 154,437,500.

Nasdaq notified the Company that it had regained compliance with the Minimum Bid Price Requirement on September 13, 2023.

In addition, in connection with Mr.

He’s resignation, and to comply with Nasdaq Listing Rule 5605(c)(4)(B), on August 2, 2023, the Company notified Nasdaq that the Company no longer complied with Nasdaq’s independent director and audit committee requirements as set forth in Listing Rule 5605 as the Board was not comprised of a majority of independent directors and the Audit Committee of the Board (the “Audit Committee”) was not comprised of at least three independent directors.

The non-compliance was subsequently cured by the appointment of Mr.

Peker as an independent member of the Board and Audit Committee.

Although, the Company has regained compliance with Nasdaq Listing Rules, there can be no assurance that the Company will remain compliant with such rules or other Listing Rules in the future.

In particular, the rights granted to FF Global Partners LLC (“FFGP”) under the Amended Shareholder Agreement or other similar rights granted to other investors in the future may cause FF to fall out of compliance with certain of Nasdaq’s Listing Rules, including Nasdaq Rule 5640, which disallows the voting rights of existing stockholders to be disparately reduced through any corporate action or issuance.

Any future non-compliance may be costly, divert management’s time and attention, and could have a material adverse effect on the Company’s business, reputation, financing, and results of operations.

FF may issue additional shares of Common Stock or preferred shares, which would dilute the interest of our stockholders.

FF may, in the future, issue a substantial number of additional shares of Common Stock or preferred stock.

The issuance of additional shares of Common Stock or preferred stock:

● may significantly dilute the equity interest of investors;

● may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock;

● could cause a change of control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

● may adversely affect prevailing market prices for our Common Stock.

Sales of a substantial number of shares of our Class A Common Stock in the public market, including the resale of the shares of Common Stock held by FF stockholders pursuant to its registrations statements on Form S-3 filed with the SEC or pursuant to Rule 144, could occur at any time.

These sales, or the perception in the market that the holders of a large number of shares of Common Stock intend to sell shares, could reduce the market price of the Class A Common Stock.

Pursuant to our obligations under the Secured SPA, Unsecured SPA, Unsecured Streeterville SPA, FFVV Joinder and the Senyun Joinder, we have registered 23,671,743 shares of Class A Common Stock issuable upon conversion of the Secured SPA Notes, the Unsecured SPA Notes and the exercise of Warrants (the “August Registration Statement”).

Such securities represent approximately 74.5% of the shares of Class A Common Stock outstanding as of September 30, 2023.

The August Registration Statement permits the resale of these shares until it is no longer effective.

The resale, or expected or potential resale, of a substantial number of shares of our Class A Common Stock in the public market could adversely affect the market price for the Class A Common Stock and make it more difficult for you to sell your holdings at times and prices that you determine are appropriate.

Furthermore, because there is a large number of shares registered under the August Registration Statement, we expect the selling Stockholders (as defined in the August Registration Statement and related prospectus) will continue to offer the securities covered thereby pursuant to the August Registration Statement or Rule 144 for a significant period of time, the precise duration of which cannot be predicted.

Accordingly, the adverse market and price pressures resulting from an offering pursuant to the August Registration Statement may continue for an extended period of time.

In addition, as of September 30, 2023, the Class A Common Stock is also subject to potential dilution from:

(i) the exercise of up to 4,391,895 warrants, (ii) the exercise of up to 428,081 stock options, (iii) the vesting of 177,650 unvested RSUs, (iv) the issuance of up to 312,500 earnout shares pursuant to the triggering events in the Merger Agreement and (v) the issuance of up to 289,001 remaining registered shares of Class A Common Stock that FF may elect, in its sole discretion, to issue and sell to Yorkville pursuant to the SEPA.

Additionally, the Class A Common Stock is subject to potential dilution upon the full conversion and exercise of the SPA Notes, Unsecured SPA Notes and SPA Warrants .

The Class A Common Stock is also subject to potential dilution due to issuance of Common Stock in connection with future equity and/or convertible debt financings.

Sales of substantial numbers of such shares in the public market, including the resale of the shares of Common Stock held by FF stockholders, could adversely affect the market price of the Class A Common Stock, the impact of which is increased as the value of our stock price increases.

FFGP is able to exert substantial influence over FF, including by delaying or preventing a change in control.

Under the Amended Shareholder Agreement, FFGP is entitled to nominate a number of directors based on its voting power with respect to FF’s outstanding Common Stock, currently entitling FFGP to nominate four out of seven directors to the Board of FF.

In addition, on September 23, 2022 and January 13, 2023, FF, FF Global and FFGP entered into governance settlements with FFGP, including with respect to the composition of the Board.

As a result, certain of FF’s stockholders particularly FFGP, may have the ability to determine the outcome of corporate actions requiring stockholder approval.

This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our Class A Common Stock.

Additionally, FFGP beneficially owns, directly or indirectly, all of the outstanding shares of the Company’s Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), which accounts for approximately 2.5% of FF’s total outstanding shares of Common Stock ( i.e ., Class A Common Stock and Class B Common Stock combined) and voting power as of September 30, 2023.

Under FF’s Third Amended and Restated Certificate of Incorporation, each share of Class A Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to one vote per share, subject to an increase to 10 votes per share if the company reaches a $20.0 billion equity market capitalization.

Pursuant to the Amended Shareholder Agreement, FFGP informed FF that it expects FF will submit a proposal to FF stockholders for approval to amend the Third Amended and Restated Certificate of Incorporation to provide that (i) the voting power of the Class B Common Stock will be increased to 10 votes per share (after which the outstanding shares of Class B Common Stock, which FFGP beneficially owns, will account for approximately 19.7% of FF’s voting power) and (ii) the voting power of the Class B

Common Stock will increase from 10 votes per share to 20 votes per share following the Company achieving an equity market capitalization of $3.0 billion (after which the outstanding shares of Class B Common Stock, which FFGP beneficially owns, will account for approximately 32.9% of FF’s voting power).

If FFGP obtains such enhanced voting rights, it would have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of the assets of FF, election of directors and other significant corporate actions.

FFGP could take actions that are not in the best interest of FF or its other stockholders.

This mechanism may discourage, delay or prevent a change in control, which could have the effect of depriving other stockholders of FF of the opportunity to receive a premium for their shares as part of a sale of FF.

Based on a Schedule 13D/A filed on June 21, 2023, FFGP has beneficial ownership over 1,346,856 shares of Common Stock, which includes:

(i) 800,008 shares of Class A Common Stock issuable upon conversion of 800,008 shares of Class B Common Stock held by FFGP and (ii) shares for which FFGP has entered into voting agreements with certain FF stockholders pursuant to which FFGP will vote as a proxy of all of the Class A Common Stock owned by such FF stockholders subject to certain limitations.

As a result, FFGP exercises voting power for less than 4.1% of FF’s outstanding Common Stock as of September 30, 2023.

The Company’s ability to produce the FF 91 series on a meaningful scale at its Hanford, California facility may be substantially delayed or result in material unanticipated cost increases, which would have a material adverse impact on the Company’s business, prospects, financial condition, results of operations, and cash flows.

FF plans to continue building out its FF ieFactory in Hanford, California, to support the production of the FF 91 series.

The Company may experience delays and other difficulties that could further increase costs and adversely affect FF’s scheduled timeline to manufacture and deliver vehicles at scale.

Various risks and uncertainties inherent in new manufacturing processes could result in delays in the production of FF’s vehicles including, for example, those with respect to the Company’s:

• ability to secure funding necessary to complete the build-out of the FF ieFactory California;

• securing permits and certificates required to manufacture FF’s vehicles at scale;

• pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale;

• compliance with complex and evolving environmental, workplace safety and similar regulations;

• channels to secure necessary equipment, tools and components from suppliers on acceptable terms or at all and in a timely manner;

• the ability to attract, recruit, hire and train skilled employees;

• quality controls;

• facing a health emergency such as the outbreak of the COVID-19 pandemic, difficult economic conditions, and international political tensions;

• other delays and cost increases and overruns.

If the Company in unable to timely produce the FF 91 series on a meaningful scale at FF ieFactory California or experiences unanticipated cost increases or overruns, it would have a material adverse impact on its business, prospects, financial condition, results of operations, and cash flows.

Increases in costs, disruption of supply or shortage of materials used to manufacture FF’s vehicles, in particular for lithium-ion cells or electronic components, could harm its business.

FF incurs significant costs related to procuring components and raw materials required to manufacture its vehicles.

FF may experience cost increases, supply disruption and/or shortages relating to components and raw materials, which could materially and adversely impact its business, prospects, financial condition and operating results.

FF uses various components and raw materials in its business, such as steel, aluminum, and lithium battery cells.

The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased production of electric vehicles by FF’s competitors, as well as unforeseeable events such as the COVID-19 pandemic.

For instance, FF is exposed to multiple risks relating to lithium battery cells or electronic components, including but not limited to:

(i) an increase in the cost, or decrease in the available supply, of materials used in the battery cells, such as lithium, nickel, cobalt and manganese, including as a result of the Biden administration’s May 2024 announcement of significant increases in tariff rates on certain imports from China, including on lithium-ion EV batteries, battery parts, and related minerals;

(ii) disruption in the supply of battery cells or electronic components due to quality issues or recalls by battery cell or electronic component manufacturers;

and (iii) the inability or unwillingness of FF’s current battery cell or electronic component manufacturers to build or operate battery cell or electronic components manufacturing plants to supply the numbers of lithium cells or electronic components required to support the growth of the electric vehicle industry as demand for such battery cells or electronic components increases.

FF’s business is dependent on the continued supply of battery cells for the battery packs used in its vehicles and other electronic components.

While FF believes several sources of the battery cells are available for such battery packs, it has to date fully qualified only one supplier for the battery cells used in such battery packs and has very limited flexibility in changing battery cell suppliers.

Any disruption in the supply of battery cells or electronic components from such suppliers could disrupt production of FF’s vehicles until such time as a different supplier is fully qualified.

There can be no assurance that FF would be able to successfully retain alternative suppliers on a timely basis, on acceptable terms or at all.

Furthermore, tariffs (such as the increased tariffs on lithium-ion EV batteries described above) or shortages in petroleum and other economic conditions may result in significant increases in freight charges and material costs.

In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages which would result in increased materials costs to FF thereby negatively impacting its business, prospects, financial condition and results of operations.

Substantial increases in the prices for FF’s raw materials or components would increase its operating costs, and could reduce margins if FF cannot recoup the increased costs through increased vehicle prices.

Any attempts to increase product prices in response to increased material costs could result in a decrease in sales and therefore materially and adversely affect FF’s brand, business, prospects, financial condition and operating results.

Our latest business strategy, which we refer to as the Bridge Strategy, is subject to numerous risks and uncertainties.

FF has developed a new business strategy that we refer to as the Bridge Strategy as described in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview contained in Part I of this form 10-Q.

This strategy may fail for any number of reasons, including that:

• there may be insufficient demand in the United States for a China-based electric vehicle;

• the price range that FF is initially targeting is a highly competitive segment of the electric vehicle market, and additional competitors are expected in the future;

• FF’s competitors are better capitalized, substantially larger, have developed after-sales service and support infrastructures, have existing or upcoming models in the market, and have stronger name recognition;

• FF currently lacks the necessary funding to execute on the Bridge Strategy and has not yet identified any potential funding sources, and it is unclear how much quarterly funding the Bridge Strategy would require in 2024 or 2025;

• existing tariff policies, including the tariffs on electric vehicles and lithium-ion batteries from China that were announced by the Biden administration in May 2024, and new tariffs could render the Bridge Strategy unfeasible;

• the cost of procuring components and raw materials from countries other than China in order to manage the aforementioned tariffs could render the Bridge Strategy unfeasible;

• FF’s modeling for the Bridge Strategy is preliminary and provides little margin for error in cost modeling;

• the Bridge Strategy could distract management from FF’s other business strategies and operations, including FF’s U.S.

and China dual-home strategy, U.S.

delivery of the FF 91, FF’s strategy in the Middle East including the United Arab Emirates, delivery of the FF 91 2.0 Futurist aiFalcon Limited Edition for the Middle East market, and the FF 81 and FF 71 pipeline;

• regulatory and compliance costs, as well as obtaining necessary certifications, related to the Bridge Strategy;

• building a new supply chain would be time consuming and costly;

• FF would need to obtain a certificate of occupancy for its Hanford manufacturing facility to allow FF to execute on the Bridge Strategy, and obtaining such a certificate of occupancy would be time consuming and costly;

• FF would need to hire a significant number of employees at its Gardena and Hanford locations to execute on the Bridge Strategy;

• the Bridge Strategy would require a U.S.-wide after-service and support infrastructure, which would be costly to build.

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

What changed 10-Q

Item 1A. Risk Factors