What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-14 · 321 added, 208 removed, 392 unchanged (57% of the section changed)

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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.

FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed on May 28, 2024 (as amended, the “Form 10-K”), “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Q1 2024 10-Q”) and “Cautionary Note Regarding Forward-Looking Statements” below.

FF’s actual results may differ materially from management’s expectations as a result of various factors, including but not limited to those discussed in the sections entitled “Risk Factors” in the Company’s Annual Report on Form 10-K filed on May 28, 2024 (as amended, the “Form 10-K ”), “Risk Factors” in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (the “Q1 2024 10-Q”), and “Cautionary N ote Regarding Forward-Looking Statements” below.

The objective of this section is to provide investors an understanding of the financial drivers and levers in FF’s business and describe the financial performance of the business.

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Future developments affecting us may not be those that we have anticipated.

These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performa nce to be materially different from those expressed or implied by these forward-looking statements.

These risks and uncertainties include, but are not limited to, those factors described under the section titled “ Risk Factors ” in the Form 10-K, as updated in the Q1 2024 10-Q.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Shou ld one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

We undertake no obligation (and expressly disclaim any obligation) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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FF designs and engineers next-generation intelligent, connected, electric vehicles.

We manufacture vehicles at our 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.

We manufacture vehicles at our production facility in Hanford, California (the “FF ieFactory California”).

We have additional engineering, sales, and operational capabilities in China and are exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangements.

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• Since inception, we have developed a portfolio of intellectual property, established our supply chain, and assembled a global team of automotive and technology experts and innovators to achieve our goal of redefining the future of the automotive industry.

As of June 30, 2024, we have been granted approximately 660 patents globally.

As of September 30, 2024, we have approximately 660 active patents globally.

• We believe 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.

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While the mechanical platform of the mass-market product would be from Bridge Strategy Partners, we intend to seek to utilize a component mix sufficient to reach part level duty by fulfilling the criteria for part supplier and manufacturing requirement.

For a discussion of material risks relating to the Bridge Strategy, please see Part II, Item 1A., Risk Factors – “Our latest business strategy, which we refer to as the Bridge Strategy, is subject to numerous risks and uncertainties” in the Q1 2024 10-Q.

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.

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Recent Developments

During the three months ended June 30, 2024, these additional milestones and events took place:

• As of April 1, 2024, we completed our voluntary recall in the United States through an OTA software update.

• We announced, on April 9, 2024, the establishment of a Middle Eastern sales entity in Dubai, U.A.E.

• On April 22, 2024, we announced Werner Wilhelm as Executive Launch Director.

• On May 29, 2024, we announced plans to share the details of the Bridge Strategy in the following months.

• In June 2024, we determined that the previously announced future FF 91 Alliance Edition users, Rem D Koolhaas and Emma Hernan, would not complete the acquisition of their respective FF cars, due to personal reasons.

In the period subsequent to June 30, 2024, these additional milestones and events took place:

During the three months ended September 30, 2024, these additional milestones and events took place:

• On September 22, 2024, we delivered an FF 91 2.0 Futurist Alliance to Born Leaders Entertainment in Hollywood, where Born Leaders also became a Developer Co-Creation Officer for us.

• On September 19, 2024, we officially launched our second brand, Faraday X (FX), specifically focused on producing affordable electric vehicles priced between $20,000 and $50,000 to capture a broader consumer market.

• On September 5, 2024, we entered into a Junior Securities Purchase Agreement (the “Junior Secured SPA”) with institutional investors for $30.0 million in commitments, consisting of $22.5 million in cash and $7.5 million converted from a prior loan (see Note 7, Notes Payable in the notes to the Unaudited Condensed Consolidated Financial Statements ).

The notes pursuant to the Junior Secured SPA have a 10% interest rate, are convertible into common stock, and were issued with warrants to purchase 5.7 million shares with an exercise price of $6.29 .

Each investor also received an incremental warrant to fund, at the investor’s sole discretion, additional notes pursuant to the Junior Secured SPA for amounts up to the original principal balance the investor funded.

• On August 16, 2024 after market close, the Company’s 1 -for- 40 reverse stock split became effective.

• On August 12, 2024, Wei Gao, Head of Global Communication and Community Sales, took delivery of an FF 91 2.0 Futurist Alliance, marking the second delivery in the Start of Delivery Second Phase (SOD2).

• On August 2, 2024, we entered into a Waiver Agreement with certain investors holding secured and unsecured convertible notes, allowing adjustments to the notes’ conversion price under specific conditions to reduce cash obligations, providing noteholders with the option to convert at a lower price while waiving accrued interest, and extending their right to purchase additional notes for one year.

• On August 1, 2024, we filed a Certificate of Amendment to increase authorized common stock from 463.3 million to 4.17 billion shares, bringing the total authorized shares to 4.18 billion (each on a pre-split adjusted basis).

Also on August 1, 2024, we filed a Certificate of Elimination to eliminate the designation of the Series A Preferred Stock classification, reclassifying it as authorized but unissued, following the automatic redemption of all outstanding Series A Preferred shares.

• On July 20, 2024, we held an interactive investor Community Day at our Los Angeles headquarters.

• In July 2024, we unveiled its innovative Bridge Strategy, making a return to a two-brand approach.

• On July 18, 2024, we unveiled our Automotive Bridge Strategy, reintroducing a two-brand approach to target both luxury and affordable EV markets, expanding our reach through the integration of advanced AI and software technologies.

• On July 11, 2024, we entered into a Master Lease Agreement with Utica Leaseco, LLC with respect to a collateralized loan arrangement (see Note 7, Notes Payable in the notes to the Unaudited Condensed Consolidated Financial Statements ).

In the period subsequent to September 30, 2024, these additional milestones and events took place:

• On November 1, 2024, we filed a Registration Statement on Form S-1 with the SEC.

This registration covers the issuance of Class A Common Stock that are contingently issuable under the terms of the Junior Secured SPA Notes (see Note 7, Notes Payable in the notes to the Unaudited Condensed Consolidated Financial Statements ).

• On October 24, 2024, we announced a co-investment agreement with Master Investment Group, led by Sheikh Abdulla Al Qassimi, to establish our future regional headquarters in Ras Al Khaimah, UAE, supporting Faraday’s Middle East expansion strategy.

Construction is set to begin by late 2024, with operations expected by late 2025 or early 2026.

Faraday Future signed agreements with the Ras Al Khaimah Economic Zone (RAKEZ) for both a current business location and a larger operational facility to strengthen its presence in the UAE’s strategic economic hub.

Recent Governance Developments

• On June 9, 2024, Li Han resigned as a director of the Company for personal reasons.

Han also served as a member of the Nominating and Corporate Governance Committee.

• On July 31, 2024, we announced the passage of each of the proposals presented at the annual meeting of stockholders, including the re-election of all members of the Board.

• On April 18, 2024, Nasdaq notified us that since we had not yet filed our Form 10-K for the year ended December 31, 2023, we no longer complied with Listing Rule 5250(c)(1).

Pursuant to Listing Rule 5810(c)(2)(A), this deficiency was a basis for delisting (in addition to our failure 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, as previously disclosed).

We requested and were granted a hearing from the Nasdaq Hearings Panel.

On June 26, 2024, Nasdaq notified us that the Nasdaq Hearings Panel had granted our request for continued listing on Nasdaq subject to our compliance with the periodic reporting requirement by July 31, 2024, and the minimum bid price requirement by August 31, 2024.

We met the periodic reporting compliance requirement by filing our Q1 2024 Form 10-Q on July 30, 2024.

• We made senior leadership changes, appointing Koti Meka as Chief Financial Officer, effective September 23, 2024 and Aaron Ma as Acting Head of EV R&D, effective August 2024, to advance its dual-brand strategy.

• On September 22, 2024, we delivered an FF 91 2.0 Futurist Alliance to Born Leaders Entertainment in Hollywood, where Born Leaders also became a Developer Co-Creation Officer for us.

• On September 4, 2024, Nasdaq confirmed that we regained compliance with Nasdaq's listing requirements.

This followed a series of actions to address deficiencies in timely filing of the Form 10-K and the Q1 2024 10-Q and a minimum bid price deficiency.

On June 26, 2024, Nasdaq had granted continued listing, contingent upon meeting filing and minimum bid price requirements by July 31 and August 31, 2024, respectively.

On July 30, 2024, we met the periodic reporting compliance requirement by filing our Q1 2024 Form 10-Q.

Subsequently, in August 2024, we met the minimum bid price requirements following the August 2024 Reverse Stock Split.

• On August 27, 2024, we appointed Tin Mok as Head of FF United Arab Emirates (“UAE”), where he will lead business development and strategic financing efforts in the UAE and Middle East.

• On July 31, 2024, at the annual stockholder meeting, our stockholders approved proposals to increase authorized shares, approve a reverse stock split, reelect directors, and amend the 2021 Stock Incentive Plan, raising available shares by 88.3 million (on a pre-split adjusted basis).

Components of FF’s Results of Operations

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Our ability to become profitable in the future will depend on our ability to successfully market our vehicles and control our costs.

Through June 30, 2024, we have sold a total of four and leased six vehicles.

Through September 30, 2024, we have sold a t otal of five and leased nine vehicles.

As a result, we will require substantial additional capital to develop products and fund operations for the foreseeable future.

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Any delays in the successful completion of our FF ieFactory California will impact our ability to generate revenue.

For additional discussion of the substantial doubt about our ability to continue as a going concern, see Note 2, Liquidity and Capital

Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements and for further details on liquidity, see the “Liquidity and Capital Resources” section below.

For additional discussion of the substantial doubt about our ability to continue as a going concern, see Note 2,

Liquidity and Capital Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements and for further details on liquidity, see the “Liquidity and Capital Resources” section below.

Revenue Recognition

We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023.

We sold and leased zero vehicles during the three months ended June 30, 2024.

Automotive Sales Revenue

Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, 24/7 roadside assistance, OTA software updates, internet connectivity and destination fees.

During the three months ended September 30, 2024, we did not sell any vehicles and leased out two vehicles.

Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, 24/7 roadside assistance, Over-The-Air (“OTA”) software updates, internet connectivity and destination fees.

We recognize revenue on automotive sales upon delivery to the customer, which is when control of a vehicle transfers.

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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.

The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations.Vehicle contracts do not contain a significant financing component.

The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations.

Vehicle contracts do not contain a significant financing component.

Revenue from promises to the customer that are considered immaterial are combined with the vehicle performance obligation and recognized when the product has been transferred.

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Customers have the right to purchase the vehicle at the end of the lease term, which is usually 36 months.

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.

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.

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.

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.

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.

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Our customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time.

Refundable deposits, for vehicle reservations and services, received from customers prior to an executed vehicle purchase agreement are recorded as customer deposits within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.

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 us.

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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.

We expect R&D expenses to decrease in the near future as we substantially completed R&D activities related to the FF 91 in late 2023.

Sales and Marketing

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Marketing activities are those related to introducing our brand and our electric vehicle prototypes to the market.

We expect selling and marketing expenses to continue to increase as we bring our electric vehicles to market and seek to generate sales.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our 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.

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.

We expect our general and administrative expenses to increase as we continue to grow our business.

Settlement on Accrued Research and Development Expenses

Settlement on accrued research and development expenses represents adjustments resulting from settling previously accrued R&D obligations at amounts lower than initially estimated.

This line item generally includes gains arising from negotiations or dispute resolutions with vendors, technology partners, or service providers, where the final settlement amount reduces the originally accrued expenses associated with R&D activities.

Lease Impairment Loss

Lease impairment loss includes impairment charges on right-of-use (ROU) assets for leased properties that we have vacated, abandoned, or plan to terminate.

This line item captures losses recognized when the carrying value of an ROU asset exceeds its fair value due to our exiting premises or terminating leases.

Impairment losses may occur when facilities, including retail, office, or research spaces, are vacated, and the remaining lease liabilities continue to be recognized on the balance sheet.

Lease impairment loss is not offset against lease termination gain, which is included in Other Income (Expense), net discussed below.

Loss on Disposal of Property, Plant and Equipment

Loss on disposal of property, plant 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 our cost reduction program.

Charges associated with disposals are recognized within operating expenses in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

Charges associated with disposals are recognized within operating expenses.

Change in Fair Value of Earnout Liability

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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.

Interest Expense

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

Other expense, net consists of foreign currency transaction gains and losses and other expenses such as bank fees and late charges.

Related Party Interest Expense

Related party interest expense consists of interest expense on notes payable with related parties not marked to fair value.

Other Income (Expense), net

Other expense, net primarily consists of foreign currency transaction gains and losses and other expenses such as bank fees and late charges.

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.

We expect other expense to fluctuate as we continue to transact internationally.

Other income, net primarily consists of lease termination gains.

Results of Operations

Comparison of results of operations for the three months ended June 30, 2024 versus the three months ended June 30, 2023:

Three Months Ended June 30,

Comparison of results of operations for the three months ended September 30, 2024 versus the three months ended September 30, 2023:

Three Months Ended September 30,

(in thousands) 2024 2023

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General and administrative 8,278 24,023

Settlement on accrued research and development expenses (14,935) —

Lease impairment loss 57 —

(Gain)/Loss on disposal on property, plant and equipment 16 —

Loss on disposal on property, plant and equipment 2,582 —

Change in fair value of earnout liability — (67)

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Related party interest expense (1,212) (69)

Other expense, net (292) (1,466)

Other income/(expense), net 361 (1,624)

Loss before income taxes (77,687) (78,046)

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Net loss $ (77,686) $ (78,046)

Three Months Ended June 30,

Three Months Ended September 30,

(in thousands) 2024 2023 Amount %

Revenue $ 293 $ — $ 293 NM*

*NM = not meaningful.

Automotive sales revenue was $0.3 million for the three months ended June 30, 2024.

We started vehicle delivery to its customers during the third quarter of 2023.

We began delivering vehicles in the third quarter of 2023.

Revenue $ 9 $ 551 $ (542) (98) %

Total revenue decreased by $0.5 million for the three months ended September 30, 2024 compared to the same period in 2023 .

Automotive leasing revenue was recognized during the three months ended September 30, 2024, though the amount was not material, and no automotive sales revenue was recorded.

In contrast, automotive sales revenue totaled $0.6 million for the

three months ended September 30, 2023 , with no leasing revenue during that period.

The 2023 sales revenue resulted from the initial delivery of our flagship luxury electric vehicle, the FF 91 Futurist.

Cost of Revenues

Three Months Ended June 30,

Three Months Ended September 30,

(in thousands) 2024 2023 Amount %

Cost of revenues $ 21,453 $ 16,131 $ 5,322 33 %

*NM = not meaningful.

Cost of revenues was $21.0 million for the three months ended June 30, 2024.

On March 29, 2023, we announced the start of production of our first electric vehicle, the FF 91 Futurist and, on April 14, 2023, our first production FF 91 Futurist vehicle came off the line.

We began delivering vehicles in the third quarter of 2023.

Cost of revenues increased by $5.3 million for the three months ended September 30, 2024 compared to the same period in 2023 .

This increase was primarily driven by depreciation expenses resulting from placing equipment into service to improve our production capabilities, in particular our paint and body shop, and an increase in corporate cost absorption into inventory and cost of revenues.

During the three months ended September 30, 2024 , we continued transitioning our production capabilities to include both luxury and more affordable electric vehicles.

This strategic shift, which is aligned with broader market demand, is expected to result in additional fixed cost allocations to cost of revenues as equipment is placed into service, while we continue to optimize our production efficiencies.

Research and Development (R&D)

Three Months Ended June 30,

Three Months Ended September 30,

(in thousands) 2024 2023 Amount %

Research and development $ 5,180 $ 21,593 $ (16,413) (76) %

The decrease in R&D expense was primarily due to a decrease in personnel and compensation expenses of $21.2 million, a decrease in stock-based compensation of $1.0 million due to a decrease in headcount as part of cost saving measures implemented by us in light of its financial position, as well as the allocation of certain personnel from the R&D department to production, and a decrease in professional services expenses of $0.8 million.

R&D expense decreased by $16.4 million for the three months ended September 30, 2024 compared to the same period in 2023 .

This reduction was primarily attributable to a $10.1 million decrease resulting form headcount reductions and the reassignment of R&D personnel to production roles, as well as a $4.3 million decrease in engineering, design, and testing costs .

As we transition from an R&D focus to full-scale production, resources have been reallocated from R&D to manufacturing to enhance operational efficiency.

This shift supports the commercialization of completed R&D developments while enabling targeted innovation in key areas.

Strategic partnerships with technology providers and industry experts have also been established to sustain innovation with reduced internal costs.

We have also begun shifting our R&D focus towards the development of more affordable electric vehicle platforms, expanding our technology portfolio to address broader market demands.

This strategic shift ensures continued innovation across both luxury and more affordable segments, aligning with evolving industry trends.

Sales and Marketing

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Sales and marketing $ 2,601 $ 5,318 $ (2,717) (51) %

The decrease in sales and marketing expense was due to a decrease in compensation expenses of $3.3 million, a decrease in professional services expenses of $1.1 million, a decrease in marketing expenses of $0.7 million, a decrease in stock-based compensation expense of $0.1 million, and a decrease in other miscellaneous expenses of $0.5 million.

Sales and marketing expense decreased by $2.7 million for the three months ended September 30, 2024 compared to the same period in 2023 .

The reduction was primarily driven by a $1.7 million decrease in compensation expense, a decrease of $0.3 million in advertising costs, and a $0.2 million decrease in professional services expenses.

Despite a reduction in sales and marketing personnel, we continue to market effectively by leveraging our Co-Creation strategy, which involves partnerships with industry pioneers and influential personalities.

Through this approach, we amplify our brand by engaging high-profile figures and involving users in our product development and marketing processes.

Additionally, we host VIP events and participate in major industry showcases to provide customers and stakeholders with immersive experiences of our flagship vehicles, further enhancing customer engagement and brand visibility.

These efforts allow us to optimize our marketing reach and increase brand awareness while maintaining lower internal costs.

General and Administrative

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

General and administrative $ 8,278 $ 24,023 $ (15,745) (66) %

The increase in general and administrative expense was primarily due to an increase in information technology expense of $0.4 million, partially offset by a decrease in stock-based compensation expense of $0.1 million.

Lease impairment loss

Three Months Ended June 30, Change

General and administrative expense decreased by $15.7 million for the three months ended September 30, 2024 compared to the same period in 2023 .

This decrease was primarily driven by a $6.5 million reduction in professional service fees, a $4.0 million decrease in general expenses, such as rent and insurance costs, and a $1.9 million reduction in wages and wage-related costs.

Additionally, there was a $1.9 million decrease in depreciation expense.

These reductions reflect our ongoing cost-cutting initiatives aimed at optimizing general and administrative expenses.

We have implemented measures to streamline operations, including renegotiating vendor contracts, consolidating office space to reduce rent, and restructuring our workforce to lower wage-related expenses, all while maintaining operational efficiency.

Settlement of Accrued Research and Development expenses

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Lease impairment loss $ 7,616 $ — $ 7,616 NM*

During the three months ended June 30, 2024, the we moved out of a leased store facility and a leased research facility while working with the landlords to negotiate the related lease terminations, resulting in a lease ROU asset impairment loss of $7.5 million for the loss of use of these two leased facilities.

We also terminated one of the operating leases in China, resulting in a net lease ROU asset impairment loss of $0.1 million during the three months ended June 30, 2024.

(Gain)/Loss on Disposal on Property, Plant and Equipment

Three Months Ended June 30, Change

Settlement on accrued research and development expenses $ (14,935) $ — $ (14,935) NM*

*NM = not meaningful

Gain on settlement of previously accrued R&D expenses increased by $14.9 million for the three months ended September 30, 2024 compared to the same period in 2023 .

This gain resulted from a settlement that resolved ongoing disputes over unpaid invoices due to Palantir Technologies Inc.

(“Palantir”) As of the date of settlement, we had accrued approximately $19.9 million of R&D expense .

Following arbitration, the parties reached a settlement in which we agreed to pay Palantir $5.0 million.

We paid $0.2 million in cash and fulfilled the remaining $4.8 million obligation with the issuance of Class A Common Stock.

On August 8, 2024, we issued Palantir 252,768 shares of Class A Common Stock valued at $2.4 million.

As of September 30, 2024, we had an obligation to pay Palantir the remaining $2.4 million.

We settled this obligation on October 1, 2024 through the issuance of 827,526 shares of Class A Common Stock.

We recognized a gain of $14.9 million , reflecting the difference between the accrued expenses and the final settlement amount due to Palantir.

Loss on Disposal on Property, Plant and Equipment

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

(Gain)/Loss on disposal on property, plant and equipment $ 16 $ — $ 16 NM*

Loss on disposal on property, plant and equipment $ 2,582 $ — $ 2,582 NM*

*NM = not meaningful.

We recognized an immaterial Loss on disposal of property, plant and equipment for the three months ended June 30, 2024.

There were no such transactions for the three months ended June 30, 2023.

We recognized a $2.6 million loss on the disposal of property, plant, and equipment during the three months ended September 30, 2024.

No comparable transactions were recorded during the three months ended September 30, 2023.

We dispose of equipment when the assets become obsolete, costly to maintain, or are replaced by more efficient technologies.

Change in Fair Value of Earnout Liability

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

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*NM = not meaningful.

As of April 21, 2023, we reclassified the earnout obligation from equity classification to liability classification as a result of the us having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .

As a result of the reclassification, we reclassified $2.1 million out of Additional paid-in capital into the Earnout liability.

The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the three months ended June 30, 2023.

There was no comparable transaction during the three months ended June 30, 2024.

We did not have any earnout shares that were re-measured at fair value during the three months ended September 30, 2024.

As of August 25, 2023, upon an increase in our authorized shares of Class A Common Stock, we reclassified the earnout shares from liability classification to equity classification.

Once the number of authorized shares of our Class A Common Stock was increased, the earnout shares were determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .

The $0.1 million decrease in the fair value of the earnout shares represents the change in fair

value of the earnout prior to its reclassification and was recognized as a Change in fair value of earnout liability during the three months ended September 30, 2023.

Change in Fair Value of Notes Payable and Warrant Liabilities

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Change in fair value of notes payable and warrant liabilities $ 8,287 $ 17,571 $ (9,284) (53) %

During the three months ended June 30, 2024, the fair value of our outstanding notes and warrants were revalued at higher fair values than in the preceding three month period.

The increase in the fair value of the notes and warrants during the period was primarily driven by improvements in our stock price, which also contributed to an improvement in our volatility assumption.

During the three months ended June 30, 2023, the fair value of our notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.

During the three months ended September 30, 2024, the fair value of our outstanding notes and warrants were revalued at lower fair values compared to the same period in 2023.

The decrease in the fair value of the notes and warrants during the period was driven by factors including:

(1) the decline in our stock price during the period;

(2) pursuant to the terms of the Waiver Agreement (see Note 7, Notes Payable in the notes to the Unaudited Condensed Consolidated Financial Statements ), interest payments due under the Secured SPA became due at maturity;

and (3) the elimination of the interest make-whole pursuant to the Waiver Agreement.

These gains were partially offset by $0.7 million in transaction costs during the period.

The change in the fair value of our notes payable and warrant liabilities also decreased during the three months ended September 30, 2024 when compared with the same period in 2023 due to a 46% decrease in notes payable outstanding that are remeasured at fair value.

Change in Fair Value of Related Party Notes Payable and Related Party Warrant Liabilities

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Change in fair value of related party notes payable and related party warrant liabilities $ 654 $ 4,726 $ (4,072) (86) %

During the three months ended June 30, 2024, the fair value of our outstanding related party notes and warrants were revalued at higher fair values than in the preceding three month period.

The increase in the fair value of the related party notes and warrants during the period was primarily driven by improvements in our stock price, which also contributed to an improvement in our volatility assumption.

During the three months ended June 30, 2023, the fair value of our related party notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.

During the three months ended September 30, 2024, the fair values of our outstanding related party notes and warrants were revalued at lower fair values compared to the same period in 2023.

This decrease was primarily driven by declines in our stock price during the period.

T he change in the fair value of our notes payable and warrant liabilities also decreased during the three months ended September 30, 2024 when compared with the same period in 2023 due to a 55% decrease in notes payable outstanding that are remeasured at fair value.

Loss on Settlement of Notes Payable

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Loss on settlement of notes payable $ (59,128) $ (21,357) $ (37,771) 177 %

The decrease in the Loss on settlement of notes payable during the three months ended June 30, 2024 was driven by a reduced conversion volume during the period.

In addition, during the three months ended June 30, 2023, we recognized an $11.4 million Loss on settlement of notes payable from amendments to our Secured SPA Notes in May 2023 accounted for as extinguishments.

During the three months ended June 30, 2024, note holders converted $15.4 million of notes payable compared with $94.4 million in the comparable prior year period.

The impact of the volume difference is offset by a larger loss on settlement per dollar of principal during the three months ended June 30, 2024.

The increase in the loss on settlement per dollar of principal was driven by the trailing-twelve-month trend of declines in the fair value of our notes payable driven by the change in our stock price over the period and improvements in the conversion terms of the notes from June 30, 2023 to June 30, 2024.

The increase in the loss on settlement of notes payable during the three months ended September 30, 2024 was driven by an increase in the notes payable converted during the period compared with the same period in 2023.

During the three months ended September 30, 2024, noteholders converted $62.0 million of notes payable compared with $25.8 million during the three months ended September 30, 2023.

Additionally, during the three months ended September 30, 2024, we recognized a loss on extinguishment of $2.7 million resulting from the Waiver Agreement.

The increase was partially offset by a decrease in the loss on settlement per dollar of principal during the three months ended September 30, 2024.

Loss on Related Party Notes Payable

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

1 unchanged sentence

*NM = not meaningful.

There were no settlements of related party notes payable during the three months ended June 30, 2024.

During the three months ended June 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 290,549 shares of our Class A Common Stock.

There wer e no settlements of related party notes payable during the three months ended September 30, 2024.

During the three months ended September 30, 2023, a related party converted Unsecured SPA Notes with an aggregate principal balance of $6.6 million in exchange for 21,850 shares of Class A Common Stock.

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

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Interest expense $ (1,442) $ (90) $ (1,352) (1,502) %

The increase in Interest expense was primarily due to the financial obligation on sale and leaseback transaction that did not exist during the three months ended June 30, 2023.

Interest expense increased by $1.4 million for the three months ended September 30, 2024 compared to the same period in 2023 .

This increase was p rimarily due to financial obligations associated with the Hanford, California manufacturing facility.

We pursued a sale-leaseback arrangement for this facility to generate liquidity for operational and facility enhancements.

However, due to conditions within the sale-leaseback agreement, the transaction was treated as a financing arrangement under U.S.

generally accepted accounting principles (“GAAP”), resulting in interest expense rather than lease expense.

This arrangement did not exist during the same period in 2023 .

Related Party Interest Expense

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Related party interest expense $ (1,212) $ (69) $ (1,143) (1657) %

The increase in Related party interest expense was due to our default on the Chongquing Leshi Small Loan Co., Ltd.

note, which resulted in a substantial increase in our interest rate along with additional interest expense and penalties.

As discussed in Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements , we had previously negotiated with a related party to partially forgive debt and interest on its related note, in exchange for the promise to make payments on a scheduled basis.

The interest related to this note was reinstated during the first quarter of 2024 due to our default on the underlying note.

Other Expense, net

Three Months Ended June 30, Change

Related party interest expense increased by $1.1 million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to interest expense due to our loan with Chongqing Leshi Small Loan Co., Ltd.

(“Chongqing”), a related party.

This increase was primarily due to our default on the related party note with Chongqing, in the first quarter of 2024, which triggered an increase in the interest rate as well as additional interest expense and penalties.

Since the default, we continue to accrue all relevant interest and penalties.

Other Income/ (Expense), Net

Three Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Other expense, net $ (292) $ (1,466) $ 1,174 80 %

The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.

Dollars that are remeasured at the end of each period.

Comparison of results of operations for the six months ended June 30, 2024 versus the six months ended June 30, 2023:

Six Months Ended June 30,

Other income/(expense), net $ 361 $ (1,624) $ 1,985 122 %

Other income was $0.4 million for the three months ended September 30, 2024, compared to other expense of $1.6 million for the same period in 2023.

The $0.4 million of other income for the three months ended September 30, 2024 and the other expense of $1.6 million for the same period in 2023 were primarily attributable to the revaluation of foreign currency transactions denominated in non-U.S.

currencies assessed at the end of each period.

During the three months ended September 30, 2024, the U.S.

dollar exchange rate to the Chinese currency CNY declined, resulting in a foreign currency transaction gain from the revaluation of foreign currency transactions, which was recorded as Other income.

During the three months ended September 30, 2023, the U.S.

dollar exchange rate to the Chinese currency CNY climbed up, resulting in a foreign currency transaction loss from the revaluation of foreign currency transactions, which was recorded as Other expense.

Comparison of results of operations for the nine months ended September 30, 2024 versus the nine months ended September 30, 2023:

Nine Months Ended September 30,

(in thousands) 2024 2023

7 unchanged sentences

General and administrative 39,327 67,598

Settlement on accrued research and development expenses (14,935) —

Lease impairment loss 7,673 —

(Gain)/Loss on disposal on property, plant and equipment (71) 3,698

Loss on disposal on property, plant and equipment 2,511 3,698

Change in fair value of earnout liability — 2,033

7 unchanged sentences

Related party interest expense (7,812) (139)

Other expense, net 238 (298)

Other income/(expense), net 599 (1,922)

Loss before income taxes (234,585) (347,919)

1 unchanged sentence

Net loss $ (234,588) $ (347,947)

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Revenue $ 295 $ — $ 295 NM*

*NM = not meaningful.

Automotive sales revenue was $0.3 million for the six months ended June 30, 2024.

On March 29, 2023, we announced the start of production of our first electric vehicle, the FF 91 Futurist and, on April 14, 2023, our first production FF 91 Futurist vehicle came off the line.

We started vehicle delivery to its customers during the third quarter of 2023.

Cost of Revenues

Six Months Ended June 30, Change

Revenue $ 304 $ 551 $ (247) (45) %

Total revenue decreased by $0.2 million for the nine months ended September 30, 2024 compared to the same period in 2023 .

This decline was primarily driven by a $0.2 million reduction in automotive sales revenue and adjustments to leasing revenue, as certain co-collaborators did not meet their public engagement obligations.

Automotive sales in 2023 were largely attributable to the initial delivery of the FF 91 Futurist, which began in the third quarter of 2023 .

Nine Months Ended September 30,

(in thousands) 2024 2023 Amount %

Cost of revenues $ 63,110 $ 22,744 $ 40,366 177 %

Cost of revenues was $41.7 million for the six months ended June 30, 2024.

We began production of vehicles during the second quarter of 2023 and began delivering vehicles in the third quarter of 2023.

Cost of revenues increased by $40.4 million for the nine months ended September 30, 2024 compared to the same period in 2023.

This increase was primarily due to higher depreciation expenses from placing equipment into service to improve our production capabil ities, an increase in corporate cost absorption into inventory and cost of revenues, and the fact that vehicle production only began in the latter part of the second quarter of 2023.

During the nine months ended September 30, 2024, we began transitioning our production capabilities to include both luxury and more affordable electric vehicles.

Research and Development (R&D)

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Research and development $ 15,185 $ 104,670 $ (89,485) (85) %

The decrease in R&D expense is primarily due to the reduction in ED&T, General expenses and Information technology of $21.1 million, $4.0 million, and $2.0 million, respectively, as we substantially completed R&D activities related to the FF91 in late 2023 and moved into production.

In addition, there was a decrease in personnel and compensation expenses of $35.8 million due to a decrease in headcount resulting from both the substantial completion of R&D and cost saving measures implemented by us in light of our financial position, as well as a decrease in stock-based compensation expense of $7.0 million resulting from the same reduction in headcount and revaluation of stock-based compensation resulting from the transition of stock-based compensation from liability to equity classification.

R&D expense decreased by $89.5 million for the nine months ended September 30, 2024, compared to the same period in 2023.

The most significant factor driving this reduction was a $51.6 million decrease due to headcount reductions and the transfer of R&D personnel to production roles.

Additionally, engineering, design, and testing costs declined by $24.9 million, and information technology-related expenses decreased by $3.2 million.

As we transition from an R&D focus to full-scale production, resources have been reallocated from R&D to manufacturing to enhance operational efficiency.

This shift supports the commercialization of completed R&D developments while enabling targeted innovation in key areas.

Strategic partnerships with technology providers and industry experts have also been established to sustain innovation with reduced internal costs.

We have also begun shifting our R&D focus towards the development of more affordable electric vehicle platforms, expanding our technology portfolio to address broader market demands.

This strategic shift ensures continued innovation across both luxury and more affordable segments, aligning with evolving industry trends.

Sales and Marketing

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Sales and marketing $ 6,857 $ 18,082 $ (11,225) (62) %

The decrease in sales and mark eting expense is primarily due to a decrease in personnel and compensation expenses of $5.0 million due to a decrease in headcount as part of cost saving measures implemented by us in light of our financial position and a decrease of $0.6 million in stock-based compensation expense driven by reductions in headcount and the revaluation of stock-based compensation resulting from the transition of stock-based compensation from liability to equity classification.

In addition, there was a decrease in marketing expenses and professional services expenses of $0.9 million and $0.8 million, respectively.

Sales and marketing expense decreased by $11.2 million for the nine months ended September 30, 2024 compared to the same period in 2023 .

This reduction was primarily driven by a $6.8 million decrease in compensation expense, a $1.4 million decrease in general expenses (such as rent, rent related expenses, and insurance costs), and a $1.0 million decrease in professional services expenses.

Through this approach, we amplify our brand by engaging high-profile figures and involving users in our product development and marketing processes.

Additionally, we host VIP events and participate in major industry showcases, to provide customers and stakeholders with immersive experiences of our flagship vehicles, further enhancing customer engagement and brand visibility.

These efforts allow us to optimize our marketing reach and increase brand awareness while maintaining lower internal costs.

General and Administrative

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

General and administrative $ 39,327 $ 67,598 $ (28,271) (42) %

The decrease in gener al and administrative expense was primarily due to the decrease in professional services expense of $8.3 million, personnel and compensation expense of $2.9 million, and stock-based compensation expense of $1.5 million, due to a decrease in headcount as part of cost saving measures implemented by us in light of our financial position.

General and administrative expense decreased by $28.3 million for the nine months ended September 30, 2024, compared to the same period in 2023.

This decline was primarily driven by a $14.8 million reduction in professional service fees, a $6.7 million decrease in general expenses, such as rent and insurance costs, and a $4.8 million reduction in wages and wage-related costs.

Additionally, there was a $2.8 million decrease in depreciation expense.

These reductions reflect our ongoing cost-cutting initiatives aimed at optimizing general and administrative expenses.

Settlement of Accrued Research and Development expenses

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Settlement on accrued research and development expenses $ (14,935) $ — $ (14,935) NM*

*NM = not meaningful

Gain on settlement of previously accrued R&D expenses increased by $14.9 million for the nine months ended September 30, 2024 compared to the same period in 2023 .

This gain resulted from a settlement that resolved ongoing disputes over unpaid invoices due to Palantir.

As of the date of settlement, we had accrued approximately $19.9 million of R&D expense .

Following arbitration, the parties reached a settlement in which we agreed to pay Palantir $5.0 million.

We paid $0.2 million in cash and fulfilled the remaining $4.8 million obligation with the issuance of Class A Common Stock.

On August 8, 2024, we issued Palantir 252,768 shares of Class A Common Stock valued at $2.4 million.

As of September 30, 2024, we had an obligation to pay Palantir the remaining $2.4 million.

We settled this obligation on October 1, 2024 through the issuance of 827,526 shares of Class A Common Stock.

We recognized a gain of $14.9 million , reflecting the difference between the accrued expenses and the final settlement amount due to Palantir.

Lease Impairment Loss

Six Months Ended June 30, 2024 Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Lease impairment loss $ 7,673 $ — $ 7,673 NM*

During the six months ended June 30, 2024, we moved out of a leased store facility and a leased research facility while working with the landlords to negotiate the related lease terminations, resulting in a lease ROU asset impairment loss of $7.5 million for the loss of use of these two leased facilities.

We also terminated one of the operating leases in China, resulting in a net lease ROU asset impairment loss of $0.1 million during the six months ended June 30, 2024.

(Gain)/Loss on Disposal of Property, Plant and Equipment

Six Months Ended June 30, Change

NM = not meaningful

During the nine months ended September 30, 2024, we recorded a $7.7 million impairment loss related to lease right-of-use (ROU) assets.

This loss resulted from moving out of a leased store facility, a leased research facility and an administrative facility in China, as we worked with landlords to negotiate the related lease terminations.

We have taken steps to optimize our operational footprint by reducing unnecessary overhead to align with current needs.

These initiatives, including lease terminations and renegotiations, have contributed to a more efficient cost structure and helped reduce ongoing lease obligations.

Loss on Disposal of Property, Plant and Equipment

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

(Gain)/Loss on disposal on property, plant and equipment $ (71) $ 3,698 $ (3,769) (102) %

The change in loss on disposal of property, plant and equipment was primarily due to the non-recurring write-off of $3.7 million during the six months ended June 30, 2023 of certain construction in process assets that are not expected to be used as part of start of production.

Loss on disposal on property, plant and equipment $ 2,511 $ 3,698 $ (1,187) (32) %

Loss on disposal of property, plant, and equipment decreased by $1.2 million for the nine months ended September 30, 2024 compared to the same period in 2023.

In 2024, we recognized a $2.5 million loss on the disposal of property, plant, and equipment, while in 2023, there was a non-recurring write-off of $3.7 million, primarily related to construction-in-process assets that were not expected to be used as part of the start of production.

We dispose of equipment when the assets become obsolete, costly to maintain, or are replaced by more efficient technologies.

Change in Fair Value of Earnout Liability

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Change in fair value of earnout liability $ — $ 2,033 $ (2,033) (100) %

As of December 31, 2022, we had reclassified our earnout obligation from equity classification to liability classification as a result of us 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 .

On February 28, 2023, upon stockholder approval to increase our authorized shares, we had sufficient authorized shares to fully settle all outstanding equity-linked financial instruments.

Accordingly, we reclassified the fair value of the Earnout liability of $5.0 million into Additional paid-in capital.

The $2.8 million increase in the Earnout liability from December 31, 2022 to February 28, 2023 was recognized as an expense in the Change in fair value of earnout liability during the six months ended June 30, 2023.

In addition, as of April 21, 2023, we again reclassified our earnout obligation from equity classification to liability classification as a result of us having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity .

As a result of the reclassification, we reclassified $2.1 million out of Additional paid-in capital into the Earnout liability.

The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the six months ended June 30, 2024.

There was no comparable transaction during the six months ended June 30, 2024.

We did not have any earnout shares that were re-measured at fair value during the nine months ended September 30, 2024 .

As of August 25, 2023, upon an increase in our authorized shares of Class A Common Stock, we reclassified the earnout shares from liability classification to equity classification.

During the nine months ended September 30, 2023, we recognized $2.0 million as the change

in fair value of earnout liability for when the equity-linked instruments were classified as derivative liabilities from time to time.

Change in Fair Value of Notes Payable and Warrant Liabilities

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Change in fair value of notes payable and warrant liabilities $ 28,927 $ 90,030 $ (61,103) (68) %

During the six months ended June 30, 2024 and 2023, the fair value of our outstanding notes and warrants were revalued at lower values than in the preceding six month periods.

During the nine months ended September 30, 2024 and 2023, the fair value of our outstanding notes and warrants were revalued at lower values than in the preceding periods.

Our outstanding notes and warrants were remeasured at predominantly lower fair values due to pricing inputs that use the market price of our Common Stock and debt discount rate, which have experienced a decline.

The change in fair value during the six months ended June 30, 2024 is smaller than during the six months ended June 30, 2023 predominantly due to improvements in our conversion terms and a smaller decline in our stock price during the period.

The change in fair value during the nine months ended September 30, 2024 is smaller compared to the same period in 2023 due to a decline in the outstanding balance of notes payable during the nine months ended September 30, 2024 as compared with an increase in the outstanding balance of notes payable during the nine months ended September 30, 2023.

Change in Fair Value of Related Party Notes Payable and Related Party Warrant Liabilities

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Change in fair value of related party notes payable and related party warrant liabilities $ 315 $ 5,110 $ (4,795) (94) %

During the six months ended June 30, 2024, the fair value of our outstanding related party notes and warrants were revalued at higher fair values than in the preceding six month period.

During the six months ended June 30, 2023, the fair value of our related party notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.

During the nine months ended September 30, 2024 and 2023, the fair value of our outstanding related party notes and warrants were revalued at lower values than in the preceding periods.

The change in fair value during the nine months ended September 30, 2024, is smaller compared to the same period in 2023 due to a decline in the outstanding balance of related party notes payable during the nine months ended September 30, 2024 as compared with an increase in the outstanding balance of related party notes payable during the nine months ended September 30, 2023.

Loss on Settlement of Notes Payable

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Loss on settlement of notes payable $ (117,509) $ (204,885) $ 87,376 (43) %

The decrease in the Loss on settlement of notes payable during the six months ended June 30, 2024 was driven by a lower conversion volume during the period, partially offset by a higher loss on settlement per dollar of principal.

During the six months ended June 30, 2024, note holders converted $33.7 million of notes payable compared to $156.0 million in the comparable prior year period.

The decrease in the loss on settlement of notes payable during the nine months ended September 30, 2024 was driven by smaller losses on extinguishment resulting from the modification of our notes payable accounted for as an extinguishment pursuant to the guidance in ASC 470-50, Debt—Modifications and Extinguishments , and a lower conversion volume during the nine months ended September 30, 2024.

During the nine months ended September 30, 2024, we incurred a loss on extinguishment of $2.7 million as a result of entering into the Waiver Agreement, and noteholders converted $96.3 million of notes payable.

During the nine months ended September 30, 2023, we incurred a loss on extinguishment of $11.4 million as a result of the Eighth Secured SPA Amendment, and noteholders converted $200.4 million of notes payable.

Loss on Related Party Notes Payable

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Loss on related party notes payable $ (14,295) $ (17,248) $ 2,953 (17) %

During the six months ended June 30, 2024, related party note holders converted $0.7 million of related party notes payable, which constituted the remaining outstanding balance, in exchange for 1,324,292 shares of our Class A Common Stock and 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.

In addition, as discussed in Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements , we also recognized a $14.1 million loss on related party notes from the recognition of interest and penalties and the increase of principal due to our breach of the agreement with Chongquing Leshi Small Loan Co., Ltd.

During the nine months ended September 30, 2024, related party noteholders converted $0.7 million of related party notes payable into 1,324,292 shares of our Class A Common Stock, and 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.

principal due to our breach of the agreement with Chongqing Leshi Small Loan Co., Ltd.

There was no comparable related party loss in the comparable prior year period.

During the six months ended June 30, 2023, a related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 290,549 shares of our Class A Common Stock.

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.

In May 2023, we entered into Unsecured SPA Notes with Metaverse Horizon Limited (“MHL”), who is a related party, and V W Investment Holding Limited (“V W Investment”) .

During the nine months ended September 30, 2023, MHL converted Unsecured SPA Notes with an aggregate principal balance of $18.7 million into 602,947 shares of Class A Common Stock, and 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

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Interest expense $ (5,386) $ (591) $ (4,795) (811) %

The increase in Interest expense was primarily due to the financial obligation on sale and leaseback transaction that did not exist during the six months ended June 30, 2023.

Interest expense increased by $4.8 million for the nine months ended September 30, 2024 c ompared to the same period in 2023.

This increase was p rimarily due to financial obligations associated with the Hanford, California manufacturing facility.

We pursued a sale-leaseback arrangement for this facility to generate liquidity for operational and facility enhancements.

However, due to conditions within the sale-leaseback agreement, the transaction was treated as a financing arrangement under GAAP, resulting in interest expense rather than lease expense.

This arrangement did not exist during the same period in 2023.

Related Party Interest Expense

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Related party interest expense $ (7,812) $ (139) $ (7,673) 5520 %

The increase in Related party interest expense was due to our default on the Chongquing Leshi Small Loan Co., Ltd note, which resulted in a substantial increase in our interest rate along with additional interest expense and penalties.

As discussed in Note 8, Related Party Transactions, w e had previously negotiated with a related party to partially forgive debt and interest on its related note, in exchange for the promise to make payments on a scheduled basis.

The interest related to this note was reinstated for the first quarter of 2024 due to our default on the underlying note.

Related party interest expense increased by $7.7 million for the nine months ended September 30, 2024 c ompared to the same period in 2023, primarily due to interest expense due to our loan with Chongqing, a related party.

Since the default, we continue to accrue all relevant interest and penalties.

Other/(Expense) Income, Net

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in thousands) 2024 2023 Amount %

Other expense, net $ 238 $ (298) $ 536 (180) %

The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S.

Dollars that are remeasured at the end of each period.

Other income/(expense), net $ 599 $ (1,922) $ 2,521 (131) %

Other income was $0.6 million for the nine months ended September 30, 2024, compared to Other expense of $1.9 million for the same period in 2023.

The $0.6 million of Other income for the nine months ended September 30, 2024 and the $1.9 million of Other expense for the same period in 2023 were primarily attributable to the revaluation of foreign currency transactions denominated in non-U.S.

currencies assessed at the end of each period.

During the nine months ended September 30, 2024, the U.S.

dollar exchange rate to the Chinese currency CNY declined, resulting in a foreign currency transaction gain from the revaluation of foreign currency transactions, which was recorded as Other income.

During the nine months ended September 30, 2023 , the U.S.

Liquidity and Capital Resources

3 unchanged sentences

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

Accordingly, the Unaudited Condensed Consolidated Financial Statements have been prepared on a basis that assumes we will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Accordingly, the Unaudited Condensed Consolidated Financial Statements have been prepared on

a basis that assumes we will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

We have and will continue to devote substantial effort and, to the extent available, capital resources, to strategic planning, engineering, design, and development of our electric vehicle platform, development of vehicle models, finalizing the build out of the FF ieFactory California manufacturing facility, and capital raising.

We incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $4,115.4 million, an unrestricted cash balance of $0.8 million and a negative working capital position of $198.7 million, excluding restricted cash, as of June 30, 2024.

We incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $4,193.1 million, an unrestricted cash balance of $7.3 million and a negative working capital position of $168.3 million, excluding restricted cash, as of September 30, 2024.

During 2023, we delivered our first vehicles but expect to continue generating significant operating losses for the foreseeable future.

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Pursuant to the Secured SPA, the Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder, and the Senyun Joinder (collectively the “SPA Commitments”) (see Note 7, Notes Payable and Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements), we obtained commitments from several investors.

As of June 30, 2024, the SPA Commitments totaled $554.5 million, of which $343.2 million was funded, $211.3 million remained to be funded, and $78.6 million in principal was outstanding.

As of June 30, 2024, Optional Commitments under the SPA Commitments totaled $366.0 million, of which $47.2 million was funded, $318.8 million remained to be funded, and $9.2 million was outstanding.

The remaining amounts to be funded as of June 30, 2024, are subject to the achievement of delivery milestones, satisfaction of closing conditions, resolution of 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.

As of September 30, 2024, the SPA Commitments totaled $554.5 million, of which $365.3 million was funded, $189.2 million remained to be funded, and $38.7 million in principal was outstanding.

As of September 30, 2024, Optional Commitments under the SPA Commitments totaled $366.0 million, of which $48.4 million was funded, $317.6 million remained to be funded, and $10.4 million was outstanding.

The remaining amounts to be funded as of September 30, 2024, are subject to the achievement of delivery milestones, satisfaction of closing conditions, and satisfaction or waiver of other conditions.

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.

On September 5, 2024, we entered into another Securities Purchase Agreement (the “Junior Secured SPA”) with certain institutional investors as purchasers (the “Junior Secured SPA Investors”).

Pursuant to the Junior Secured SPA, the Junior Secured SPA Investors agreed to purchase certain secured promissory notes (the “Junior Secured SPA Notes”), warrants, and incremental warrants for approximately $30.0 million, of which $22.5 million was paid in cash and approximately $7.5 million was converted from a previous loan to us, in two closings.

As of September 30, 2024, we received $20.8 million of the commitments and the remaining commitments were received by October 30, 2024.

Additionally, the Junior Secured SPA Investors were given an incremental warrant to purchase additional Junior Secured SPA commitments, up to amounts originally funded (the “Incremental Warrants”), at the same terms and conditions as the original Junior Secured SPA Notes.

The Incremental Warrants are exercisable immediately, entirely at the option of the holder, with a term of one year to purchase the additional Junior Secured SPA Notes at an exercise price equal to the principal amount of the Junior Secured SPA Notes issued to the Junior Secured SPA Investor.

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

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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 our option) of Class A Common Stock to an affiliate of Yorkville Advisors, subject to certain limitations.

As of June 30, 2024, we had the right to issue and sell up to an additional $192.5 million, or $342.5 million if we exercise our option under the SEPA, of Class A Common Stock under the SEPA.

As of September 30, 2024, we had the right to issue and sell up to an additional $192.5 million, or $342.5 million if we exercise our option under the SEPA, of Class A Common Stock under the SEPA.

In addition, on September 26, 2023, we entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, B.

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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”).

The ATM Program had been the primary source of liquidity for us since September 2023.

SEC rules and regulations, because we failed to timely file the Form 10-K and the Quarterly Report Form 10-Q for the quarter ended March 31, 2024, it is not S-3 eligible and cannot access the ATM Program.

The ATM Program was the primary source of liquidity for us during the period from September 2023 through December 2023.

Under applicable SEC rules and regulations, because we failed to timely file our Form 10-K and the Quarterly Report Form 10-Q for the quarter ended March 31, 2024, we are not eligible to use the S-3 registration process, which restricts our ability to raise capital through that streamlined method of offering securities and cannot access the ATM Program.

As such, our current primary source of liquidity is the issuance of various convertible note instruments.

Our ability to issue and sell additional shares of common stock or warrants under the SEPA is constrained by the number of authorized shares of our common stock.

Our ability to issue and sell additional shares of common stock or warrants under the SEPA and ATM Program is constrained by the number of authorized shares of our common stock.

We must consider shares issuable under convertible debt, warrants or other obligations with equity rights.

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.

In addition, equity issuances can potentially trigger provisions under the SPA Commitments and Junior Secured SPA Notes that increase the number of shares to be issued upon conversion and reduce the strike price of related warrants.

This could result in us having inadequate authorized shares to meet our outstanding commitments.

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

As of and since June 30, 2024, we were and have been in default on the SPA Commitments and we are presenting the related notes as current.

Since April 2023, we had been in default on, and since January 1, 2024, have been in breach of, our debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balance of $7.6 million and interest payable of $18.5 million as of June 30, 2024.

Since April 2023, we have been in default on, and since January 1, 2024, 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 $7.7 million and interest payable of $20.0 million as of September 30, 2024.

During 2024, we were also in default on our Unsecured Convertible Note obligations and various related party notes (see Note 7, Notes Payable and Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements).

Due to the cross default provisions of the SPA Notes and Junior Secured SPA Notes, we were and have been in default on the SPA and Junior Secured Commitments and we are presenting the related notes as current.

Sources of Liquidity

As of June 30, 2024, we maintained unrestricted cash on hand totaling $0.8 million, which was held for working capital and general corporate purposes.

We also have access to various sources of additional capital, including the SEPA, the ATM Program, the SPA Commitments and other unsecured convertible notes.

Our current primary source of liquidity the issuance of various convertible note instruments.

As of September 30, 2024, we maintained unrestricted cash on hand totaling $7.3 million, which was held for working capital and general corporate purposes.

We also have access to various sources of additional capital, including the SEPA, the ATM Program, the Secured SPA, the Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder, and the Senyun Joinder (collectively the “SPA Commitments”), the Junior Secured SPA and other unsecured convertible notes.

Our current primary source of liquidity is the issuance of various convertible note instruments pursuant to the SPA Commitments and the Junior Secured SPA.

Our ability to access these sources of capital and further information on amounts available is discussed in Note 2, Liquidity and Capital Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements.

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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 Unaudited Condensed Consolidated Financial Statements.

Related party notes payable consists of the following as of June 30, 2024:

Related party notes payable consists of the following as of September 30, 2024:

(in thousands) Contractual

Date Contractual

Related party notes – China December 2023 18.0% $ 7,577

Related party notes – Unsecured Convertible April 8, 2024 0.0427 $ 1,302

Related party notes – China December 2023 18.0% $ 7,706

Related party notes – China various other Due on Demand —% 3,805

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Related party notes – FFGP Various 2024 4.27% - 5.27% 1,576

Related party notes – Other December 2024 12.0% 75

Related party notes payable, current (14,714)

Related party notes payable, less current $ —

We have entered into notes payable agreements with third parties, which consist of the following as of June 30, 2024:

We have entered into notes payable agreements with third parties, which consist of the following as of September 30, 2024:

(in thousands) Contractual

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Various dates in 2029 10%-15% 22,802 398 (2,350) 20,850

Unsecured Convertible Notes Various dates in 2024 4.27% 18,080 3,105 — 21,185

Junior Secured Notes September 2029 10% 20,769 (11,341) — 9,428

Collateralized loan October 2028 28% 4,805 — (419) 4,386

Notes payable – China other

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$ 79,720 $ (15,089) $ (4,745) 59,886

Related party notes payable $ (1,951)

Notes payable, current portion (56,086)

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* includes amounts attributed to the Unsecured Streeterville SPA

All notes are classified as current as of June 30, 2024.

All notes, except amounts due in greater than 12 months pursuant to the Collateralized Loan, are classified as current as of September 30, 2024.

Cash Flow Analysis

Presented below is a summary of FF’s cash flows for the periods indicated:

(in thousands) Six Months Ended

(in thousands) Nine Months Ended

September 30,

Net cash provided by (used in):

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Operating Activities

We continue to experience negative cash flows from operations as we design and develop our vehicles and build our infrastructure both in the United States and China.

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.

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.

Net cash used in operating activities was $29.1 million for the six months ended June 30, 2024 as compared to $160.7 million for the six months ended June 30, 2023.

Cash used in operating activities was primarily made up of Net loss, depreciation expense, impairment on leases, changes in fair value of and settlements on notes and related party notes payable and changes in working capital.

The change in net cash used in operating activities was primarily driven by decreases to net loss, to losses on settlement notes payable, and to changes in fair value of notes payable and warrant liabilities, and by increases in depreciation expense, loss on impairment on leases, and loss on related party notes payable, and a decrease in cash outflows from operating activities, partially offset by reductions in settlements on notes payable, changes in the fair value of related party notes and a reduction in stock-based compensation expense.

We continue to experience negative cash flows from operating activities as we design and develop our vehicles and build our infrastructure in both the United States and China.

Cash flows from operating activities are significantly impacted by our capital investments to support business growth, particularly in enhancing the production capabilities of our electric vehicles, corporate planning, and general and administrative functions.

Additionally, our operating cash flows are influenced by working capital requirements to support growth, as well as fluctuations in personnel-related expenses, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.

Net cash used in operating activities was $51.8 million for the nine months ended September 30, 2024 as compared to $240.4 million for the nine months ended September 30, 2023, representing an improvement of $188.6 million .

This improvement was primarily driven by a $113.4 million reduction in net loss for the nine months ended September 30, 2024, compared to the prior period.

Significant non-cash adjustments to net loss included a $61.5 million decrease in fair value adjustments on notes payable and warrant liabilities and a $25.8 million increase in depreciation and amortization.

These were partially offset by an $87.4 million decrease in losses on the settlement of notes payable and a $14.9 million gain from the settlement of previously accrued R&D expenses.

Changes in operating assets and liabilities also significantly impacted cash flows from operating activities.

Key contributors included a $37.7 million change in inventory balances, a $26.9 million change in accrued expenses and other current liabilities, a $20.4 million change in deposits, and a $11.0 million change in other current and non-current assets, partially offset by a $15.6 million change in accounts payable.

Investing Activities

Net cash used in investing activities was $0.3 million and $25.9 million for the six months ended June 30, 2024 and 2023, respectively, and was related to the significant decrease in the acquisition of fixed assets due to the reduction of liquidity.

Net cash used in investing activities was $0.6 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of $10.3 million .

This change was driven by a significant decrease in the acquisition of fixed assets due to the reduction of liquidity.

Financing Activities

Net cash provided by financing activities was $26.7 million and $181.8 million for the six months ended June 30, 2024 and 2023, respectively.

Net cash provided by financing activities during the six months ended June 30, 2024 primarily consisted of $23.9 million in proceeds from notes payable, net of original issue discount, and $3.0 million in proceeds from related party notes payable.

Net cash provided by financing activities during the six months ended June 30, 2023 primarily consisted of $160.8 million in proceeds from notes payable, net of original issue discount, and $4.1 million in proceeds from the exercise of warrants, offset by $1.8 million of notes payable transaction costs.

Given the challenging financing landscape, we continue to pursue strategic opportunities to strengthen our cash position and support our growth objectives, primarily utilizing a mix of convertible loans and non-convertible funding alternatives.

Net cash provided by financing activities was $55.7 million and $237.6 million for the nine months ended September 30, 2024 and 2023, respectively, reflecting a decrease of $181.9 million.

Proceeds from notes payable in the nine months ended September 30, 2024 totaled $54.0 million, down from $208.7 million in the same period in 2023, a reduction of $154.6 million.

Proceeds from related-party notes payable for the nine months ended September 30, 2024 were $3.1 million, down from $19.8 million in the same period in 2023, a reduction of $16.7 million.

Furthermore, cash generated from common stock sales decreased by $8.5 million for the nine months ended September 30, 2024 compared to the same period in 2023.

Effect of Exchange Rate Changes on Cash and Restricted Cash

The effects of exchange rate changes on cash and restricted cash was immaterial for the six months ended June 30, 2024 and $5.6 million for the six months ended June 30, 2023.

The effects of exchange rate changes on cash and restricted cash result from fluctuations in the translation of assets and liabilities denominated in foreign currencies, primarily Chinese Renminbi.

The effects of exchange rate changes on cash and restricted cash was immaterial for the nine months ended September 30, 2024 and $3.7 million for the nine months ended September 30, 2023.

The effects of exchange rate changes on cash and restricted cash result from fluctuations in the translation of assets and liabilities denominated in foreign currencies, primarily Chinese currency CNY .

Fluctuations in exchange rates against the U.S.

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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, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Thus, we did not have any off-balance sheet arrangements as of June 30, 2024 and December 31, 2023.

Thus, we did not have any off-balance sheet arrangements as of September 30, 2024 and December 31, 2023.

Critical Accounting Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis