FARADAY FUTURE INTELLIGENT ELECTRIC INC. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references in this report to “FFAI,” the “Company,” “we,” “us,” or “our” mean Faraday Future Intelligent Electric Inc., together with its consolidated subsidiaries. Unless the context suggests otherwise, references to “Faraday Future Intelligent Electric Inc.” mean the parent company without its subsidiaries. The following discussion and analysis is intended to help the reader understand our results of operations and financial condition. This discussion and analysis is provided as a supplement to, and should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this quarterly report on Form 10-Q (this “Report” or this “Form 10-Q”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our 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 March 31, 2025 and “Cautionary Note Regarding Forward-Looking Statements” below. The objective of this section is to provide investors an understanding of the financial drivers and levers in our business and describe the financial performance of the business. C autionary Note Regarding Forward-Looking Statements This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our financial and business performance, market acceptance and success of our business model, our ability to expand the scope of our offerings, and our ability to comply with the extensive, complex, and evolving regulatory requirements. These statements are based on management's current expectations, but actual results may differ materially due to various factors. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. 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 risks and uncertainties include, but are not limited to, those factors described under the section titled “Risk Factors” in the Form 10-K filed on March 31, 2025. 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. 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. These risks and others described under the section titled “Risk Factors” Item 1A in the Form 10-K, filed on March 31, 2025, may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Overview We are a California- based, global, shared, intelligent mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry. Our Class A Common Stock and Public Warrants trade on The Nasdaq Capital Market (“Nasdaq”) under the ticker sym bols “FFAI” and “FFAIW,” respectively. With headquarters in greater Gardena, California, we design and engineer next-generation intelligent, connected, electric vehicles. We manufacture vehicles at the FF ieFactory California production facility in Hanford, California. We have additional engineering, sales, and operational capabilities in China, and we are exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangements. Additionally, we have established an entity in the UAE to manage the assembly and sales support of FF 91 series vehicles, further expanding our market presence in the region. 51 Table of Contents Since our founding, we have created major innovations in technology and products, and followed a user-centered business model. We believe these innovations will enable us to set new standards in luxury and performance that will redefine the future of intelligent mobility. Company Overview & Global Strategy • Dual-Home Market Strategy: We have implemented a dual-home market strategy, integrating U.S.-based technological innovation and vehicle development with China’s supply chain and production capabilities. • Third Pole Strategy: We have begun implementing a "third pole" strategy with an operational facility in the UAE, complementing our U.S. and China market approach. Technology & Innovation • Our Proprietary VPA: We have designed and developed a breakthrough mobility platform—our proprietary VPA, which enables scalable vehicle development across multiple segments, including the new FX Series. • Propulsion System: Our propulsion system provides a competitive edge in acceleration and range, enabled by an industry-leading inverter design and a propulsion system integrated with our AI-powered user experience. • I.A.I Technology: Our advanced I.A.I technology offers high-performance computing, high-speed internet connectivity, OTA updating, an open ecosystem for third-party application integration, and an advanced autonomous driving-ready system. • Intellectual Property & Supply Chain Development: Since inception, we have developed a portfolio of intellectual property, established its supply chain, and assembled a global team of automotive and technology experts. As of March 31, 2025, FF has been granted approxima tely 660 patents global ly. Product & Launches • FF 91 Launch: 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. We started production on the first FF 91 Futurist and delivered the first FF 91 2.0 Futurist Alliance in 2023. • Vehicle Pipeline: Our planned B2C passenger vehicle pipeline includes the FF 91 series, plus the new FX Series (FX 5, FX 6, and FX Super One). Manufacturing & Distribution • FF Series Manufacturing: The FF 91 Series is currently being manufactured in FF ieFactory California. • FX Series Manufacturing: Certain models of FX Series are planned to be manufactured in FF ieFactory California. • Global Availability: All of our vehicles are expected to be available for sale in the U.S. and the Middle East, with potential expansion to China and European markets. 52 Table of Contents Recent Developments From January 1, 2025, through the filing date, we achieved key operational and financing milestones. Below is a summary of significant events by category. Strategic Operations and Product Development • In January 2025, we unveiled the FX Super One concept, an AI-powered MPV, expanding our FX lineup, which also includes th e FX 5 and FX 6 targeting $20,000–$50,000 segments. We targeted initial production by year-end 2025, contingent on funding. • In March 2025, we plan to launch our first FX vehicle by year-end 2025 with refundable orders starting in Q2. We benchmarked our second FX vehicle against the Toyota RAV4 and shipped two FX 6 prototypes to the U.S. for testing. • In March 2025, we hosted FF Open AI Day and unveiled our Personalized AI and Bespoke AI systems. These innovations are part of our All-AI Mobility Ecosystem. Personalized AI is designed to learn and adapt to user preferences across vehicle controls, comfort, and interaction styles. Bespoke AI delivers co-created, premium user interfaces and intelligent services tailored for luxury users, acting as a digital concierge. Both systems are built on large-model AI architecture and are planned for integration into the FF 91 and FX series. • In March 2025, Future AIHER AI Hybrid Extended-Range Electric Powertrain System Inc. was incorporated in the State of Delaware as a subsidiary of the Company. This subsidiary focuses on the design and development of AI hybrid extended-range electric powertrain systems. • In April 2025, we initiated a comprehensive company-wide organizational and governance overhaul aimed at enhancing execution efficiency and value creation. The initiative, publicly launched through a company-wide town hall, was designed to eliminate historical inefficiencies, increase strategic clarity, and improve performance across operations, amid ongoing external uncertainty and market pressure. • In April 2025, our FX CEO and team drove the FF 91 to Washington, D.C., for policy meetings with White House officials and showcased the FX Super One. Capital Raising & Financing Agreements • In December 2024, we secured approximately $30.0 million in cash financing commitments for the purchase of unsecured convertible notes (the “ 2024 Unsecured SPA Notes”) . Each investor (the “ 2024 Unsecured SPA Investors”) also received a 2024 Unsecured Incremental Warrant to fund, at the 2024 Unsecured SPA Investor’s sole discretion, additional notes up to the original principal balance the of 2024 Unsecured SPA Notes purchased by such 2024 Unsecured SPA Investor . These funds are intended to support our core business operations and the ongoing ramp-up of the FX strategy. On January 28, 2025, we entered into a letter agreement with certain of the 2024 Unsecured SPA Investors. Pursuant to the letter agreement, prior to our receipt of stockholders’ approval, for the issuance of the Unsecured 2024 SPA Notes, 2024 Unsecured SPA Warrants and 2024 Unsecured Incremental Warrants, such investors agreed not to convert any outstanding 2024 Unsecured SPA Notes at a conversion price less than $1.16, the initial conversion price of the 2024 Unsecured SPA Notes, and we agreed to issue, following receipt of such stockholders’ approval, to such investors who convert any U2024 Unsecured SPA Notes at the $1.16 conversion price prior to our receipt of stockholders’ approval, additional shares of Class A Common Stock as a true-up. • In January 2025, we received $30 million in previously committed financing to support FF 91 deliveries and FX program development. • In March 2025, we disclosed that our total capital raised since September 2024 exceeded $100 million, with positive net cash flow reported for Q3 and Q4 2024. Stock Exchange Compliance & Stockholder and Corporate Actions • In January 2025, we filed a filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series A Certificate of Designation designated one share of our Preferred Stock as Series A Preferred Stock, and established and designated the preferences, rights and limitations thereof. The Series A Preferred Stock is not convertible into any other series of stock, but votes at a rate of 3,000,000,000 votes per share. • In January 2025, we issued one share of Series A Preferred Stock to our Global Co-CEO, Matthias Aydt for the purchase price of $100.00. • In March 2025, we formally changed our Nasdaq ticker symbol to 'FFAI' to reflect our company’s rebranding around AI mobility. This symbol change reinforced our strategic emphasis on integrating artificial intelligence into 53 Table of Contents our product and business ecosystem. • In March 2025, we disclosed that our total capital raised since September 2024 exceeded $100 million. • In April 2025, we confirmed that we will not pursue a reverse stock split unless required to maintain Nasdaq compliance. Corporate Governance • In February 2025, the consolidated class action lawsuit filed in Delaware was dismissed with prejudice, resolving all litigation of this type. • In March 2025, Jerry Wang was promoted to President of the Company. At the time, he reported to the sole Global CEO. Following the April 2025 appointment of Yueting Jia as Global Co-CEO (see below), Mr. Wang now reports to both Global Co-CEOs as part of the Company’s current dual-CEO leadership structure. His role continues to focus on overseeing day-to-day business operations and driving alignment across global functions. • In April 2025, Yueting Jia, our founder, was promoted to Global Co-Chief Executive Officer (“Global Co-CEO”). Mr. Jia will co-lead the Company alongside Matthias Aydt, our other Global Co-CEO, with a focus on advancing user ecosystem development, supply chain management, EV R&D, finance, legal, and our China and Middle East operations. The appointment aligns with our broader strategic initiatives to enhance execution efficiency, strengthen our AI mobility leadership, and drive long-term shareholder value. • In April 2025, we confirmed that we will not pursue a reverse stock split unless required to maintain Nasdaq compliance. Supply Chain Exposure and Tariff Risk As of March 31, 2025, a significant portion of the Company’s direct material purchases were sourced from suppliers based in China. This concentration presents an ongoing risk given elevated U.S. import tariffs on electric vehicle components. While the Company’s cost of goods sold was not materially affected for the three months ended March 31, 2025, due to limited production volume and the use of existing inventory, continued reliance on China-based sourcing may result in higher input costs and materially impact the Company’s cost structure as production scales. Segment Information We operate in one operating segment and one reportable segment. Our Global Co-CEOs, acting jointly serving as co-Chief Operating Decision Makers (“CODMs”), regularly evaluate our financial performance using consolidated financial information at the total-company level. The CODMs receive regular financial and operational reporting that focuses primarily on our consolidated loss from operations, overall cash flows, liquidity, and strategic initiatives. Management has identified Loss from operations, as presented in the Company's Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, as the primary measure used by the CODMs to evaluate the performance of the business and allocate resources. This measure is critical for a going concern that must carefully manage its cash outflows, particularly given that the timing of its cash inflows is influenced by external investor decisions. We define “significant segment expense” as controllable operating costs that are regularly provided to and reviewed by management, which include the expenses presented in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss as Cost of revenue, Research and development, Sales and marketing, and General and administrative. Management closely tracks its expenditure on these key expense categories through regular reviews of cash balances, near‑term cash flow projections, monthly management reports, and project management reports. The CODMs, work in close collaboration with our business leaders to establish critical operational targets, set project timelines, and adjust spending plans. These leaders are responsible for implementing its strategic plans and revising targets and deadlines based on continuous internal communications and review meetings, thereby ensuring that any deviations from target spending or project timelines are promptly addressed. This rigorous oversight supports our strategic objectives to focus business activities on production, sales, and leasing of its FF 91 vehicles, and the planned launch of the FX Series vehicles. In addition, the Company defines “other segment items” as other operating expense adjustments that arise from lease or other impairments, gains and losses on the sale or disposition of its fixed assets, or other market‑driven factors that impact Loss from operations presented in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss and are not part of our recurring and controllable operating costs . By segregating these “Other Segment Items” from “loss from operations,” we provide investors with a clear view of the expenses that management can directly influence versus those driven by external factors. 54 Table of Contents Other potentially reportable items, such as separate automotive sales and leasing revenues (currently immaterial), geographic information, depreciation expense, interest expense, or other segment-specific activities, are not separately reviewed by the CODMs. Accordingly, these detailed segment components do not influence the CODM's decision-making or resource allocation processes and thus are not separately disclosed. Emerging Growth Company Status Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies. Any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. Components of Our Results of Operations Key Factors Affecting Operating Results Our performance and future success depend on several factors that present significant opportunities but also pose risks and challenges including those discussed below and, in the section, titled “Risk Factors” in Item 1A of the Form 10-K, filed on March 31, 2025. Production and Operations We expect to continue to incur significant operating costs that will impact our future profitability, including R&D expenses as we introduce new models and improve existing models; capital expenditures for the expansion of our manufacturing capacities; additional operating costs and expenses for production ramp-up; raw material procurement costs; general and administrative expenses as we scale our operations; interest expense from debt financing activities; and selling and distribution expenses as we builds our brand and markets our vehicles. We may incur significant costs in connection with our services as we deliver at scale the FF 91 Futurist, including servicing and warranty costs. Our ability to become profitable in the future will depend on our ability to successfully market our vehicles and control our costs. Through March 31, 2025 , we have sold six and leased eleven vehicles. As a result, we will require substantial additional capital to develop products and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales, we will fund our ongoing operations through a combination of various funding and financing alternatives, including equipment financing of the FF ieFactory California, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on our assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time. Any delays in the successful completion of its 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, please see the “Liquidity and Capital Resources” section below. Revenue and Cost of Revenue Automotive Sales Revenue We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023 and have leased one vehicle during the three months ended March 31, 2025. Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, twenty-four-seven roadside assistance, OTA software updates, internet connectivity and destination fees. 55 Table of Contents We recognize revenue on automotive sales upon delivery to the customer, which is when control of vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business and as indicated in the sales contract. OTA software updates are provisioned upon transfer of control of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer. For obligations related to automotive sales, we estimate the 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. Revenue from immaterial promises is combined with the vehicle performance obligation and recognized when the product has been transferred. We accrue costs to transfer these immaterial goods and services regardless of whether they have been transferred. In certain circumstances, we provide customers with a residual value guarantee which may or may not be exercised in the future. The impact of such residual value guarantees was immaterial to our Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2025 . We have entered and may continue to enter into co-creator consulting agreements with our customers under which customers share feedback, driving data, ideas, experiences with its engineers, social media posts and other promotions in exchange for specified fees. We consider these arrangements to be consideration payable to a customer. The consideration paid to the customer relates to marketing and R&D services that are distinct and could be purchased by us from a separate third-party. We perform an analysis in which we maximize the use of observable market inputs to ascribe a fair value to these services and record the fair value of these services to sales and marketing expense or R&D expense, as applicable. Any consideration payable to a customer that is above the fair value of the distinct services being provided is treated as a reduction of revenue. Automotive Leasing Revenue Revenue from Operating Leasing Program We have outstanding leases under our vehicle operating leasing program in the U.S. Qualifying customers are permitted to lease a vehicle for up to 36 months. At the end of the lease term, customers are generally required to return the vehicles to us. We account for these leasing transactions as operating leases. We record leasing revenues as automotive leasing revenue on a straight-line basis over the contractual term, and we record the depreciation of these vehicles as cost of automotive leasing revenue. As of March 31, 2025, deferred lease-related upfront payments which will be recognized on a straight-line basis over the contractual terms of the individual leases were immaterial. Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts. 56 Table of Contents Revenue from Sales-Type Leasing Program We have outstanding leases accounted for as sales-type leases under accounting standards codification (“ASC”) 842, Leases (“ASC 842”). 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. 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. Customer Deposits and Deferred Revenue 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 (Accrued expenses and other current liabilities). Customer deposits were $3.0 million and $3.0 million as of March 31, 2025 and December 31, 2024, respectively. When vehicle purchase agreements are executed, the consideration for the vehicle and any accompanying products and services must be paid in advance prior to our transfer of the products or services. Such advance payments are considered non-refundable, and we defer revenue related to any products or services that are not yet transferred. Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Deferred revenue related to products and services w as immaterial a s of March 31, 2025 and December 31, 2024. Cost of Automotive Sales Revenue Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, and reserves for estimated warranty expenses. Cost of automotive sales revenues also includes adjustments to warranty expense. Cost of Automotive Leasing Program Cost of automotive leasing revenue includes the depreciation of operating lease vehicles, cost of goods sold associated with direct sales-type leases and warranty expense related to leased vehicles. Warranties We provide a manufacturer’s warranty on all vehicles sold. The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components. The warranty does not cover any item that fails due to normal wear and tear. This assurance-type warranty does not create a performance obligation separate from the vehicle. Management tracks warranty claims by vehicle ID, owner, and date. As we continue to manufacture and sell more vehicles we will reassess and evaluate our warranty claims for purposes of our warranty accrual. Operating Expenses Research and Development Research and development activities represent a significant part of our business. Our R&D efforts focus on the design and development of our electric vehicles and continuing to prepare our prototype electric vehicles to exceed industry standards for compliance, innovation, and performance. 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 have completed R&D activities related to the FF 91, offset by increases in R&D expenses related to FX Series vehicles. Sales and Marketing Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on sales and marketing, costs associated with sales and marketing activities, marketing services provided by co-creators, and an allocation of overhead. Marketing activities are those related to 57 Table of Contents introducing our brand, our electric vehicles, and our electric vehicle prototypes to the market. We expect Sales and marketing expenses to continue to increase as we bring our electric vehicles to market and seek to generate additional sales. General and Administrative General and administrative expenses consist primarily of personnel-related costs, (including salaries, bonuses, benefits, and stock-based compensation) for employees associated with administrative services such as legal, human resources, information technology, accounting and finance, other related costs, and legal loss contingency expenses, which are our estimates of future legal settlements. These expenses also include certain third-party consulting services, certain facilities costs, and any corporate overhead costs not allocated to other expense categories. We expect our general and administrative expenses to increase as we continue to grow our business. Loss from Disposal of Property, Plant and Equipment Loss (gain) on disposal on 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. Non-operating Expenses Change in Fair Value of (Related Party and Third Party) Notes Payable, Warrant Liabilities, and Derivatives Call Options Change in fair value measurements consists of the losses and gains as a result of fair value measurements of certain notes payable, warrant liabilities, and other instruments which we record at fair value. Loss on Settlement of (Related Party and Third Party) Notes Payable 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 . Interest Expense (Related Party and Third Party) 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 income, net 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. 58 Table of Contents Results of Operations Consolidated Statements of Operations Three Months Ended March 31, (in thousands) 2025 2024 Revenue $ 316 $ 2 Cost of revenue 21,381 20,687 Gross profit (21,065) (20,685) Operating expenses Research and development 6,419 6,688 Sales and marketing 2,629 2,474 General and administrative 13,674 13,848 Loss (gain) on disposal on property, plant, and equipment 44 (87) Total operating expenses 22,766 22,923 Loss from operations (43,831) (43,608) Change in fair value of notes payable, warrant liabilities, and derivative call options 51,458 27,885 Change in fair value of related party notes payable, warrant liabilities, and derivative call options (277) (7) Loss on settlement of notes payable (15,920) (11,403) Loss on settlement of related party notes payable (1,180) (14,295) Interest expense (2,302) (2,225) Related party interest expense — (5,094) Other income, net 1,784 530 Loss before income taxes (10,268) (48,217) Income tax expense (10) — Net loss $ (10,278) $ (48,217) Revenue Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Revenue $ 316 $ 2 $ 314 15700.0 % Revenue increased by $0.3 million for the three months ended March 31, 2025, compared to the same period in 2024. There was no automotive sales revenue for the three months ended March 31, 2025 and 2024. Automotive leasing revenue was $0.3 for the three months ended March 31, 2025 compared to an immaterial amount for the same period in 2024. Additionally, one vehicle was delivered during the three months ended March 31, 2025, compared to none for the same period in 2024. Cost of Revenue Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Cost of revenue $ 21,381 $ 20,687 $ 694 3.4 % Cost of revenue increased by $0.7 million for the three months ended March 31, 2025, compared to the same period in 2024. This increase was primarily driven by higher depreciation expenses as equipment and expenses related to FF ieFactory California lease agreement, which commenced in late 2023, and the Collateralized Loan financing, initiated in 2024. During the three months ended March 31, 2025, we continued expanding our production capabilities to include both luxury and more affordable electric vehicles. This strategic shift, aligned with broader market demand, is expected to increase fixed cost allocations to cost of revenues as new equipment is placed into service. We remain focused on optimizing production efficiencies and preparing the FF ieFactory California facility for planned new product lines. 59 Table of Contents For the three months ended March 31, 2025, U.S. tariffs on electric vehicle components imported from China did not have a material impact on the Company’s cost of goods sold. This was primarily due to the Company’s low production volume and the utilization of existing inventory that was procured prior to recent tariff adjustments. However, as production scales and the Company sources a greater volume of materials subject to current tariff rates, these duties may increase per-unit build costs in future periods. Management continues to monitor trade developments and assess sourcing strategies to mitigate potential cost escalation. Research and Development Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Research and development $ 6,419 $ 6,688 $ (269) (4.0) % R&D expense decreased by $0.3 million for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily driven by a $2.3 million reduction in salary and headcount costs, including the reassignment of R&D personnel to production roles, and a $1.6 million decrease in information technology expenses. These reductions were partially offset by a $2.4 million increase in R&D expense due to less allocations to cost of revenue in 2025, resulting in more expenses remaining in the R&D category this year. As we transition from an R&D-intensive focus to a greater emphasis on full-scale production resources are being reallocated from R&D to manufacturing to enhance operational efficiency. This shift prioritizes the commercialization of past R&D advancements while enabling continued but more targeted innovation. To sustain progress with lower internal costs, we have also established strategic partnerships with technology providers and industry experts. Additionally, we are refocusing our R&D efforts on developing more affordable electric vehicle platforms, expanding our technology portfolio to meet broader market demands. This strategic shift ensures continued innovation across both luxury and more accessible segments, aligning with evolving industry trends. Sales and Marketing Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Sales and marketing $ 2,629 $ 2,474 $ 155 6.3 % Sales and marketing expense increased by $0.2 million for the three months ended March 31, 2025, compared to the same period in 2024 . The increase was primarily driven by a $0.7 million rise in marketing expenses—largely related to the launch of the new FX line—and a $0.4 million increase in compensation costs, despite a reduction in sales and marketing personnel. These increases were partially offset by a $0.5 million reduction in rent, a $0.2 million decrease in professional services, and a $0.1 million decline in sales and marketing consumables. Despite a reduction in sales and marketing personnel, we continue to market effectively by leveraging our Co-Creation strategy, which engages industry pioneers and influential personalities. Through this approach, we expand our brand by collaborating with high-profile figures and integrating users in our product development and marketing processes. Additionally, we host VIP events and participate in major industry showcases to offer customers and stakeholders immersive experiences of our flagship vehicles and prototypes, further enhancing customer engagement and brand visibility. These efforts enable us to optimize our marketing reach and increase brand awareness while maintaining lower internal costs. 60 Table of Contents General and Administrative Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % General and administrative $ 13,674 $ 13,848 $ (174) (1.3) % General and administrative expense decreased by $0.2 million for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily driven by a $2.8 million reduction in insurance costs—mainly due to lower directors and officers’ insurance premiums, a $0.8 million reduction in allocation to cost of goods sold, and a $0.8 million decrease in information technology expenses. These reductions were partially offset by a $2.6 million increase in compensation and a $1.3 million increase in professional service fees. This net decrease reflects our ongoing cost-optimization initiatives aimed at improving the efficiency of general and administrative operations. Key actions include renegotiating vendor agreements, consolidating office space to lower occupancy costs, and restructuring portions of our workforce. These efforts have enabled us to reduce certain overhead costs, such as insurance and IT, while still supporting strategic investments in personnel and advisory services needed to execute on core business priorities. Loss (gain) from disposal of property, plant and equipment Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Loss (gain) on disposal on property, plant, and equipment $ 44 $ (87) $ 131 (150.6) % Loss (gain) on disposal on property, plant, and equipment changed by $0.1 million for the three months ended March 31, 2025, compared to the same period in 2024. We dispose of equipment when the assets become obsolete, costly to maintain, or are replaced by more efficient technologies. Change in Fair Value of Notes Payable, Warrant Liabilities, and Derivative Call Options Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Change in fair value of notes payable, warrant liabilities, and derivative call options $ 51,458 $ 27,885 $ 23,573 84.5 % The Change in fair value of notes payable, warrant liabilities, and derivative call options increased by $23.6 million for the three months ended March 31, 2025, compared to the same period in 2024. Significant driving factor increasing the gain on the change in fair value year over year are (1) the SPA Portfolio Note warrants and (2) the issuance of the Incremental Warrants. During the three months ended March 31, 2025 we recognized a $13.6 million gain from the change in fair value of the Incremental Warrants. There was no comparable instrument outstanding during the three months ended March 31, 2024. During the three months ended March 31, 2025 we recognized a $6.4 million gain from the change in fair value of the SPA Portfolio Note warrants compared to a $0.2 million gain during the same period in 2024. This increase was largely driven by the year-over-year growth in the number of SPA Portfolio Note warrants outstanding. Beginning in the second half of 2024, we began issuing SPA Portfolio Note warrants equal to 100% of the shares issuable upon conversion of the aggregate principal amount of the applicable SPA Portfolio Note, significantly increasing the number of warrants outstanding year over year. As of March 31, 2025 there were 35,260,186 SPA Portfolio Note warrants outstanding compared to 13,968 outstanding as of March 31, 2024. These increases are offset by a reduction in gain from the change in fair value recognized on our SPA Portfolio Notes and the recognition of losses upon the issuance of new SPA Portfolio Notes during the three months ended March 31, 2025. The principal balance of SPA Portfolio Notes outstanding decreased from $96.6 million as of March 31, 2024, to $48.0 million as of March 31, 2025, contributing to the reduced gain from the change in fair value. 61 Table of Contents Change in Fair Value of Related Party Notes Payable and Related Party Warrant Liabilities Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Change in fair value of related party notes payable, warrant liabilities, and derivative call options $ (277) $ (7) $ (270) 3857.1 % The Change in fair value of related party notes payable, warrant liabilities, and derivative call options increased by $0.3 million for the three months ended March 31, 2025, when compared with the same period in 2024. Significant driving factors include (1) The issuance of the related party 2025 March Unsecured SPA Notes, warrants, and Incremental Warrants and (2) the recognition of day-one losses upon the issuance of related party 2025 March Unsecured SPA Notes and associated instruments during the three months ended March 31, 2025. We issued $1.9 million of related party SPA Portfolio Notes in March 2025. Upon issuance the Company recognized a loss of $1.1 million, as the combined fair value of the SPA Portfolio Note, SPA Portfolio Note Warrant, and Incremental Warrant exceeded the cash proceeds received. These issuance-date losses were offset by gains from the remeasurement of related party notes payable, related party warrant liabilities, and related party Incremental Warrants as of March 31, 2025. The fair value of our related party instruments declined during the period ended March 31, 2025, primarily due to a 53% drop in our Class A Common Stock price over the quarter, including a 13% decline during the three months ended March 31, 2025 when related party debt activity occurred. There was not significant related party debt activity during the three months ended March 31, 2024. Loss on Settlement of Notes Payable Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Loss on settlement of notes payable $ (15,920) $ (11,403) $ (4,517) 39.6 % The $4.5 million increase in Loss on settlement of notes payable for the three months ended March 31, 2025, was driven by higher conversion activity compared to the same period in 2024, as well as a greater loss per dollar of principal converted. During the three months ended March 31, 2025, noteholders converted $20.4 million of principal, compared to $18.3 million during the same period in 2024. Loss on Settlement of Related Party Notes Payable Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Loss on settlement of related party notes payable $ (1,180) $ (14,295) $ 13,115 (91.7) % During the three months ended March 31, 2025 a related party converted a $1.5 million note in exchange for 1,352,767 shares of our Class A Common Stock. We recognized a $1.2 million 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 During the three months ended March 31, 2024 a related party converted notes payable, with an aggregate principal balance of $0.7 million in exchange for 33,107 shares of our Class A Common Stock. We recognized a $0.2 million Loss on settlement of related party notes payable. 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 related to interest, penalties, and principal increases resulting from our breach of the agreement with Chongqing Leshi Small Loan Co., Ltd. (“Chongqing”). Interest Expense Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Interest expense $ (2,302) $ (2,225) $ (77) 3.5 % Interest expense increased by $0.1 million for the three months ended March 31, 2025, compared to the same period in 2024. This increase was primarily due to financial obligations associated with the FF ieFactory California manufacturing facility in Hanford, California. 62 Table of Contents Related Party Interest Expense Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Related party interest expense $ — $ (5,094) $ 5,094 (100.0 %) Related party interest expense decreased by $5.1 million for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily driven by our default in the first quarter of 2024 on the loan with our related party lender, Chongqing, which triggered retroactive interest charges and penalties under the prior agreement. Under the revised loan agreement, no interest is incurred unless the Company defaults. Other Expense, net Three Months Ended March 31, Change (in thousands) 2025 2024 Amount % Other income, net $ 1,784 $ 530 $ 1,254 236.6 % Other income, net increased by $1.3 million for the three months ended March 31, 2025, compared to the same period in 2024. During 2025, the U.S. dollar’s continued strengthening against the Chinese yuan (CNY) resulted in a foreign currency transaction loss within Other income, net. However, the extent of the dollar's appreciation was less than in 2024, leading to a smaller foreign currency transaction loss and contributing to the overall reduction in Other income, net. 63 Table of Contents Liquidity and Capital Resources Going Concern We have evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Unaudited Condensed Consolidated Financial Statements are issued. Based on our recurring losses from operations since inception and continued cash outflows from operating activities (all as described below), we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these Unaudited Condensed Consolidated Financial Statements were issued. Preparation of Financial statements 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 which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Capital Investment, SPA Portfolio Notes, and Future Equity Plans 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 have incurred cumulative losses from operations, negative cash flows from operating activities, and we have an accumulated deficit of $4,324.6 million, an unrestricted cash balance of $9.5 million and a negative working capital position of $112.3 million as of March 31, 2025. During 2025 , we funded our operations and capital needs primarily through the issuance of notes payable and related party notes payable convertible notes (see Note 7, Notes Payable and Note 8, Related Party Transactions ), and the sale of Class A Common Stock. Debt Commitments under SPA Portfolio Notes and Other Notes SPA Portfolio Notes: We have issued various financing arrangements collectively known as the SPA Portfolio Notes. These are categorized as follows: (i) Secured SPA Notes; (ii) 2023 Unsecured SPA Notes; (iii) Junior Secured SPA Notes; (iv) and 2024 Unsecured SPA Notes. As of March 31, 2025, the SPA Portfolio Notes were in good standing. Pursuant to the SPA Portfolio Notes commitments (collectively the “SPA Commitments”) (see Note 7, Notes Payable and Note 8, Related Party Transactions ), we obtained commitments from several investors. On March 31, 2025, the SPA Commitments totaled $655.5 million, of which $427.7 million was funded, $227.8 million remained to be funded, and $45.8 million in principal was outstanding. On March 31, 2025, optional commitments under the SPA Commitments totaled $467.0 million, of which $50.9 million was funded, $386.1 million remained to be funded, and $2.5 million was outstanding. The remaining amounts to be funded as of March 31, 2025 are subject the achievement of delivery milestones, satisfaction of closing conditions, resolving disputes with investors, and satisfaction or waiver of other conditions, including for a portion of such financing an effective registration statement for the shares underlying the applicable notes. 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. Other Financing Arrangements and Related Party Notes: Additional financing is provided via convertible debt instruments, equipment financing arrangements, and related party notes that support our operations and capital expenditures. As of March 31, 2025, all notes were in good standing. Standby Equity Purchase Agreement, At-The-Market Offerin g , and Equity Issuance Constraints Standby Equity Purchase Agreement On November 11, 2022, we entered into the SEPA, which expires in November 2025. Under the 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 at our option) of Class A Common Stock to Yorkville, subject to certain limitations. As of March 31, 2025, 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. 64 Table of Contents At-The-Market Offerin g In addition, on September 26, 2023, we entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, B. Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc. 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”). Under applicable SEC rules and regulations, because we failed to timely file our Form 10-K for the year ended December 31, 2023, as well as our Form 10-Q for the quarter ended March 31, 2024, we will not be eligible to access the ATM Program until August 1, 2025, at the earliest. Equity Issuance Constraints Our ability to issue and sell additional shares of Class A Common Stock or warrants to support ongoing capital needs is further constrained by the number of authorized shares. In addition to outstanding shares, we must also consider shares reserved for issuance under convertible debt, warrants or other obligations with equity rights. In addition, equity issuances can potentially trigger various anti-dilution features in our debt and equity instruments that increase the number of shares to be issued and/or reduce the exercise price. This could result in us having inadequate authorized shares to meet our outstanding commitments. Capital Needs, FX Series Production, and Bankruptcy Risk We project that we will require substantial additional funds to continue operations and support production of the FF 91, and we also plan to initiate production of our FX Series of vehicles. If additional capital is not secured, we will not have sufficient resources to meet our obligations and continue operations, which could result in bankruptcy protection and asset liquidation, with equity holders receiving little to no recovery. However, the anticipated start of FX Series production is expected to generate new revenue streams and enhance operational performance, thereby partially mitigating near-term cash flow pressures. However, if additional capital is not secured, we will not have sufficient resources to meet our obligations and continue operations, which could result in bankruptcy protection and asset liquidation, with equity holders receiving little to no recovery. Funding Alternatives and Risks We continue to explore various funding and financing alternatives to fund our ongoing operations and to ramp up production. The particular funding and financing mechanisms, terms, timing, and amounts depend on our assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time. However, there have been delays in securing additional funding commitments, which have exacerbated supply chain pressures, among other things. If our ongoing capital raising efforts are unsuccessful or significantly delayed, or if we experience prolonged material adverse trends in our business, production will be delayed or decreased, and actual use of cash, production volume and revenue for 2025 will vary from our previously disclosed forecasts, and such variances may be material. While we are actively engaged in negotiations with potential financing sources, we may be unable to raise additional capital on terms acceptable to us or at all. In addition to the risk that our assumptions and analyses may prove incorrect, the projections may underestimate the professional fees and other costs to be incurred related to the pursuit of various financing options currently being considered and ongoing legal risks. Capital needs to fund development of our remaining product portfolio will highly depend on the market success and profitability of the FF 91 and the launch of the FX series, and our ability to accurately estimate and control costs. Apart from the FF 91 series and FX series, substantial additional capital will be required to fund operations, research, development, and design efforts for future vehicles. In addition, elevated U.S. import tariffs on electric vehicle components sourced from China could increase our future manufacturing costs as production of the FX Series and other future vehicle models are introduced. While tariffs did not materially impact cost of goods sold for the three months ended March 31, 2025, due to limited production volume, continued reliance on China-based suppliers may contribute to higher input costs, pressure gross margins, and increase the Company's future funding needs. Going Concern and Future Capital Strat egy Despite our diversified financing structure - including the SPA Portfolio Notes, convertible debt instruments, and equipment financing, and targeted inflows from new debt, and anticipated equity - and our current cash flow projections, our recurring operating losses and continuing negative cash flows from operations continue to raise substantial doubt about our ability to continue as a going concern. 65 Table of Contents Sources of Liquidity As of March 31, 2025, our principal source of liquidity was cash on hand totaling $9.5 million, which was held for working capital and general corporate purposes. We also have access to various sources of additional capital, including the SEPA and the SPA Commitments. 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, of the notes to the Consolidated Financial Statements included in this Form 10-Q. Significant Related Party Notes Payable and Notes Payable Facilities We have been significantly funded by notes payable from related parties and third parties. The related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by our founder and Chief Product and User Ecosystem Officer (who, as of April 2025, became Global Co-CEO). For more information on the outstanding related party notes payable and notes payable as well as the related schedules of maturities, see Note 7, Notes Payable , and Note 8, Related Party Transactions , of the notes to the Consolidated Financial Statements included in this Form 10-Q. We have entered into notes payable agreements with third parties, which consist of the following as of March 31, 2025: (in thousands) Contractual Maturity Date Contractual Interest Rates Unpaid Principal Balance Fair Value Measurement Adjustments Original Issue Discount and Proceeds Allocated to Warrants Net Carrying Value Secured SPA Notes Various 10% - 15% $ 2,500 $ 139 $ (250) $ 2,389 Junior Secured SPA Notes September 2029 10% 13,431 55 (7,426) 6,060 2024 Unsecured SPA Notes Various through January 2030 10% 30,015 12,279 (30,964) 11,330 March 2025 Unsecured SPA Notes April 2030 10% 2,000 (44) (1,193) 763 Notes payable – China other Due on Demand —% 4,132 — — 4,132 $ 52,078 $ 12,429 $ (39,833) $ 24,674 Notes payable, current $ 4,132 Notes payable, long-term portion $ 20,542 Related party notes payable consists of the following as of March 31, 2025: (in thousands) Contractual Maturity Date Contractual Interest Rates Net Carrying Value Unsecured Convertible Note June 2025 (3) 4.27% $ 451 2025 March Unsecured SPA Notes April 2030 10.0% $ 143 Notes Payable — China April 2027 18.0% 4,215 Notes Payable on Demand — China Due on Demand —% 413 FFGP Note Various 2024 4.27% - 5.27% 1,576 Convertible FFGP Note May 2024 4.27% 250 Other Notes Due on Demand 12.0% 75 $ 7,123 Related party notes payable, current $ 4,298 Related party notes payable, long-term $ 2,825 66 Table of Contents Cash Flow Analysis Three Months Ended March 31, (in thousands) 2025 2024 Net cash (used in) provided by: Operating activities $ (20,295) $ (14,719) Investing activities $ (1,568) $ (12) Financing activities $ 24,601 $ 12,013 Effect of exchange rate changes on cash and restricted cash $ (419) $ (2) Operating Activities We continue to experience negative operating cash flows as we advance the design and development of our vehicles and expand our infrastructure in both the United States and China. Our operating cash flows are significantly affected by fluctuations in working capital components, including changes in personnel expenses, accounts payable, accrued interest, other current liabilities, deposits, and current assets. For the three months ended March 31, 2025, net cash used in operating activities was $20.3 million, compared to $14.7 million for the same period in 2024, reflecting a $5.6 million increase in cash outflows . Net Loss: The reduction of $37.9 million in Net loss is an improvement in 2025 compared to the same period in 2024 ; however, this figure includes various non-cash transactions that are excluded when calculating cash flow from operating activities. Non-cash adjustments: Non-cash adjustments decreased by $29.3 million for the three months ended March 31, 2025 compared to the same period in 2024 . This decrease was comprised of a $23.6 million decrease in fair value adjustments on Change in fair value of notes payable, warrant liabilities, and derivative call options, and a $13.1 million decrease in Loss from settlement of related party notes payable. These adjustments were partially offset by a $4.5 million increase in Loss from settlement of notes payable. As these adjustments do not represent actual cash changes, they are disclosed for reconciliation purposes consistent with the cash flow statement. Changes in working capital: Changes in working capital decreased by $13.6 million for the three months ended March 31, 2025 compared to the same period in 2024. For the three months ended March 31, 2025, changes in working capital included unfavorable shifts in our operating assets and liabilities. Notable contributors to the change were a $4.4 million change in Inventory balances, a $8.8 million change in Deposits, and a $5.1 million change in Accrued interest expense. These were partially offset by a $5.2 million change in Accrued expenses and other current and non-current liabilities. While these figures are detailed in the cash flow statement, they underscore the critical role that effective working capital management has played in reducing our operating cash outflows. The reductions in cash outlays for working capital purposes result from our cost-saving and cash management measures. Investing Activities Net cash used in investing activities was $1.6 million and $0 for the three months ended March 31, 2025 and 2024, respectively. This change was driven by a increase in the acquisition of fixed assets due to the reduction of liquidity. Financing Activities Amid a challenging financing environment, we are actively seeking strategic opportunities to boost our cash reserves and support growth using a mix of convertible loans and non-convertible funding. For the three months ended March 31, 2025, financing activities provided a net cash inflow of $24.6 million, compared to a net cash inflow of $12.0 million in 2024—an increase of $12.6 million. The improvement reflects the Company’s continued ability to secure financing despite a challenging capital markets environment. In 2025, proceeds from notes payable were $22.0 million, up by $13.0 million from $9.0 million in 2024 . Our proceeds from related party notes payable decreased to $1.9 million in 2025 from $3.0 million in 2024, a decrease of $1.1 million. Moreover, financing proceeds from other financial obligations transactions totaled $1.1 million for the three months ended March 31, 2025 , compared to no similar proceeds for the three months ended March 31, 2024 . Effect of Exchange Rate Changes on Cash and Restricted Cash The exchange rates effect on cash and restricted cash was $0.4 million and $0 for the three months ended March 31, 2025 and 2024, respectively. The effects of exchange rate changes on cash and restricted cash result from fluctuations on the 67 Table of Contents translation of assets and liabilities denominated in foreign currencies, primarily Chinese Yuan. Fluctuations in exchange rates against the U.S. Dollar may positively or negatively affect our operating results. Off-Balance Sheet Arrangements We did not have any material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Thus, we did not have any off-balance sheet arrangements as of March 31, 2025 and 2024. Critical Accounting Estimates The preparation of our Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2025, in accordance GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities, and the reported amounts of expenses during the reporting period. Management bases these estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Changes in accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from management’s estimates, and such differences may materially affect our financial position, results of operations, or cash flows. Given current global macroeconomic and geopolitical conditions, our estimates are subject to additional variability and volatility. Critical accounting estimates are defined as estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. For a description of our critical accounting estimates, refer to the section titled “Critical Accounting Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7 of our Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025. As of the date of this report, there have been no changes to our critical accounting estimates described in the Form 10-K that have had a material impact on our Unaudited Condensed Consolidated Financial Statements and related footnotes. Recent Accounting Pronouncements See the sections titled “ Recent Accounting Pronouncements” in Note 1, Nature of Business and Organization, Basis of Presentation, and Summary of Significant Accounting Policies in our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q for a discussion about our recently adopted accounting pronouncements and the recently issued accounting pronouncements not yet adopted which are determined to be applicable to us. Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information under this Item as we qualify as a “smaller reporting company.”