What changed in this filing

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Item 4. Controls and Procedures

2025-08-19 compared with 2025-05-09 · 37 added, 35 removed, 48 unchanged (60% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the tim e periods specified in the Security Exchange Commission's (“SEC”) rules and forms, and that such information is accumulated and communicated to management, including its Global Co-CEOs and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) of the Exchange Act), the Company’s Global Co-CEOs and CFO (its principal executive officers and principal financial and accounting officer, respectively) have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2025, due to the material weaknesses in the Company’s internal control over financial reporting described below.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the tim e periods specified in the Security Exchange Commission's (“SEC”) rules and forms, and that such information is accumulated and communicated to management, including its Global Co-CEO Matthias Aydt and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation of the Company’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) of the Exchange Act), the Company’s Global Co-CEO Matthias Aydt and CFO ( principal executive officer and principal financial and accounting officer, respectively) have concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2025, due to the material weaknesses in the Company’s internal control over financial reporting described below.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined under Rule 13a-15(f) under the Exchange Act.

Under the supervision and with the participation of the Company’s management, including the Company’s Global Co-CEOs and CFO, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Under the supervision and with the participation of the Company’s management, including the Company’s Global Co-CEO Matthias Aydt and CFO, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this evaluation, due to the material weaknesses described below, the Company concluded that the system of internal control over financial reporting was not effective.

13 unchanged sentences

• The Company did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the period-end financial reporting process addressing areas including financial statement and footnote presentation and disclosures, account reconciliations and journal entries, including segregation of duties, assessing the reliability of reports and spreadsheets used in controls, and the timely identification and accounting for cut-off of expenditures.

• The Company did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements, specifically, with respect to (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately;

and underlying accounting records are identified, tested, authorized and implemented appropriately;

(ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate company personnel;

8 unchanged sentences

Remediation Plan for Material Weaknesses in Internal Control Over Financial Reporting

Management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses.

Since identifying the material weaknesses described above, the Company made the following enhancements to the Company’s internal control over financial reporting:

• The Company has added and will continue to add finance and accounting personnel to the organization to strengthen its finance and accounting teams.

The additional personnel are expected to provide oversight, structure, reporting lines, and additional review over the Company’s disclosures;

• The Company has implemented and will continue to develop new accounting policies and procedures, and the Company has installed and continues to configure an IT system relevant to the preparation of the Company’s financial statements to improve communication of key areas across the different departments at the Company and to provide adequate structure, accountability, and segregation of duties;

• The Company has implemented and will continue to develop enhanced controls around the Company’s related party transactions, including regular attestations;

• The Company adopted an Insider Investment Reporting Policy to enhance internal reporting of related party transactions.

Our remediation activities are continuing during 2025.

There has been substantial changes to the composition of the Board as a result of the governance settlement entered into between the Company and FF Global, as well as substantial turnover in key management personnel, including accounting, legal and compliance personnel, which could impact its ability to implement the above-described remedial measures.

In addition, the Company has engaged various advisory firms to provide consulting services to assist in improving the internal control environment and reviewing the corporate organization on a go-forward basis.

In addition, as of March 31, 2025 , certain departments within the Company report to both Mr.

Aydt, including the Company’s user ecosystem, capital markets, human resources and administration, and FF China (“FFCN”), subject to processes and controls that have been determined and continue to be developed by the Board after consultation with the Company’s management.

Further, the Board deter mined that Mr.

Jia is an “officer” of the Company within the meaning of Section 16 of the Exchange Act, and an “executive officer” of the Company under Rule 3b-7 under the Exchange Act.

On April 25, 2025, the Company announced the appointment of Mr.

Yueting Jia as Global Co-CEO, jointly leading the Company alongside Matthias Aydt, with a focus on advancing user ecosystem development, supply chain management, EV R&D, finance, legal, and China and Middle East operations.

The Company has or is planning to put in place processes and controls to mitigate the risks associated with the changes in Mr.

Jia’s responsibilities as well as to enhance oversight and co rporate governance, including but not limited to:

The Company remains committed to addressing material weaknesses in internal control over financial reporting and strengthening its overall control environment.

• The Company has added and will continue to add finance and accounting personnel, including hiring a Senior Manager of Risks and Internal Controls in Q2 2025.

Reporting directly to the CFO, this role serves as the internal point of contact for ICFR remediation and collaborates with the consulting firm to design, remediate, and implement enhanced controls;

• The Company has implemented and is continuing to develop new accounting policies and procedures;

• The Company has installed and is configuring an IT system to support financial statement preparation, improve interdepartmental communication, and establish adequate structure, accountability, and segregation of duties;

• The Company has implemented and is continuing to develop enhanced controls over related party transactions, including regular attestations;

• The Company adopted an Insider Investment Reporting Policy to strengthen internal oversight of related party transactions.

Our remediation activities are ongoing in 2025 and are expected to extend into 2026.

There have been substantial changes to the composition of the Board of Directors as a result of the governance settlement entered into between the Company and FF Global, as well as substantial turnover in key management personnel, including accounting, legal and compliance personnel, which could impact its ability to implement the above-described remedial measures.

The Company has engaged an external firm in May 2025 to assist with evaluating, designing, and implementing enhancements to its internal controls as part of its ongoing remediation efforts.

The Company has or is planning to put in place processes and controls to mitigate the risks associated to enhance oversight and co rporate governance, including but not limited to:

• Continuing to monitor the segregation of responsibilities and duties in the Company’s user ecosystem, capital markets, human resources and administration, and FFCN;

• Requiring the Board, or a designated committee of the Board, to approve the signing of financing agreements, the hiring, promoting or terminating vice presidents of the Company and above (including additional Section 16 officers), and the adoption of Company-wide compensation policies;

• While in March 2023 the Company hired a Compliance Officer with the title of a Deputy General Counsel to support its compliance efforts, (hired in March 2023),it will continue to review the need to employ a Chief Compliance Officer who will report on a dotted line to the Chair of the Audit Committee of the Baoard, and

• Re-engaging external consulting resources to review compliance activities and perform work in the capacity of an internal audit function, who will report on a dotted line to the Chair of the Audit Committee of the Board.

• The Company hired a Compliance Officer (Deputy General Counsel) in March 2023 to support its compliance efforts.

Following this individual’s departure in July 2025, the Company continues to assess the need for a Chief Compliance Officer who would report on a dotted line to the Chair of the Audit Committee, and

• In May 2025, the Company engaged an external firm to assist with evaluating, designing, and implementing enhancements to its internal controls.

The firm works closely with the Senior Manager of Risks and Internal Controls and provides support for compliance reviews and internal audit functions, reporting to the Chair of the Audit Committee.

In addition to the above actions and in view of the governance changes that the Company implemented pursuant to the Heads of Agreement and Amended Shareholder Agreement and otherwise, the Company expects to engage in additional activities, including, but not limited to:

of more complex applications of generally accepted accounting principles and to assist with documenting and assessing its accounting policies and procedures;

• Continuing to hire key finance and accounting personnel as the Company scales and until it has sufficient technical accounting resources, combined with engaging external consultants to provide support and to assist in the evaluation of more complex applications of generally accepted accounting principles and to assist with documenting and assessing its accounting policies and procedures;

• Designing and implementing controls in response to the risks of material misstatement to identify and evaluate changes in the Company’s business and the impact on internal controls;

• Designing and implementing controls for communicating and sharing information between legal, capital markets, and accounting to facilitate transactions being recorded timely and accurately;

• Designing and implementing formal processes, accounting policies, procedures, and controls supporting certain business processes and its financial close process, including creating standard balance sheet reconciliation templates and journal entry controls assessing the reliability of reports and spreadsheets used in controls;

and the timely identification and accounting for cut-off of expenditures;

• Designing and implementing controls to address the identification of and accounting for certain non-routine, unusual or complex transactions;

• Designing and implementing controls related to the identification and disclosure of certain arrangements and transactions with related parties;

• Continuing to implement additional IT systems relevant to the preparation of the Company’s financial statements and controls over financial reporting to improve communication of key areas across the different departments at the Company and to provide adequate structure, accountability, and segregation of duties;

• Continuing to implement IT systems supporting financial reporting to enhance communication, accountability, and segregation of duties;

• Designing and implementing IT general controls, including controls over change management, the review and update of user access controls and controls over critical batch jobs and data backups.

2 unchanged sentences

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

The Company is working to rem ediate the material weaknesses as efficiently and effectively as possible and expects full remediation could potentially go beyond December 31, 2025.

The Company is working to remediate the material weaknesses as efficiently and effectively as possible.

Full remediation could extend beyond December 31 , 2025.

At this time, the Company cannot provide an estimate of costs expected to be incurred in connection with implementing this remediation plan;

however, these remediation measures will be time consuming, will result in the Company incurring significant costs, and will place s ignificant demands on the Company’s financial and operational resources.

While the Company believes these efforts will remediate the material weaknesses, the Company may not be able to complete its evaluation, testing or any required remediation in a timely fashion, or at all.

While the Company believes these efforts will remediate the material weaknesses, there is no assurance that evaluation, testing, or required remediation will be completed on time.

It is also possible they may not be completed at all.

The Company cannot assure that the measures that have been taken to date and may be taken in the future, will be sufficient to remediate the control deficiencies that led to the material weaknesses in internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

The effectiveness of the Company’s internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud.

Further loss and/or turnover in key management personnel, particularly accounting, finance and legal personnel, may negatively impact the Company’s ability to implement its remediation plan.

Further turnover in key management personnel, particularly accounting, finance and legal personnel, may negatively impact the Company’s ability to implement its remediation plan.

If the Company is unable to remediate its material weaknesses, the Company’s ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, may adversely affect the Company’s reputation and business and the market price of the Class A Common Stock.

Any such failures could result in litigation or regulato ry actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of the Company’s securities and harm to the Company’s reputation and financial condition, or diversion of financial and management resources from the operation of the Company’s business.

The Company remains focused on executing its remediation plan and strengthening its internal controls to support reliable financial reporting.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Following the end of the quarter, the Company remediated the previously identified material weakness related to the lack of formal procedures for reporting material cybersecurity incidents to the Board by updating its Cybersecurity Incident Reporting Policy.

Management believes that this enhancement strengthens the Company’s internal control environment and improves its cybersecurity governance framework.

On August 6, 2025, the Board of Directors determined that, during the pendency of the SEC investigation involving the Company and certain current and former executives, Mr.

Jia will be excluded from oversight of the Company’s finance, legal, accounting, and public reporting functions (the “Governance Adjustments”).

As part of these adjustments, Mr.

Jia was also relieved of responsibility for providing certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

These oversight responsibilities have been delegated to Mr.

Matthias Aydt, who previously shared such responsibilities with Mr.

The Governance Adjustments became effective on August 13, 2025.

Except for the changes described above, there have been no changes in internal control over financial reporting during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

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 4. Controls and Procedures