The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
Faraday Future Intelligent Electric Inc., formally
known as Property Solutions Acquisition Corp. (the “Company”) was incorporated in Delaware on February 11, 2020. The Company
was a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities.
Business Combination
On July 21, 2021 (the “Closing Date”),
Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp. (“PSAC”)), a Delaware corporation (the
“Company”), consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger,
dated as of January 27, 2021 (as amended, the “Merger Agreement”), by and among the Company, PSAC Merger Sub Ltd., an exempted
company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of the Company (“Merger
Sub”), and FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws
of the Cayman Islands (“FF”), as amended by the First Amendment to Agreement and Plan of Merger, dated as of February 25,
2021 (the “First Amendment to Merger Agreement”), the Second Amendment to Agreement and Plan of Merger, dated as of May 3,
2021 (“Second Amendment to Merger Agreement”) the Third Amendment to Agreement and Plan of Merger dated as of June 14, 2021
(“Third Amendment to Merger Agreement”) and the Fourth Amendment to Agreement and Plan of Merger dated as of July 12, 2021
(“Fourth Amendment to Merger Agreement”) by and among the Company, Merger Sub, and FF.
Pursuant to the terms of the Merger Agreement,
Merger Sub merged with and into FF, with FF surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”).
Upon the consummation of the Business Combination (the “Closing”), the registrant changed its name from “Property Solutions
Acquisition Corp.” to “Faraday Future Intelligent Electric Inc.”
At the effective time of
the Business Combination on July 21, 2021 (the “Effective Time”):
|
●
|
each outstanding FF share (or indicative FF share, with respect to such outstanding FF converting debt and such other outstanding liabilities of FF) converted into a number of shares of new Class A common stock (or, in the case of FF Top (as defined below), shares of new Class B common stock) of the Company following the Business Combination equal to an exchange ratio (the “Exchange Ratio”) of 0.14130; and
|
|
●
|
each FF option or FF warrant that is outstanding immediately prior to the closing of the Business Combination (and by its terms will not terminate upon the closing of the Business Combination) remained outstanding and converted into the right to purchase a number of shares of Company Class A common stock equal to the number of FF ordinary shares subject to such option or warrant multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option or warrant divided by the Exchange Ratio, with the aggregate amount of shares of Class A common stock issuable upon exercise of such options and warrants to be 44,880,595.
|
The Company’s stockholders approved the
Business Combination at a special meeting of the stockholders held on July 20, 2021 (the “Special Meeting”). The parties to
the Merger Agreement consummated the Business Combination on July 21, 2021.
At the Effective Time, pursuant to the terms
of the Merger Agreement, the outstanding FF shares (other than the outstanding FF shares held by FF Top Holding LLC (f/k/a FF Top
Holding Ltd.) (“FF Top”)), the outstanding FF converting debt and certain other outstanding liabilities of FF were
converted into 153,954,009 shares of new Class A common stock of the Company following the Business Combination and, for FF Top,
64,000,588 shares of new Class B common stock of the Company were issued following the Business Combination. As of the Effective
Time, holders of FF options and holders of FF warrants continued to hold such options or warrants, as applicable, but the aggregate
amount of shares of Class A common stock issuable upon exercise of such options and warrants became 44,880,595.
Holders of 20,600 shares of PSAC common
stock properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the
proceeds from PSAC's initial public offering, calculated as of two business days prior to the consummation of the business
combination, which was approximately $10.00 per share, or $0.2 million in the aggregate. At the Effective Time, each non-redeemed
outstanding share of PSAC common stock was converted into one share of Class A common stock.
Following the Business Combination, the Company
will continue to have outstanding 23,652,119 warrants, consisting of (i) approximately 22,977,568 public warrants (the “Public Warrants”)
listed on the Nasdaq Stock Market (the “Nasdaq”) and (ii) 674,551 private warrants (the “Private Warrants” and,
collectively with the Public Warrants, the “Warrants”), each exercisable for one share of Company Class A common stock at
a price of $11.50 per share.
In connection with the Business Combination, the Company entered into Subscription
Agreements on January 27, 2021 (collectively and as amended, the “Subscription Agreements”) with certain accredited investors
or qualified institutional buyers (collectively, the “Subscription Investors”). Pursuant to the Subscription Agreements, the
Subscription Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such Subscription Investors,
an aggregate of 76,140,000 shares of PSAC common stock for a purchase price of $10.00 per share, or an aggregate of $761.4 million in
gross cash proceeds (the “Private Placement”). Pursuant to the Subscription Agreements, the Company gave certain registration
rights to the Subscription Investors with respect to the shares issued and sold in the Private Placement. The closing of the Private Placement
occurred immediately prior to the Closing.
Business Prior to the Business Combination
Prior to the Business Combination, the Company
had one subsidiary, PSAC Merger Sub, Ltd., a wholly-owned subsidiary of the Company an exempted company with limited liability incorporated
under the laws of the Cayman Islands on January 27, 2021 (“Merger Sub”).
All activity through June 30, 2021 related to
the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and
identifying a target company for an initial business combination and consummating the acquisition of Faraday Future Intelligent Electric
Inc.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The registration statement for the Company’s
Initial Public Offering was declared effective on July 21, 2020. On July 24, 2020, the Company consummated the Initial Public Offering
of 20,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public
Shares”), at $10.00 per Unit, generating gross proceeds of $200,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 535,000 units (the “Private Units”) at a price of $10.00 per Private
Unit in a private placement to Property Solutions Acquisition Sponsor, LLC (the “Sponsor”) and EarlyBirdCapital, Inc. (“EarlyBirdCapital”),
generating gross proceeds of $5,350,000, which is described in Note 4.
Following the closing of the Initial Public Offering
on July 24, 2020, an amount of $200,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Units was placed in a trust account (the “Trust Account”) located in the United States and
invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940,
as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company
that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company
Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution
of the funds in the Trust Account, as described below.
On July 29, 2020, the underwriters notified the
Company of their intent to partially exercise their over-allotment option on July 31, 2020. As such, on July 31, 2020, the Company consummated
the sale of an additional 2,977,658 Units, at $10.00 per Unit, and the sale of an additional 59,551 Private Units, at $10.00 per Private
Unit, generating total gross proceeds of $30,371,190. A total of $29,775,680 of the net proceeds was deposited into the Trust Account,
bringing the aggregate proceeds held in the Trust Account to $229,775,680.
Transaction costs amounted to $5,117,030 consisting
of $4,595,510 of underwriting fees and $521,520 of other offering costs.
Risks and Uncertainties
In March 2020, the World Health Organization declared
the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the World. As
of the date the financial statement was issued, there was considerable uncertainty around the expected duration of this pandemic. The
Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company
for a Business Combination, the specific impact is not readily determinable as of the date of this financial statement. The financial
statement does not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
As of June 30, 2021, the Company had $17,873 in its
operating bank accounts, $229,788,742 in cash and securities held in the Trust Account to be used for a Business Combination or to repurchase
or redeem its common stock in connection therewith and a working capital deficit of $2,276,754, which excludes $79,800 of franchise taxes
payable. As of June 30, 2021, $13,062 of the amount on deposit in the Trust Account represented interest income, which is available to
pay the Company’s tax obligations.
On February 28, 2021, the Company entered into
a convertible promissory note with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount
of $500,000.
On June 7, 2021, the Company entered into a convertible
promissory note with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $200,000.
On July 21, 2021, pursuant to the Subscription Agreements,
the Subscription Investors purchased, and the Company agreed to sell to such Subscription Investors, an aggregate of 76,140,000 shares
of PSAC common stock for a purchase price of $10.00 per share, or an aggregate of $761.4 million in gross cash proceeds (the “Private
Placement”). The closing of the Private Placement occurred immediately prior to the Closing.
The Company may be required to obtain additional financing. If the Company
is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but
not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern through twelve months of the issuance
of this report. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should the Company be unable to continue as a going concern.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated under
the Securities Act. Certain information or footnote disclosures normally included in financial statements prepared in accordance with
GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they
do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or
cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows
for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A, as filed with the SEC on May 26, 2021.
The interim results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for
the year ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, 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 (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of condensed financial statements
in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of June 30, 2021 and December 31, 2020.
Cash and Marketable Securities Held in Trust
Account
At June 30, 2021 and December 31, 2020, substantially
all of the assets held in the Trust Account were held in money market funds, which primarily invest in U.S. Treasury securities. The Company
accounts for its securities held in the trust account in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 320 “Debt and Equity Securities.” These securities are classified as trading securities with unrealized gains or losses,
if any, recognized through the statement of operations.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the
stockholders’ equity section of the Company’s condensed balance sheets.
Warrant Liability
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment
considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant
to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants
are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required
to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company determined that the Private
Placement Warrants should be treated as a derivative liability under ASC 815 due to certain settlement provisions that depend on the holder
of the warrant. The fair value of the warrants was estimated using a binomial lattice simulation model (see Note 9).
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment
date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The Company is currently not
aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company
is subject to income tax examinations by major taxing authorities since inception.
On March 27, 2020, the CARES Act was enacted in
response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new
legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section
163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest
(ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii)
making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019,
and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv)
enhancing the recoverability of alternative minimum tax credits. Given the Company’s full valuation allowance position and
capitalization of all costs, the CARES Act did not have an impact on the financial statements.
Net Income (Loss) per Common Share
Net income (loss) per share is computed by dividing
net income by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock subject
to forfeiture. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to
purchase an aggregate of 23,572,119 shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent
upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations includes
a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method
of income (loss) per share. Net income (loss) per common share, basic and diluted, for Common stock subject to possible redemption is
calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable
franchise and income taxes, by the weighted average number of Common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted,
for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities
attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding
for the period.
Non-redeemable common stock includes Founder Shares
and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates
in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The following table reflects the calculation of
basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
For
the period
from February 11,
2020 (inception)
through
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in
Trust Account
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
$
|
7,694
|
|
|
$
|
—
|
|
|
$
|
36,466
|
|
|
$
|
—
|
|
Company's portion available to pay taxes
|
|
|
(7,694
|
)
|
|
|
—
|
|
|
|
(36,466
|
)
|
|
|
—
|
|
Net income allocable to Common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Common stock subject to possible redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
22,103,036
|
|
|
|
—
|
|
|
|
22,195,523
|
|
|
|
—
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
$
|
(0.00
|
)
|
|
$
|
—
|
|
|
$
|
(0.00
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(5,726,988
|
)
|
|
$
|
—
|
|
|
$
|
(7,544,047
|
)
|
|
$
|
(1,000
|
)
|
Non-Redeemable Net Loss
|
|
$
|
(5,726,988
|
)
|
|
$
|
—
|
|
|
$
|
(7,544,047
|
)
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
7,413,475
|
|
|
|
5,200,000
|
|
|
|
7,320,988
|
|
|
|
5,200,000
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
$
|
(0.77
|
)
|
|
$
|
—
|
|
|
$
|
(1.03
|
)
|
|
$
|
—
|
|
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying
amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards update, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 20,000,000 Units, at $10.00 per Unit. On July 31, 2020, in connection with the underwriters’ partial exercise of their over-allotment
option, the Company sold an additional 2,977,568 Units at a price of $10.00 per Unit. Each Unit consists of one share of common stock
and one warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share common stock at a price
of $11.50 per share, subject to adjustment (see Note 8).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and EarlyBirdCapital purchased an aggregate of 535,000 Private Units at a price of $10.00 per Private Unit,
for an aggregate purchase price of $5,350,000. On July 31, 2020, in connection with the underwriters’ partial exercise of their
over-allotment option, the Company sold an additional 59,551 Private Units at a price of $10.00 per Private Unit. The Sponsor purchased
483,420 Private Units and EarlyBirdCapital purchased 111,131 Private Units. Each Private Unit consists of one share of common stock (“Private
Share”) and one warrant (“Private Warrant”). Each Private Warrant entitles the holder to purchase one share of common
stock at a price of $11.50 per full share, subject to adjustment (see Note 8). The proceeds from the Private Units were added to the proceeds
from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination
Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements
of applicable law).
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On February 11, 2020, the Sponsor purchased an
aggregate of 5,750,000 shares of the Company’s common stock for an aggregate price of $25,000 (the “Founder Shares”).
The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the Sponsor would collectively own 20% of the Company’s issued and
outstanding shares after the Initial Public Offering (excluding the Private Shares). As a result of the underwriters’ election to
partially exercise their over-allotment option on July 31, 2020 and the expiration of the remaining over-allotment option, 5,608 Founder
Shares were forfeited and 744,392 Founder’s Shares are no longer subject to forfeiture, resulting in there being 5,744,392 Founder
Shares issued and outstanding.
The Sponsor has agreed, subject to certain limited
exceptions, not to transfer, assign or sell any of the Founder Shares until (1) with respect to 50% of the Founder Shares, the earlier
of one year after the completion of a Business Combination and the date on which the closing price of the common stock equals or exceeds
$12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within any 30-trading day period commencing after a Business Combination and (2) with respect to the remaining 50% of the Founder
Shares, one year after the completion of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination,
the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property.
Advances — Related Party
The Sponsor advanced the Company an aggregate
of $75,000 to cover expenses related to the Initial Public Offering. The advances were non-interest bearing and due on demand. The outstanding
advances of $75,000 were repaid upon the consummation of the Initial Public Offering on July 24, 2020.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Promissory Note — Related Party
On February 14, 2020, the Company issued an unsecured
promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal
amount of $150,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020, (ii) the
consummation of the Initial Public Offering or (ii) the date on which the Company determines not to proceed with the Initial Public
Offering. The outstanding balance under the Promissory Note of $133,000 was repaid upon the consummation of the Initial Public Offering
on July 24, 2020. As of June 30, 2021, there was $500,000, outstanding under the Promissory Note, which is currently due on demand.
Administrative Services Agreement
The Company entered into an agreement whereby,
commencing on the July 21, 2020, through the earlier of the Company’s consummation of a Business Combination and its liquidation,
the Company will pay an affiliate of the Company’s executive officers a total of $10,000 per month for office space and related
services. For the three and six months ended June 30, 2021, the Company incurred and paid $30,000 and $60,000 in fees for these services,
respectively.
Related Party Loans
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor, or certain of the Company’s officers and directors or their affiliates may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such
Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. The units would
be identical to the Private Units.
On February 28, 2021, the Company entered into
a convertible promissory note with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount
of $500,000 (the “Note”). The Note is non-interest bearing and due on the date on which the Company consummates a Business
Combination. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside the Trust
Account to repay the Note; however, no proceeds from the Trust Account may be used for such repayment. Up to $500,000 of the Note may
be converted into Class A common stock at a price of $10.00 per common stock at the option of the Sponsor. As of the date of these financial
statements, there is a $500,000 balance outstanding under the Note.
On June 7, 2021, the Company entered into a convertible
promissory note with the Sponsor pursuant to which the Sponsor agreed to loan the Company up to an aggregate principal amount of $200,000
(the “Convertible Note”). The Convertible Note is non-interest bearing and due on the date on which the Company consummates
a Business Combination. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside
the Trust Account to repay the Convertible Note; however, no proceeds from the Trust Account may be used for such repayment. Up to $200,000
of the Note may be converted into units, with each unit consisting of one share of Class A common stock and one Private Placement warrant
at a price of $10.00 per unit at the option of the Sponsor. As of the date of these financial statements, there is a $200,000 balance
outstanding under the Note. As of June 30, 2021, the aggregate fair market value of the Convertible Note was $480,400 (see Note 9).
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered
into on July 21, 2020, the holders of the Founder Shares and Representative Shares, as well as the holders of the Private Units and any
units that may be issued in payment of Working Capital Loans made to Company, will be entitled to registration rights. The holders of
a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders of the majority
of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these
shares of common stock are to be released from escrow. The holders of a majority of the Representative Shares, Private Units and units
issued in payment of Working Capital Loans (or underlying securities) can elect to exercise these registration rights at any time after
the Company consummates a business combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one
occasion and only during the five-year period beginning on the effective date of the Initial Public Offering. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation
of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration only during
the seven-year period beginning on the effective date of the Initial Public Offering. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
On the Closing Date, in connection with the consummation
of the Business Combination, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration
Rights Agreement”) with PSAC, the Sponsor, EarlyBirdCapital, Inc., and certain FF shareholders (collectively, with each other person
who has executed and delivered a joinder thereto, the “RRA Parties”), pursuant to which the RRA Parties are entitled to certain
registration rights in respect of the registrable securities under the Registration Rights Agreement. The material terms of the Registration
Rights Agreement are described in the section of the Proxy Statement entitled “Certain Agreements Related to the Business Combination—Registration
Rights Agreement,” which is incorporated herein by reference.
Business Combination Marketing Agreement
The Company has engaged EarlyBirdCapital as an
advisor in connection with a Business Combination to assist the Company in holding meetings with its shareholders to discuss the potential
Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing
the Company’s securities in connection with a Business Combination, assist the Company in obtaining shareholder approval for the
Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The
Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal to 3.5%
of the gross proceeds of Initial Public Offering, or $8,042,149 (exclusive of any applicable finders’ fees which might become payable);
provided that up to 33% of the fee may be allocated at the Company’s sole discretion to other third parties who are investment banks
or financial advisory firms not participating in this offering that assist the Company in identifying and consummating a Business Combination.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 7. STOCKHOLDER’S EQUITY
Preferred Stock — The Company is
authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other
rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2021 and December
31, 2020, there were no shares of preferred stock issued or outstanding.
Common Stock — The Company is
authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. At June 30, 2021 and December 31, 2020, there
were 6,538,943 and 7,227,474 shares of common stock issued and outstanding, excluding 22,977,568 and 22,289,037 shares of common stock
subject to possible redemption, respectively.
NOTE 8. WARRANTS
Warrants — As of June 30, 2021 and
December 31, 2020, there were 22,977,568 Public Warrants outstanding. The Public Warrants will become exercisable on the later of (a)
30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. No warrants
will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock
issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing,
if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within
a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise
warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption
is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless
basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Once the warrants become exercisable, the Company
may redeem the Public Warrants:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per warrant;
|
|
|
|
|
●
|
upon not less than 30 days’ prior written notice of redemption to each warrant holder;
|
|
|
|
|
●
|
if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and
|
|
|
|
|
●
|
if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
|
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,”
as described in the warrant agreement.
In addition, if (x) the Company issues additional
shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination
at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price
to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Sponsor or their
affiliates, without taking into account any Founder Shares held by them prior to such issuance), (y) the aggregate gross proceeds
from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business
Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading
price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company
consummates Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants
will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which
we issue the additional shares of common stock or equity-linked securities.
The exercise price and number of shares of common
stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or our recapitalization, reorganization, merger or consolidation. However, except as described above, the warrants will not be
adjusted for issuances of shares of common stock at a price below their respective exercise prices. Additionally, in no event will the
Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination
Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect
to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect
to such warrants. Accordingly, the warrants may expire worthless.
At June 30, 2021, there were 594,551 Private Placement
Warrants outstanding. The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering,
except that the Private Warrants and the common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable
or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the
Private Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their
permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Representative Shares
On February 11, 2020, the Company issued to the
designees of EarlyBirdCapital 200,000 shares of common stock (the “Representative Shares”). The Company accounted for the
Representative Shares as an offering cost of the Initial Public Offering, with a corresponding credit to stockholders’ equity. The
Company estimated the fair value of Representative Shares to be $820 based upon the price of the Founder Shares issued to the Sponsor.
The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business
Combination. In addition, the holders have agreed (i) to waive their conversion rights (or right to participate in any tender offer)
with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating
distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination
Period.
The Representative Shares have been deemed compensation
by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration
statement related to the Initial Public Offering pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA
Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would
result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date
of the registration statements related to the Initial Public Offering, nor may they be sold, transferred, assigned, pledged or hypothecated
for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public Offering
except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
229,788,742
|
|
|
$
|
229,884,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Private Placement Warrants
|
|
|
3
|
|
|
$
|
6,605,462
|
|
|
$
|
630,224
|
|
Convertible Promissory Notes – Related Party
|
|
|
3
|
|
|
|
480,400
|
|
|
|
—
|
|
The Private Placement Warrants were accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities
are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of
warrant liabilities in the consolidated statement of operations.
The Private Placement Warrants were initially
valued using a binomial lattice model, which is considered to be a Level 3 fair value measurement. The binomial lattice model’s
primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the
common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’
companies without an identified target. The expected volatility as of subsequent valuation dates will be implied from the Company’s
own public warrant pricing.
The key inputs into the binomial lattice simulation
model for the Private Placement Warrants were as follows at June 30, 2021 and December 31, 2020:
Input
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Risk-free interest rate
|
|
|
0.83
|
%
|
|
|
0.35
|
%
|
Trading days per year
|
|
|
252
|
|
|
|
252
|
|
Expected volatility
|
|
|
87.6
|
%
|
|
|
17.4
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock Price
|
|
$
|
15.58
|
|
|
$
|
10.00
|
|
There were no transfers between Levels 1, 2 or
3 during the three months ended June 30, 2021.
The following table presents the changes in the
fair value of warrant liabilities:
|
|
Private
Placement
Warrants
|
|
Fair value as of January 1, 2021
|
|
$
|
630,224
|
|
Change in valuation inputs or other assumptions
|
|
|
5,975,238
|
|
Fair value as of June 30, 2021
|
|
$
|
6,605,462
|
|
The Company elected the fair value option for
the Convertible Promissory Notes. The fair value of the Convertible Promissory Notes was determined using a binomial lattice simulation
model, which is considered to be a Level 3 fair value measurement.
The estimated fair value of the Convertible Promissory
Notes was based on the following significant inputs:
|
|
June 30,
2021
|
|
Risk-free interest rate
|
|
$
|
0.83
|
%
|
Trading days per year
|
|
$
|
252
|
|
Expected volatility
|
|
|
87.6
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Stock Price
|
|
$
|
15.58
|
|
Probability of transaction
|
|
|
90.0
|
%
|
There were no transfers in or out of Level 3
from other levels in the fair value hierarchy during the three months ended June 30, 2021.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The following table presents the changes in the
fair value of the Level 3 Convertible Promissory Notes:
|
|
Convertible
Promissory
Note
|
|
Fair value as of January 1, 2021
|
|
$
|
—
|
|
Proceeds received through Convertible Promissory Note
|
|
|
200,000
|
|
Change in valuation inputs or other assumptions
|
|
|
280,400
|
|
Fair value as of June 30, 2021
|
|
$
|
480,400
|
|
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements,
aside from those already disclosed in the notes. See Note 1 for discussion of the closing of the Business Combination and related transactions.