Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, any accompanying prospectus supplement
and the documents incorporated by reference herein and therein may contain forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although the Company believes
that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company
cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject
to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s
possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements
may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,”
“forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,”
“anticipates” or “intends” or similar expressions.
Forward-looking statements are not guarantees of
performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that
the following important factors, among others, could affect the Company’s future results and could cause those results or other
outcomes to differ materially from those expressed or implied in the Company’s forward-looking statements:
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the inability to recognize the anticipated benefits of the Business Combination (as defined herein), which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;
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changes adversely affecting the business in which the Company is engaged;
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the Company’s ability to execute on its plans to develop and market its vehicles and the timing of these development programs;
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the Company’s ability to meet its future capital requirements and manage its indebtedness, including its ability to refinance its current indebtedness;
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the ability of the Company’s suppliers to deliver necessary components for the Company’s products;
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the Company’s ability to successfully develop or obtain licenses and other rights to certain technology to reach production for its vehicles;
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the Company’s ability to remediate the identified material weaknesses in its internal control over financial reporting;
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the Company’s ability to navigate economic, operational and legal risks specific to operations based in China;
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the Company’s estimates of the size of the markets for its vehicles;
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the rate and degree of market acceptance of the Company’s vehicles;
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the success of other competing manufacturers;
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the performance and security of the Company’s vehicles;
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potential litigation involving PSAC or the Company;
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general economic conditions;
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the result of future financing efforts; and
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the impact of the COVID-19 pandemic and its effect on the business and financial conditions of the Company.
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These and other factors that could cause actual
results to differ from those implied by the forward-looking statements in this prospectus are more fully described in the “Risk
Factors” section. The risks described in “Risk Factors” are not exhaustive. New risk factors emerge from
time to time and it is not possible for us to predict all such risk factors, nor can the Company assess the impact of all such risk factors
on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained
in any forward-looking statements. All forward- looking statements attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly
any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
SUMMARY
This summary highlights selected information
appearing elsewhere in this prospectus or the documents incorporated by reference herein. Because it is a summary, it may not contain
all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus, the registration
statement of which this prospectus is a part and the documents incorporated by reference herein carefully, including the information set
forth under the heading “Risk Factors” and our financial statements.
The Company
FF is a California-based global shared intelligent
mobility ecosystem company with a vision to disrupt the automotive industry.
With headquarters in Los Angeles, California,
FF designs and engineers next-generation smart electric connected vehicles. FF intends to start manufacturing vehicles at its production
facility in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing partner
in South Korea. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer in South
Korea. FF has additional engineering, sales, and operational capabilities in China and plans to develop its manufacturing capability
in China through a joint venture or other arrangements.
Since its founding, FF has created major innovations
in technology and products, and a user centered business model. These innovations are enabling FF to set new standards in luxury and performance
that will enhance quality of life and redefine the future of intelligent mobility.
Background
Property Solutions Acquisition Corp., a special
purpose acquisition company incorporated in Delaware, completed its initial public offering in July 2020. On July 21, 2021 (the “Closing
Date”), Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp.), 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 PSAC (“Merger Sub”), and FF Intelligent
Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Legacy
FF”). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy 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.” Legacy FF is considered the Company’s accounting acquirer.
Pursuant
to the terms of the Merger Agreement, the Business Combination was effected on July 21, 2021 through the merger of Merger Sub with
and into Legacy FF, with Legacy FF surviving as the surviving company and a wholly-owned subsidiary of the Company. Upon closing the
Business Combination, the Company received $229.7 million in proceeds from PSAC’s trust account, net of redemptions of $0.2
million. At the effective time of the Business Combination (the “Effective Time”), the outstanding Legacy FF
Class A ordinary shares, par value $0.00001 per share, Legacy FF Class B ordinary shares, par value $0.00001 per share,
Legacy FF Class A-1 preferred shares, par value $0.00001 per share, Legacy FF Class A-2 preferred shares, par value
$0.00001 per share, Legacy FF Class A-3 preferred shares, par value $0.00001 per share and Legacy FF redeemable preferred
shares, par value $0.00001 per share, the outstanding Legacy FF converting debt and certain other outstanding liabilities of
Legacy FF were canceled and converted into the right to receive pro rata portions of approximately 154.0 million shares of Class A
Common Stock and the outstanding Legacy FF Class B preferred shares,
par value $0.00001 per share were canceled and converted into the right to receive pro rata portions of approximately 64.0
million shares of Class B common stock, par value $0.0001 per share, of the Company (the “Class B Common Stock,” and
together with the Class A Common Stock, the “Common Stock”). Additionally, the Legacy FF options and Legacy FF warrants
that were outstanding immediately prior to the Effective Time (and by their terms did not terminate upon the Closing) remained
outstanding and converted into the right to purchase pro rata portions of approximately 44.9 million shares of Class A Common Stock.
Holders of the Legacy FF shares issued and outstanding as of immediately prior to the Effective Time also have the contingent right
to receive up to 25.0 million shares of Class A Common Stock in two tranches upon the occurrence of certain stock price-based
triggering events as set forth in the Merger Agreement (“Earnout Shares”).
On July 21, 2021, a number of purchasers (each,
a “Subscriber”) purchased from the Company an aggregate of 76.1 million shares of Class A Common Stock (the “PIPE Shares”),
for a purchase price of $10.00 per share and an aggregate purchase price of $761.4 million, pursuant to separate subscription agreements
entered into effective as of January 27, 2021 (each, a “Subscription Agreement” and such investment in the PIPE Shares by
the Subscribers collectively, the “Private Placement”). Pursuant to the Subscription Agreements, the Company gave certain
registration rights to the Subscribers with respect to the PIPE Shares. The sale of the PIPE Shares was consummated concurrently with
the Closing.
Our
shares of Class A Common Stock and our Public Warrants are currently listed on The Nasdaq Stock Market (“NASDAQ”) under
the symbols “FFIE” and “FFIEW,” respectively.
The
rights of holders of our Common Stock, Private Warrants and Public Warrants are governed by our second amended and restated certificate
of incorporation (the “Amended and Restated Charter”), our amended and restated bylaws (the “Amended and Restated Bylaws”)
and the Delaware General Corporation Law (the “DGCL”), and in the case of the Private Warrants and Public Warrants, the Warrant
Agreement dated as of July 21, 2020, duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New
York limited liability trust company, as warrant agent. The convertible notes (the “Notes”) and ATW NPA Warrants were
issued pursuant to, and are governed by, the terms of the Second Amended and Restated Note Purchase Agreement, dated as of October 9,
2020 (as amended from time to time, the “NPA”), among certain subsidiaries of the Company and guarantors party thereto, U.S.
Bank National Association, as the Notes agent, Birch Lake Fund Management, LP, as the collateral agent, and the Note purchasers party
thereto, and related forms of notes and warrants issued thereunder. For more information, see the section entitled “Description
of Securities.”
PRC Subsidiaries
FFIE
is a holding company incorporated in the State of Delaware. Faraday&Future Inc. (“FF U.S.”), FF’s primary U.S.
operating subsidiary, was incorporated and founded in the State of California in May 2014. Our subsidiaries in China include FF Automotive
(China) Co. Ltd., Ruiyu Automotive (Beijing) Co., Ltd. and Shanghai Faran Automotive Technology Co., Ltd. (the “PRC Subsidiaries”).
See Exhibit 21.1 to the registration statement of which this prospectus forms a part for a complete list of all our subsidiaries
organized in China and “Business - Corporate History and Milestones” for a detailed discussion of FF’s corporate
history.
How Cash is Transferred Through Our Corporate Organization
The organizational chart below shows FFIE’s
operating subsidiaries1 as of the date hereof:
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Excludes
subsidiaries with immaterial operations.
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The PRC has currency and capital transfer regulations that require
us to comply with certain requirements for the movement of capital in and out of the PRC. FFIE is able to transfer cash (U.S. Dollars)
to the PRC Subsidiaries through capital contributions (increasing FFIE’s capital investment in the PRC Subsidiaries). FFIE may
receive cash or assets declared as dividends from the PRC Subsidiaries. The PRC Subsidiaries can transfer funds to each other when necessary
by way of intercompany loans.
During 2019, FF Inc., a U.S.-based subsidiary
incorporated in California, issued a loan to FF Hong Kong Limited, a holding company subsidiary established in Hong Kong, in the aggregate
amount of $1.2 million, which was the only transaction that involved the transfer of cash or assets throughout our corporate structure
during 2019. During 2020, LeSee Automotive (Beijing) Co. Ltd., a PRC Subsidiary, assigned to Legacy FF its obligation to pay certain
notes issued by a third party in the aggregate principal and accrued interest amount of $26.5 million. Also during 2020, Smart Technology
Holdings Ltd., a subsidiary incorporated in the Cayman Islands, transferred to FF Hong Kong Limited $1.7 million in cash, in the aggregate,
by way of capital contributions to fund the PRC Subsidiaries’ operations. During 2021, Smart Technology Holdings Ltd. transferred
to FF Hong Kong Ltd. $32.1 million, in the aggregate, by way of capital contributions to fund the operations of the PRC Subsidiaries,
including $10 million proceeds from the sale of PIPE Shares. In August 2021, Legacy FF extended a loan of $50 million to FF Automotive
(Zhuhai) Co. Ltd., a PRC Subsidiary, for the purpose of acquiring a technology license agreement with a third party. We expect to transfer
cash or assets of $8.3 million from Smart Technology Holdings Ltd. to FF Hong Kong Limited during the fourth quarter of 2021 and the
first six months of 2022 to fund the ongoing operations of the PRC Subsidiaries. We will continue to assess the PRC Subsidiaries’
requirements to fund their operations and intend to effect additional contributions as appropriate. As of the date hereof, the PRC Subsidiaries
have not transferred cash or other assets to FFIE, including by way of dividends. FFIE does not currently plan or anticipate transferring
cash or other assets from our operations in China to any non-Chinese entity.
Capital contributions to PRC companies are
governed by the Foreign Investment Law, and the dividends and distributions from the PRC Subsidiaries are subject to regulations and
restrictions on dividends and payment to parties outside of the PRC. Applicable PRC law permits payment of dividends to FFIE by our PRC
Subsidiaries only out of their net income, if any, determined in accordance with PRC accounting standards and regulations. Our operating
PRC Subsidiaries are required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations
until such reserves have reached 50% of the relevant entity’s registered capital. These reserves are not distributable as cash
dividends. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits
retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. In addition, registered
share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each
operating subsidiary.
PRC Restrictions on Foreign Exchange and Transfer of Cash
Under PRC laws, if certain procedural requirements
are satisfied, the payment of current account items, including profit distributions and trade and service related foreign exchange transactions,
can be made in foreign currencies between entities, across borders, and to U.S. investors without prior approval from State Administration
of Foreign Exchange (the “SAFE”) or its local branches. However, where Renminbi (“RMB”) is to be converted into
foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies,
approval from or registration with SAFE or its authorized banks is required. The PRC government may take measures at its discretion from
time to time to restrict access to foreign currencies for current account or capital account transactions. If the foreign exchange control
system prevents our PRC Subsidiaries from obtaining sufficient foreign currencies to satisfy their foreign currency demands, our PRC
Subsidiaries may not be able to pay dividends in foreign currencies to FFIE. Further, we cannot assure you that new regulations or policies
will not be promulgated in the future that would have the effect of further restricting the remittance of RMB into or out of the PRC.
We cannot assure you, in light of the restrictions in place, or any amendment thereof, that the PRC Subsidiaries will be able to fund
their future activities which are conducted in foreign currencies, including the payment of dividends.
Furthermore, under PRC laws, dividends may
be paid only out of distributable profits. Distributable profits are the net profit as determined under PRC GAAP, less any recovery of
accumulated losses and appropriations to statutory and other reserves required to be made. Our PRC Subsidiaries shall appropriate 10%
of the net profits as reported in their statutory financial statements (after offsetting any prior year’s losses) to the statutory
surplus reserves until the reserves have reached 50% of their registered capital. As a result, our PRC Subsidiaries may not have sufficient,
or any, distributable profits to pay dividends to us. See “Risk Factors — Risks Related to FF’s Operations in China
— FFIE is a holding company and, in the future, may rely on dividends and other distributions on equity paid by the PRC Subsidiaries
to fund any cash and financing requirements FFIE may have, and the restrictions on PRC Subsidiaries’ ability to pay dividends or
make other payments to FFIE could restrict its ability to satisfy its liquidity requirements and have a material adverse effect on FFIE’s
ability to conduct its business” for a more detailed discussion of the relevant risks relating to restrictions on foreign exchange
and transfer of cash.
Requirements Under PRC Laws and Regulations
Under current PRC laws and regulations, each
of our PRC Subsidiaries is required to obtain a business license to operate in the PRC. Our PRC Subsidiaries have all received the requisite
business license to operate, and no application for business license had been denied.
As our operations in the PRC expand, our PRC
Subsidiaries will be required to obtain approvals, licenses, permits and registrations from PRC regulatory authorities, such as the State
Administration for Market Regulation, the National Development and Reform Commission, Ministry of Commerce (“MOFCOM”), the Ministry
of Industry and Information Technology (“MIIT”), which oversee different aspects of the electric vehicle business. As of
the date hereof, no application by our PRC Subsidiaries for any such approvals, licenses, permits and registrations that are currently
applicable to them had been denied, but there can be no assurance that the PRC Subsidiaries will be able to maintain their existing licenses
or obtain new ones. See “Risk Factors — Risks Related to FF’s Operations in China — FF may be adversely affected
by the complexity, uncertainties and changes in PRC regulations on internet-related business, automotive businesses and other business
carried out by FF’s PRC Subsidiaries” for a more detailed discussion of the risks relevant to the regulations relating
to the operations of the PRC Subsidiaries
We do not believe any permission is required
from any Chinese authorities (including the China Securities Regulatory Commission (the “CSRC”) and the Cyberspace Administration
of China (the “CAC”) in connection with this offering. However, there can be no assurance that the relevant Chinese authorities,
including the CSRC, would reach the same conclusion as us, and that the CSRC or any other Chinese authorities would not promulgate new
rules or interpret or implement current rules that would require us to obtain CSRC or other governmental approvals for this offering.
See “Risk Factors — Risks Related to FF’s Operations in China — While the approval of PRC government
authorities, including the CSRC and CAC, are not currently required for this offering, they may be in the future under a PRC regulation
adopted in August 2006, as amended, and, if required, we cannot assure you that we will be able to obtain such approval” for
a more detailed discussion of the relevant risks relating to the applicable of PRC laws and Regulations.
Summary Risk Factors
An investment in our Class A Common Stock involves
substantial risk. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,”
alone or in combination with other events or circumstances, may have a material adverse effect on our business, cash flows, financial
condition and results of operations. Important factors and risks that could cause actual results to differ materially from those in the
forward-looking statements include, among others, the following:
Risks Related to FF’s Business and Industry
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FF has a limited operating history and faces significant barriers to growth in the electric vehicle industry.
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FF has incurred losses in the operation of its business and anticipates that it will continue to incur losses in the future. It may
never achieve or sustain profitability.
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FF expects its operating expenses to increase significantly in the future, which may impede its ability to achieve profitability.
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FF’s operating results forecast relies in large part upon assumptions and analyses developed by its management. If these assumptions
and analyses prove to be incorrect, its actual operating results could suffer.
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FF may be unable to meet its future capital requirements, including capital required for initial investments to reach initial production
and revenue, which could jeopardize its ability to continue its business operations.
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FF has historically incurred substantial indebtedness and may incur substantial additional indebtedness in the future, and it may
not be able to refinance borrowings on terms that are acceptable to FF, or at all.
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FF’s vehicles are in development and its first vehicle may not be available for sale within 12 months after the Closing, if
at all.
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FF’s recurring losses from operations had raised substantial doubt about FF’s ability to continue as a going concern. Such circumstance might recur and result in FF not being able to continue as a going concern.
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For the audits of the years ending December 31, 2020 and 2019, FF’s independent registered public accounting firm included a
note relating to FF’s ability to continue as a going concern in its report on FF’s audited financial statements included in
this prospectus.
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FF will depend on revenue generated from a single model of vehicles in the foreseeable future.
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The market for FF’s vehicles, including its Smart Last Mile Delivery vehicles, is nascent and not established.
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FF is dependent on its suppliers, the majority of which are single-source suppliers. The inability of these suppliers to deliver necessary
components for FF’s products according to the schedule and at prices, quality levels and volumes acceptable to FF, or FF’s
inability to efficiently manage these suppliers, could have a material adverse effect on its business, prospects, financial condition
and operating results.
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FF needs to develop complex software and technology systems in coordination with vendors and suppliers to reach production for its
electric vehicle, and there can be no assurance such systems will be successfully developed.
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FF identified material weaknesses in its internal control over financial reporting. If FF is unable to remediate these material weaknesses,
or if it identifies additional material weaknesses in the future or otherwise fails to maintain effective internal control over financial
reporting, it may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect
FF’s business and share price.
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FF has yet to obtain licenses and other rights in certain technologies, software, and content needed for its vehicles and FF may face
technical difficulties and attendant delays in integrating such technologies in its vehicles. Licensing third-party technology carries
risks that are difficult to control. Accordingly, FF may need to modify aspects of planned vehicle designs and alter features.
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FF’s decision to manufacture its own vehicles in its leased Hanford, California facility does not guarantee FF will not incur significant delays in the production of the vehicles.
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Production and manufacturing of some of FF’s vehicles
may be outsourced to a third-party contract manufacturer in South Korea and potentially,
through a joint venture or other arrangement in China. FF is also exploring other potential
contract manufacturing options in addition to the contract manufacturer in South Korea. If
such contract manufacturer, joint venture or other arrangement fails to produce and deliver
vehicles in a timely manner for any reason, FF’s business, prospects, financial condition
and results of operation could be materially harmed.
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FF faces competition from multiple sources, including new and established domestic and international competitors, and expects to face
competition from others in the future, including competition from companies with new technology. This fierce competition may impair FF’s
revenues, increase its costs to acquire new customers, and hinder its ability to acquire new customers.
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FF’s go-to-market and sales strategy, including its self-owned and partner-owned stores as well as FF’s online web platform,
will require substantial investment and commitment of resources and are subject to numerous risks and uncertainties.
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FF faces risks related to natural disasters, health epidemics and pandemics, terrorist attacks, civil unrest and other circumstances
outside its control, including the current COVID-19 pandemic, which could significantly disrupt FF’s operations.
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FF has elected to protect some of its technologies as trade secrets rather than as patents, however, this approach has certain risks
and disadvantages.
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FF and its manufacturing partners may be subject to increased environmental and safety or other regulation resulting in higher costs,
cash expenditures, and/or sales restrictions.
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Increases in costs, disruption of supply or shortage of materials used to manufacture FF’s vehicles, in particular for lithium-ion
cells or electronic components, could harm its business.
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FF may be subject to risks associated with autonomous driving technology.
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FF’s vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
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FF’s founder, Mr. Yueting Jia (“YT Jia”), is closely associated with the image and brand of FF. Circumstances affecting
YT Jia’s reputation, and investor and public perception of his role and influence in FF, may shape FF’s brand and ability
to do business. Additionally, YT Jia may continue to be subject to certain restrictions in China if not all creditors participating in
YT Jia’s restructuring plan comply with the requirement to request removal of YT Jia from such restrictions.
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FF Global Partners LLC, a Delaware limited liability company (“FF Global”), which is governed by an executive committee
consisting of eight members, may exert influence over the management of FF through its issuance of equity interests as additional compensation
to the management of FF.
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Risks Related to FF’s Operations in China
FF operates and plans to have significant operations
in the future in China through its PRC Subsidiaries and faces various legal and operational risks associated with doing business in China,
which could result in a material change in the operations of our PRC Subsidiaries, cause the value of FF’s securities to significantly
decline or become worthless, and significantly limit or completely hinder FF’s ability to accept foreign investments and offer
or continue to offer securities to foreign investors. These risks, each discussed in detail in the section “ Risk Factors —
Risks Related to FF’s Operations in China,” include:
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Changes
in the political and economic policies of the PRC government may materially and adversely affect FF’s business, financial condition
and results of operations and may result in our inability to sustain our growth and expansion strategies.
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Uncertainties
with respect to the Chinese legal system, regulations and enforcement policies could have a material adverse effect on FF.
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Fluctuations
in exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends
payable on, our Common Stock in foreign currency terms.
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Changes
in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business,
results of operations and financial condition.
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FFIE
is a holding company and, in the future, may rely on dividends and other distributions on equity paid by the PRC Subsidiaries to fund
any cash and financing requirements FFIE may have, and the restrictions on PRC Subsidiaries’ ability to pay dividends or make other
payments to FFIE could restrict its ability to satisfy its liquidity requirements and have a material adverse effect on FFIE’s
ability to conduct its business.
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Under
the PRC EIT Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification
would likely result in unfavorable tax consequences to us and our non-PRC enterprise stockholders and has a material adverse effect on
our results of operations and the value of your investment.
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FF
and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer
of non-Chinese-holding companies. Enhanced scrutiny by the Chinese tax authorities may have a negative impact on potential acquisitions
and dispositions we may pursue in the future.
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PRC
regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds
of this offering to make loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect
our liquidity and our ability to fund and expand our business.
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The
PRC government can take regulatory actions and make statements to regulate business operations in China with little advance notice, including
cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting
new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Rules and regulations
in China can also change with little advance notice, and actions related to oversight and control over offerings that are conducted overseas
and/or foreign investment in issuers with substantial operations in China could significantly limit or completely hinder our ability
to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.
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While
the approval of PRC government authorities, including the CSRC and CAC, are not currently required for this offering, they may be required
in the future under a PRC regulation adopted in August 2006, as amended, and, if required, we cannot assure you that we will be able
to obtain such approval.
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The
M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions in China.
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FF
may be adversely affected by the complexity, uncertainties and changes in PRC regulations on internet-related business, automotive businesses
and other business carried out by FF’s PRC Subsidiaries.
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We
may be liable for improper use or appropriation of personal information provided by others.
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Any
independent registered public accounting firm operating in China that FF uses as an auditor for its operations in China will not be permitted
to be subject to inspection by the Public Company Accounting Oversight Board (“PCAOB”), and as such, investors may be deprived
of the benefits of such inspection.
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U.S.
regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.
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There
may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments
or bringing original actions in China based on United States or other foreign laws against us and our management.
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Additional Information
FF’s principal executive offices are located
at Faraday Future Intelligent Electric Inc., 18455 S. Figueroa Street, Gardena, CA 90248, and FF’s telephone number is (424) 276-7616.
Our website address is www.ff.com. Information contained on our website or connected thereto does not constitute part of, and is
not incorporated by reference into, this prospectus or the registration statement of which it is a part.
THE OFFERING
Issuer
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Faraday Future Intelligent Electric Inc.
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Shares of Class A Common Stock offered by us
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33,848,368 shares of Class A Common Stock issuable upon exercise of the Warrants and conversion of the Notes.
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Shares of Class A Common Stock offered by the Selling Securityholders
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Up to 236,226,156 shares of Class A Common Stock.
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Warrants Offered by the Selling Securityholders
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Up to 674,551 Private Warrants.
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Shares
of Class A Common Stock outstanding prior to exercise of all Warrants
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324,360,508
shares of Class A Common Stock (as of September 20, 2021).
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Shares
of Class A Common Stock outstanding assuming exercise of all Warrants
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352,556,885
shares of Class A Common Stock (based on total shares outstanding as of September 20, 2021).
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Use of Proceeds
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We will not receive any proceeds from the sale of shares of Class A Common Stock by the Selling Securityholders. We will receive up to an aggregate of approximately $284 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes, which may include temporary or permanent repayment of our outstanding indebtedness. See “Use of Proceeds.”
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Redemption
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The Warrants are redeemable in certain circumstances. See “Description of Securities — Description of Warrants” for further discussion.
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Market for Class A Common Stock and Warrants
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Our shares of Class A Common Stock and Public Warrants are currently traded on NASDAQ under the symbols “FFIE” and “FFIEW,” respectively.
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Risk Factors
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See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.
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For additional information concerning the offering, see “Plan
of Distribution.”
RISK FACTORS
Investing in our securities involves risks.
Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note
Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks
actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market
price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described
in this prospectus, any prospectus supplement or in any document incorporated by reference herein or therein are not the only risks and
uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial
may become material and adversely affect our business.
Risks Related to FF’s Business and
Industry
FF has a limited operating history and faces significant barriers
to growth in the electric vehicle industry.
FF was founded in 2014 and has built several prototype
and pre-production vehicles. However, to date, FF has not started commercial production of its first electric vehicle. Although FF expects
to start commercial sales of FF 91 series within 12 months after the Closing, there is no assurance FF will be able to develop the manufacturing
capabilities and processes, or secure reliable sources of component supply to meet the quality, engineering, design or production standards,
or the required production volumes to successfully grow into a viable business.
Furthermore, even if FF achieves production of
electric vehicles, it faces significant barriers to growth in the electric vehicle industry, including continuity in development and production
of safe and quality vehicles, brand recognition, customer base, marketing channels, pricing policies, talent management, value-added service
packages and sustained technological advancement. If FF fails to address any or all of these risks and barriers to entry and growth, its
business and results of operation may be materially and adversely affected.
Given FF’s limited operating history, the
likelihood of its success must be evaluated especially in light of the risks, expenses, complications, delays and the competitive environment
in which it operates. There is, therefore, no assurance that FF’s business plan will prove successful. FF will continue to encounter
risks and difficulties frequently experienced by early commercial stage companies, including scaling its infrastructure and headcount,
and may encounter unforeseen expenses, difficulties or delays in connection with its growth. In addition, due to the capital-intensive
nature of FF’s business, it can be expected to continue to incur substantial operating expenses without generating sufficient revenues
to cover those expenditures. There is no assurance FF will ever be able to generate revenue, raise additional capital when required or
operate profitably. Any investment in FF is therefore highly speculative.
FF has incurred losses in the operation of its business and anticipates
that it will continue to incur losses in the future. It may never achieve or sustain profitability.
The design, engineering, manufacturing, sales and
service of smart electric vehicles is a capital-intensive business. FF has incurred losses from operations and has had negative cash flows
from operating activities since inception. FF incurred a net loss of $128.3 million, $147.1 million and $142.2 million for the six months
ended June 30, 2021 and the years ended December 31, 2020 and 2019, respectively. Net cash used in operating activities was $52.3 million,
$41.2 million and $189.8 million for the six months ended June 30, 2021 and the years ended December 31, 2020 and 2019, respectively.
Since inception, FF has made significant investments in technology as well as vehicle design, development and tooling, construction of
manufacturing facilities, employee compensation and benefits and marketing and branding. FF expects to continue or increase such investments,
however, there can be no assurance these investments will result in the successful and timely delivery of FF 91 series or subsequent vehicle
programs, or at all.
FF may incur unforeseen expenses, or encounter
difficulties, complications, and delays in delivering FF 91 series, and therefore may never generate sufficient revenues to
sustain itself. Even if FF brings FF 91 series to market, it may continue to incur substantial losses for reasons including the lack
of demand for FF 91 series and the relevant services, increasing competition, challenging macroeconomic conditions, regulatory changes
and other risks discussed herein, and so it may never achieve or sustain profitability.
FF expects its operating expenses to increase significantly in
the future, which may impede its ability to achieve profitability.
FF expects to further incur significant operating
costs which will impact its profitability, including research and development expenses as it introduces new models and improves existing
models, capital expenditures in the expansion of its manufacturing capacities, additional operating costs and expenses for production
ramp-up, raw material procurement costs, general and administrative expenses as it scales its operations, and sales, marketing, and distribution
expenses as it builds its brand and markets its vehicles. Additionally, it may incur significant costs once it delivers FF 91 series,
including vehicle service and warranty expenses.
FF’s ability to become profitable in the
future will not only depend on its ability to successfully market its vehicles and other products and services, but also to control costs.
Ultimately, FF may not be able to adequately control costs associated with its operations for reasons outside its control, including the
cost of raw materials such as aluminum, steel and lithium-ion cells. Substantial increases in such costs could increase FF’s cost
of revenue and its operating expenses, and could reduce its margins. Additionally, unforeseen events such as the current ongoing global
pandemic could adversely affect supply chains, impacting FF’s ability to control and manage costs. Additionally, currency fluctuations,
tariffs or shortages in petroleum and other economic or political conditions could result in significant increases in freight charges
and raw material costs. If FF is unable to design, develop, manufacture, market, sell and service its vehicles, including providing service
in a cost-efficient manner, its margins, profitability, and prospects would be materially and adversely affected.
The rate at which FF may incur costs and losses
in future periods compared to current levels may increase significantly, as it:
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continues to develop FF 91, FF 81, and FF 71 series and Smart
Last Mile Delivery (“SLMD”) electric vehicle models;
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develops
and equips its manufacturing facility in Hanford, California to produce FF 91, and to secure
manufacturing capabilities in South Korea and other potential manufacturing options, and
in China for additional capacities production capacity for FF 91 and other electric vehicle
models;
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builds up inventories of parts and components for FF 91;
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develops and expands its design, development, maintenance,
servicing and repair capabilities;
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opens offline FF self-owned stores; and
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increases its sales and marketing activities.
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These efforts may be more expensive than FF currently
anticipates, and these efforts may not result in increases in revenues, which could further increase its losses. As FF is seeking funding
to realize its business operations plan based on its estimated capital requirements, any cost overruns that deviate from FF’s estimates
may materially and adversely affect its business prospects, financial condition and results of operations.
FF’s operating results forecast relies in large part upon
assumptions and analyses developed by its management. If these assumptions and analyses prove to be incorrect, its actual operating results
could suffer.
FF’s operating results forecast relies in
large part upon assumptions and analyses developed by its management and reflects current estimates of future performance. Whether actual
operating and financial results and business developments will be consistent with FF’s expectations and assumptions as reflected
in the forecast depends on a number of factors, many of which are outside FF’s control, including, but not limited to:
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whether it can obtain sufficient capital to sustain and grow
its business;
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its ability to manage growth;
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whether it can manage relationships with key suppliers;
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whether it can sign up and manage relationships with business
partners for them to invest in and operate sales and service centers;
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the ability to obtain necessary regulatory approvals;
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demand for its products and services;
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the timing and cost of new and existing marketing and promotional
efforts;
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competition, including established and future competitors;
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its ability to retain existing key management, to integrate
recent hires and to attract, retain and motivate qualified personnel;
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the overall strength and stability of domestic and international
economies;
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regulatory, legislative and political changes; and
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consumer spending habits.
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Specifically, FF’s results forecast is based
on projected purchase prices, unit costs for materials, manufacturing, packaging and logistics, warranty, sales, marketing and service,
and its projected number of orders for the vehicles with factors such as industry cost benchmarks taken into consideration. Any of these
factors could turn out to be different than those anticipated. Unfavorable changes in any of these or other factors, most of which are
beyond FF’s control, could materially and adversely affect its business, prospects, financial results and results of operations.
FF may be unable to meet its future capital requirements, including
capital required for initial investments to reach initial production and revenue, which could jeopardize its ability to continue its business
operations.
FF operates in a capital-intensive industry which
requires significant cash to fund its operations. FF expects its capital expenditures to continue to be significant in the foreseeable
future as it continues to develop and grow its business. However, FF believes that existing cash along with recent financing activities
including the Business Combination, will be sufficient to support working capital and capital expenditure requirements for at least the
next 12 months. FF has developed a detailed budget for that period, but any challenges in supplier reengagements, delays in ramping capacity
at Hanford or sales and service engagements may increase the need for additional capital to launch FF 91 series on time. Apart from FF
91 series, additional capital may be required to fund operations, research, development, and design efforts for future vehicles.
It is difficult to predict the demand for FF’s
vehicles and appropriately budget for such expenses; and FF may have limited insight into trends that could emerge and affect its business.
As a company, FF does not have experience manufacturing vehicles, and as such, there is no historical basis for FF to make judgments on
the demand for its vehicles. If FF is unable to accurately estimate the demand for its vehicles, match the timing and quantities of component
purchases to actual needs or successfully implement inventory management and other systems to accommodate the increased complexity in
FF’s supply chain, FF may incur unexpected production disruption, and storage, transportation and write-off costs, which could have
a material adverse effect on its business, prospects, financial condition and operating results.
FF may raise additional funds through the issuance
of equity, equity related or debt securities, or through obtaining credit from financial institutions or governmental organizations. FF
cannot be certain that additional funds will be available on favorable terms when required, or at all, and any such financing may dilute
FF’s stockholder value. If FF is unable to obtain funding in a timely manner or on commercially acceptable terms, or at all, its
financial condition, results of operations, business and prospects could be materially and adversely affected.
FF has historically incurred substantial indebtedness and may
incur substantial additional indebtedness in the future, and it may not be able to refinance borrowings on terms that are acceptable to
FF, or at all.
FF had a working capital deficit (being the extent
to which total consolidated current liabilities exceeds total consolidated current assets less restricted cash) of $775.9 million, $835.3
million and $688.2 million as of June 30, 2021, December 31, 2020 and 2019, respectively. Although FF settled the majority of all of its
existing debt in either equity or cash upon consummation of the Business Combination, and paid off certain other indebtedness with the
proceeds of the Business Combination, FF may incur additional indebtedness from time to time to support its operations. If FF incurs additional
debt, the risks it faces as a result of indebtedness and leverage could intensify. The incurrence of any additional debt could:
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limit FF’s ability to satisfy obligations under certain
debt instruments, to the extent there are any;
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cause FF to seek bankruptcy protection or enter into other
insolvency proceedings in the event FF is not able to renew or refinance any existing indebtedness as it becomes due;
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increase FF’s vulnerability to adverse general economic
and industry conditions;
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require FF to dedicate a substantial portion of cash flow
from operations to servicing and repaying indebtedness, thereby reducing the availability of cash flow to fund its working capital, capital
expenditures, and other general corporate purposes;
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increase its exposure to interest rate and exchange rate fluctuations;
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limit its ability to borrow additional funds and impose additional
financial and other restrictions on FF, including limitations on declaring dividends; and
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increase the cost of additional financing.
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Commercial banks, financial institutions and individual
lenders may have concerns in providing additional financing for FF’s operations. The governments of the United States, China
and Europe may also pass measures or take other actions that may tighten credit available in relevant markets. Any future monetary tightening
measures as well as other monetary, fiscal and industrial policy changes and/or political actions by those governments could materially
and adversely affect FF’s cost and availability of financing, liquidity, access to capital, and ability to operate our business.
FF’s vehicles are in development and its first vehicle
may not be available for sale within 12 months after closing of the Business Combination, if at all.
FF has not yet commenced production of any model
and has not recognized any revenue as of the date hereof. FF’s future business depends in large part on its ability to execute on
its plans to develop, manufacture, market, sell and deliver electric vehicles, including FF 91, FF 81, FF 71 series, and Smart Last Mile
Delivery electric vehicle models that appeal to customers. Although FF plans to commence commercial sales of its first vehicle, FF 91
series, by July 2022, it may experience significant delays due to reasons such as supply shortages, design defects, talent gaps, and/or
force majeure. For example, FF relies on third-party suppliers for the provision and development of many key components used in FF 91
and other models. To the extent FF’s suppliers experience any delays in providing or developing necessary components, or if they
experience quality issues, FF could experience delays in delivering on its timelines. For example, due to the delay in the closing of
the Business Combination caused by PSAC’s re-evaluation of the accounting treatment for their Private Warrants, FF had to adjust
and/or reduce certain payments to suppliers. Such adjustments and/or reductions could delay the launch date for the FF 91.
To the extent FF were to delay launch of FF 91
series, potential consumers may lose confidence in FF, and customers who have placed orders for FF 91 may cancel orders, which may curtail
FF’s growth prospects. Additionally, FF’s competitors may move more quickly to market than FF, which could impact FF’s
ability to grow its market share.
FF’s recurring losses from operations had raised substantial
doubt about FF’s ability to continue as a going concern. Such circumstance might recur and result in FF not being able to continue
as a going concern.
Since inception, FF has incurred cumulative
losses from operations, negative cash flows from operating activities and has an accumulated deficit of $2,519.4 million, $2,391.1
million, and $2,244.1 million as of June 30, 2021, December 31, 2020 and December 31, 2019, respectively. FF expects to continue to
generate significant operating losses for the foreseeable future. In FF’s audited consolidated financial statements for the
years ended December 31, 2020 and 2019, FF concluded that this circumstance raised substantial doubt about FF’s ability to
continue as a going concern within one year from the original issuance date of such financial statements. Similarly, in its report
on the financial statements for the years ended December 31, 2020 and 2019, FF’s independent registered public accounting firm
included an emphasis of matter paragraph stating that FF’s recurring losses from operations and accumulated deficit raised
substantial doubt about FF’s ability to continue as a going concern. FF’s consolidated financial statements for the
years ended December 31, 2020 and 2019 do not include any adjustments that may result from the outcome of this uncertainty and do
not reflect the transactions contemplated by the Business Combination. However, after the closing of the Business Combination and
the PIPE Financing on July 21, 2021, FF received cash aggregating $991.1 million and made payments, through the date that FF’s
unaudited condensed consolidated financial statements as of June 30, 2021 were available to be issued, of (i) $28.4 million to
vendors with payables in the Vendor Trust; (ii) $31.8 million to related party notes payable holders and $57.7 million to notes
payable holders for principal and accrued interest; (iii) $9.6 million to active and former employees; and (iv) $17.5 million to
other vendors. As of the date the FF unaudited condensed consolidated financial statements as of June 30, 2021 were available to be
issued, management expects that the net proceeds from the Business Combination along with cash balances held by FF prior to the
Closing Date will be sufficient to complete the final stages of the development and commence the production of the FF 91 electric
vehicle. FF expects that the net proceeds from the Business Combination along with cash balances held prior to the Closing Date will
be sufficient to complete the final stages of the development and production of the FF 91 electric vehicle within 12 months of the
Closing.
If FF is unable to continue as a going
concern, it may have to seek protection under applicable bankruptcy laws and/or liquidate or reorganize its assets and may receive
less than the value at which those assets are carried on its audited financial statements. If this were to happen, it is likely
investors would lose part or all of their investment. Future reports from FF’s independent registered public accounting firm
may also contain statements expressing substantial doubt about its ability to continue as a going concern. If such doubt about FF
continues, investors or other financing sources may be unwilling to provide additional funding to FF on commercially reasonable
terms, or at all, and FF’s business may be harmed.
For the audits of the years ending December 31, 2020 and 2019,
FF’s independent registered public accounting firm included a note relating to FF’s ability to continue as a going concern
in its report on FF’s audited financial statements included in this prospectus.
FF’s audit reports in 2020 and 2019 from their
independent registered public accounting firm included an emphasis of matter paragraph stating that FF’s recurring losses from operations
and cash outflows from operating activities raised substantial doubt about FF’s ability to continue as a going concern. FF’s
consolidated financial statements for the years ended December 31, 2020 and 2019 do not include any adjustments that may result from the
outcome of this uncertainty and do not reflect the Business Combination transactions. As of the date the FF unaudited condensed consolidated
financial statements as of June 30, 2021 were available to be issued, FF management expects that the net proceeds from the Business Combination
along with cash balances held by FF prior to the Closing Date will be sufficient to complete the final stages of the development and commence
the production of the FF 91 electric vehicle. See “Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Liquidity and Capital Resources” section of this prospectus for additional information. FF may be
required to obtain additional funding to support its business plan beyond the next 12 months, which could affect its business, prospects,
financial condition and results of operations materially and adversely, and FF may be unable to continue as a going concern. If FF is
unable to continue as a going concern, it may have to seek protection under applicable bankruptcy laws and/or liquidate or reorganize
its assets and may receive less than the value at which those assets are carried on its audited financial statements. If this were to
happen, it is likely investors would lose part or all of their investment. Future reports from FF’s independent registered public
accounting firm may also contain statements expressing substantial doubt about its ability to continue as a going concern. If such doubt
about FF continues, investors or other financing sources may be unwilling to provide additional funding to FF on commercially reasonable
terms, or at all, and FF’s business may be harmed.
FF will depend on revenue generated from a single model of vehicles
in the foreseeable future.
FF’s success will initially depend substantially
on the future sales and success of FF 91 series. FF expects FF 91 series to be its only manufactured vehicle in the market in the
near future; it remains uncertain when FF will raise sufficient funding to complete design, development, tooling and launch of its second
model, FF 81 series. Historically, automobile customers have come to expect a variety of vehicle models offered in a manufacturer’s
fleet and new and improved vehicle models to be introduced frequently. It remains uncertain if FF’s business will generate sufficient
funds or FF will be able to obtain sufficient funds through other means to introduce new vehicle models on a regular basis. Given that
FF’s business will depend on a single or limited number of models in the foreseeable future, to the extent a particular model is
not well-received by the market, FF’s business prospects, financial condition and operating results could be materially and adversely
affected.
The market for FF’s vehicles, including its Smart Last
Mile Delivery vehicles, is nascent and not established.
FF’s B2C (“business-to-consumer”)
passenger electric vehicles are planned to be with leading design and provide superior driving experience and personalized user experience
in their respective customer segments. FF believes its electric vehicles represent the “smart mobility” of the next generation.
FF’s growth is highly dependent upon the consumers’ reception and adoption of FF’s vision as to what the future of transportation
and mobility should embody. Although there are many automakers introducing multiple options of mass-market electric vehicles, the market
for the electric vehicles with ultra-new technology and cutting-edge styling is still nascent and untested. In addition to vehicles targeting
end customers, FF plans to build the Smart Last Mile Delivery vehicles targeting B2B (“business-to-business”) last mile delivery
logistics companies. FF believes its modular approach to vehicle design provides adaptive and sustainable solutions in the commercial
vehicle segment, thus meeting the needs of commercial vehicle owners. However, there is uncertainty as to the future demands for FF’s
vehicles in both B2B and B2C market segments, and there is no assurance that the retail and commercial vehicle market FF envisions
for its vehicles will be established. To a large extent, it depends on general economic, political, and social conditions, all of which
are beyond FF’s control.
FF is dependent on its suppliers, the majority of which are single-source
suppliers. The inability of these suppliers to deliver necessary components for FF’s products according to the schedule and at prices,
quality levels and volumes acceptable to FF, or FF’s inability to efficiently manage these suppliers, could have a material adverse
effect on its business prospects, financial condition and operating results.
The FF 91 model incorporates over 2,000 purchased
components sourced from over 400 suppliers, many of whom are currently FF’s single-source suppliers for the components they supply,
and FF expects this to be similar for any other vehicles FF may produce. The supply chain exposes FF to multiple potential sources of
delivery failure or component shortages. To the extent FF’s suppliers experience any delays in providing FF with or developing necessary
components or experience quality issues, FF could experience delays in delivering on its planned timelines.
Currently, FF has not approved secondary sources
for the key single sourced components used in FF 91. For example, FF’s battery cell supplier helped develop its customized battery
cell, and is the sole source of FF battery cells used in the battery pack. Generally, FF does not maintain long-term agreements with these
single-source suppliers.
Historically, certain suppliers ceased supplying
their components and initiated legal claims against FF when FF failed to make overdue payments. While most of these legal claims have
been settled through the vendor trust FF established in April 2019 (“Vendor Trust”), there are still a number of remaining
disputes with suppliers in the U.S. and in China. Any disruption in the supply of components, whether or not from a single-source supplier,
could temporarily disrupt FF’s production until a satisfactory alternative supplier is found, which can be time consuming and costly.
There can be no assurance that FF would be able to successfully retain alternative suppliers or supplies in a timely manner or on acceptable
terms, if at all. If FF is unable to efficiently manage its suppliers, including its relationship with them, FF’s business, prospects,
financial condition and operating results may be materially and adversely affected. Additionally, changes in business and/or political
conditions, force majeure events, changes in regulatory framework and other factors beyond FF’s control could also affect the suppliers’
ability to deliver components in a timely manner. Any of the foregoing could materially and adversely affect FF’s business, prospects,
financial condition and operating results.
If any of FF’s suppliers become economically distressed
or go bankrupt, FF may be required to provide substantial financial support or take other measures to ensure supplies of components or
materials, which could increase FF’s costs, affect its liquidity or cause production disruptions.
FF expects to purchase various types of equipment,
raw materials and manufactured component parts from its suppliers. If any of these suppliers experience substantial financial difficulties,
cease operations, or otherwise face business disruptions, FF may be required to provide substantial financial support to ensure supply
continuity, or FF would have to take other measures to ensure components and materials remain available. Any disruption could affect FF’s
ability to deliver vehicles and could increase FF’s costs and negatively affect its liquidity and financial performance.
FF faces a number of challenges in the sale and marketing of
its vehicles.
FF plans to enhance its brand recognition, improve
its brand reputation and grow its client base by substantial investments in marketing and business development activities. However, FF
cannot guarantee that its marketing spending or the marketing strategies it plans to adopt will have their anticipated effect or generate
returns. FF faces a number of challenges in the sale and marketing of its vehicles, including, without limitation:
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Demand in the automobile industry is highly volatile;
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Final delivered range, performance and quality of FF’s
vehicles may vary from estimates;
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It is expensive to establish a strong brand. FF may not succeed
in continuing to establish, maintain and strengthen the FF brand in a cost-efficient manner, or at all;
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Many consumers are not aware of the benefits of FF’s
products, which may depend on factors beyond FF’s control such as transition of consumer behaviors;
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FF competes with other automotive manufacturers for consumer
spending;
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FF’s failure to keep up with rapid technological changes
could make its vehicles less attractive than those of competitors or make potential customers unwilling to pay a premium for FF’s
vehicles;
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FF may not be able to attract a sufficient number of retail
partners to support its expected sales volumes; and
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FF’s efforts to develop and market its Smart Last Mile
Delivery vehicles might not be successful given the fact that its target customers are commercial logistic companies which have different
requirements compared to retail consumers.
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If FF is unable to efficiently enhance its brand
and market its products, its business prospects, financial condition and operating results may be adversely and materially affected.
FF needs to develop complex software and technology systems in
coordination with vendors and suppliers to reach production for its electric vehicles, and there can be no assurance such systems will
be successfully developed.
FF’s vehicles will use a substantial amount
of third-party and in-house software code and complex hardware to operate. The development of such advanced technologies is inherently
complex, and FF will need to coordinate with vendors and suppliers to achieve development for its electric vehicles. Defects and errors
may be revealed over time, and FF’s control over the performance of third-party services and systems may be limited. FF is relying
on third-party suppliers to develop and manage emerging technologies for use in its vehicles, including lithium-ion battery technology.
As technology in electric vehicles is constantly evolving, FF may also need to rely on suppliers to develop technologies that are not
yet commercially viable. There can be no assurances that FF’s suppliers will be able to meet the technological requirements, production
timing, and volume requirements needed to support FF’s business plan. Nor can FF assure that such emerging technologies and systems
will be successfully developed on commercially reasonable terms, or at all. FF’s potential inability to develop the necessary software
and technology systems may harm its competitive position and its business, prospects, financial condition and operating results.
FF identified material weaknesses in its internal control over
financial reporting. If FF is unable to remediate these material weaknesses, or if it identifies additional material weaknesses in the
future or otherwise fails to maintain effective internal control over financial reporting, it may not be able to accurately or timely
report its financial condition or results of operations, which may adversely affect FF’s business and share price.
We have identified material weaknesses in FF’s
internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim consolidated financial
statements will not be prevented or detected on a timely basis. These material weaknesses are as follows:
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FF did not design and maintain an effective control environment
commensurate with its financial reporting requirements. Specifically, the Company lacked a sufficient number of professionals with an
appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely
and accurately. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate
authorities and responsibilities in pursuit of its financial reporting objectives, as demonstrated by, among other things, insufficient
segregation of duties in its finance and accounting functions.
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FF did not design and maintain effective controls in response
to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls were not sufficient
to respond to changes to the risks of material misstatement to financial reporting, due to growth in the business.
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FF did not design and maintain effective controls for communicating
and sharing information between the legal and accounting and finance departments. Specifically, the accounting and finance departments
are not consistently provided the complete and adequate support, documentation, and information to record transactions within the financial
statements timely, completely and accurately.
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These material weaknesses contributed to the following
additional material weaknesses:
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FF did not design and maintain effective controls to address
the identification of and accounting for certain non-routine, unusual or complex transactions, including the proper application of U.S.
GAAP of such transactions. Specifically, FF did not design and maintain controls to timely identify and account for embedded derivatives
related to convertible notes, impute interest on related party notes payable with interest rates below market rates, account for failed
sale leaseback transactions, and account for warrant instruments.
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FF 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.
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These material weaknesses resulted in adjustments
primarily related to expense cut-off and the associated accounts including operating expenses, accounts payable and accruals, property
and equipment, convertible notes payable and interest expense and related financial disclosures, which were recorded as of and for the
year ended December 31, 2019. These material weaknesses also resulted in adjustments primarily related to the extinguishment of a noncontrolling
interest, accounts payable, vendor payables in trust, and adjustments to the statement of cash flows which were recorded as of and for
the year ended December 31, 2019 as well as disclosure errors related to the anti-dilutive shares excluded from the calculation of diluted
net loss per share, deferred tax assets and related valuation allowance, and accrued interest for certain notes payable, and the fair
value of the Vendor Trust as of December 31, 2019. The material weakness related to accounting for warrant instruments resulted in the
restatement of the previously issued financial statements of the entity acquired as part of the July 21, 2021 merger agreement related
to warrant liabilities and equity. Additionally, these material weaknesses could result in a misstatement of substantially all of our
accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would
not be prevented or detected.
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FF 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; (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; and (iii) computer operations controls to ensure that critical batch jobs are
monitored and data backups are authorized and monitored. These IT deficiencies did not result in a material misstatement to the consolidated
financial statements, however, the deficiencies, when aggregated, could result in misstatements potentially impacting all financial statement
accounts and disclosures that would not be prevented or detected.
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FF has begun implementation of a plan to remediate
the material weaknesses described above. Those remediation measures are ongoing and include (i) hiring additional accounting and IT personnel
to bolster its technical reporting, transactional accounting and IT capabilities; (ii) designing and implementing controls to formalize
roles and review responsibilities and designing and implementing formal controls over segregation of duties; (iii) designing and implementing
controls for communicating and sharing information between legal and accounting to facilitate transactions being recorded timely and accurately;
(iv) designing and implementing procedures to identify and evaluate changes in FF’s business and the impact on its internal controls;
(v) formally assessing complex accounting transactions and other technical accounting and financial reporting matters; (vi) designing
and implementing formal processes, accounting policies, procedures, and controls supporting FF’s financial close process, including
creating standard balance sheet reconciliation templates and journal entry controls; and (vii) designing and implementing IT general controls,
including controls over change management, the review and update of user access rights and privileges, and controls over batch jobs and
data backups.
While FF believes these efforts will remediate
the material weaknesses, FF may not be able to complete its evaluation, testing or any required remediation in a timely fashion, or at
all. FF cannot assure you that the measures it has taken to date and may take in the future, will be sufficient to remediate the control
deficiencies that led to its material weaknesses in internal control over financial reporting or that they will prevent or avoid potential
future material weaknesses. The effectiveness of FF’s internal control over financial reporting is subject to various inherent limitations,
including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human
error and the risk of fraud. If FF is unable to remediate its material weaknesses, FF’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, to may adversely affect FF’s reputation and business and the market price of the Class A Common Stock.
In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor
confidence, delisting of FF’s securities and harm to FF’s reputation and financial condition, or diversion of financial and
management resources from the operation of FF’s business.
FF has yet to obtain licenses and other rights in certain technologies,
software, and content needed for its vehicles and FF may face technical difficulties and attendant delays in integrating such technologies
in its vehicles. Licensing third-party technology carries risks that are difficult to control. Accordingly, FF may need to
modify aspects of planned vehicle designs and alter features.
FF has not yet obtained rights for certain technologies,
software, and content FF currently plans to employ in its vehicles. For example, FF still needs to acquire rights to software to enable
autonomous driving, and such software will need to be customized for its use. In addition, while FF plans to differentiate its vehicles
from those of its competitors by offering a rich and connected set of mobile entertainment offerings, FF has yet to conclude the requisite
agreements with connectivity and content providers. The licensors and service providers of such software, connectivity, and content may
insist on pricing and other legal and commercial terms that FF considers unreasonable or unacceptable. If FF cannot obtain all of the
rights and services FF needs on acceptable terms and on a timely basis, FF may need to change its plans and omit planned features.
Moreover, even if FF does obtain the technologies,
software, and content FF needs from third parties, FF may encounter technical difficulties integrating them into its vehicles and with
each other. In general, the software FF needs to license must be developed and customized for FF. Delays in development of a single software
system, or delays in successfully integrating the system with other complex systems, could delay the launch of a vehicle model. Any delay
in launch dates for FF’s vehicles could have an adverse effect on FF’s financial performance. Licensing third-party technology
also carries the risk that the licensed technology has bugs or other defects or that such technology infringes another person’s
intellectual property rights, without FF’s ability to directly influence or mitigate the impacts of such circumstances.
FF’s decision to manufacture its own vehicles in its leased
Hanford, California facility does not guarantee FF will not incur significant
delays in the production of the vehicles.
FF plans to continue to build-out its leased manufacturing
facility in Hanford, California to commence production of FF 91 series within 12 months after the Closing. Additionally, this construction may experience
unexpected delays or other difficulties which could further increase costs and/or adversely affect FF’s scheduled timeline to manufacture
and deliver vehicles. Further, manufacturing and assembling components in-house in the Hanford facility does not guarantee that the production
of its vehicles will be on schedule. Various risks and uncertainties inherent in all new manufacturing processes could result in delays
in the production of FF’s vehicles, including for example those with respect to:
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pace of bringing production equipment and processes online
with the capability to manufacture high-quality units at scale;
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compliance with complex and evolving environmental, workplace
safety and similar regulations;
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channels to secure necessary equipment, tools and components
from suppliers on acceptable terms and in a timely manner;
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the ability to attract, recruit, hire and train skilled employees;
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a health emergency such as the outbreak of the COVID-19 pandemic,
difficult economic conditions and international political tensions; and
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other delays and cost overruns.
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Production and manufacturing of some of FF’s vehicles
may be outsourced to a third-party contract manufacturer in South Korea and potentially, through a joint venture in China. FF is also
exploring other potential contract manufacturing options in addition to the contract manufacturer in South Korea. If such contract manufacturer
or joint venture fails to produce and deliver vehicles in a timely manner for any reason, FF’s business, prospects, financial condition
and results of operation could be materially harmed.
FF expects to outsource the manufacturing of
some of its vehicles to a third-party contract manufacturer in South Korea and may also set up a joint venture in China for vehicle manufacturing,
which FF may heavily rely upon. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer
in South Korea. Collaboration with third parties, including FF’s joint venture, for the manufacturing of vehicles is subject to
risks that may be outside FF’s control. FF has yet to enter into any legally binding definitive agreements regarding such third-party
contract manufacturer or the joint venture. The parties could revise or terminate the preliminary memorandum of understanding with such
third-party contract manufacturer. The parties may also not reach agreement on legally binding definitive documents regarding such joint
venture, could abandon the related preliminary memorandum of understanding and cooperation agreement and pursue other commercial arrangements
(such as contract manufacturing or sale) or could terminate the preliminary memorandum of understanding and cooperation agreement at
any time before the definitive agreements are signed. Even if the definitive agreements are signed, there remains uncertainty if the
manufacturing facility would be build-out as planned or if the parties will cooperate with each other as agreed. For example, FF entered
into a joint venture agreement with The9 Limited in March 2019 with the intent for the joint venture to serve the China market with
capabilities to manufacture, market, distribute, and sell a new model designed for the JV based on concepts of FF 91. However, the joint
venture has been dormant since then because The9 Limited has never provided the required funding, and as a result FF has not licensed
its IP to the joint venture.
In addition, FF could experience delays if such
third-party contract manufacturing partner or joint venture does not meet agreed upon timelines or experiences capacity constraints. There
is risk of potential disputes with business partners, and FF could be affected by adverse publicity related to its business partners,
whether or not such publicity is related to their collaboration with FF. FF’s ability to successfully build a premium brand could
also be adversely affected by perceptions if the quality of the third-contract manufacturing partners or joint venture’s products
not related to FF’s products are questioned. Furthermore, there can be no assurance that FF will successfully ensure its manufacturing
partners or joint ventures maintain appropriate quality standards, with any failure to do so adversely affecting customers’ perceptions
of FF’s self-manufactured electric vehicles.
If FF experiences delays, disputes or other difficulties
with third-party manufacturers or joint ventures that FF outsources orders to, there can be no assurance that it would be able to engage
other third parties or to establish or expand its own production capacity to meet the needs of its customers in a timely manner or on
acceptable terms, or at all. The expense and time required to complete any transition, and to assure that vehicles manufactured at facilities
of new manufacturers comply with FF’s quality standards and regulatory requirements may be greater than anticipated. Any of the
foregoing could adversely affect FF’s business, results of operations, financial condition and prospects.
Changes in U.S. and international trade policies, including the
export and import controls and laws, particularly with regard to China, may adversely impact FF’s business and operating results.
FF operates with a United States and China
dual-home market strategy, partnering with leading international suppliers from North America, Europe and Asia. While FF believes this
is the best strategic business model, it also is more subject to risks associated with international trade conflicts including between
the United States and China, particularly with respect to export and import controls and laws. Former President Donald J. Trump advocated
for greater restrictions on international trade in general, which significantly increased tariffs on certain goods imported into the United States
- particularly from China. Former President Trump also took steps toward restricting trade in certain goods. In response, China and other
countries imposed similar retaliatory tariffs and other measures. Rising political tensions could reduce trade volume, investment, technological
exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic
conditions and the stability of global financial markets. Additionally, increasing tariffs could impact raw material prices, the cost
of component parts and transportation. Any of the foregoing could have an adverse effect on FF’s business, prospects, financial
condition and results of operations. The new administration under President Joseph R. Biden may also enact policy changes that could have
an impact on FF’s business.
Continued or increased price competition in the automotive industry
generally, and in electric and other alternative fuel vehicles, may harm FF’s business.
Increased competition could result in lower vehicle
unit sales, increased inventory, price reductions, revenue shortfalls, loss of customers and loss of market share, which could harm FF’s
business, prospects, financial condition and operating results. For example, the automotive industry has witnessed increasing price competition
over the years. With more competitors entering the field, many manufacturers are facing downward price pressure and have been adjusting
their pricing strategies. FF may not have the same financial resources as some of the competitors to allow it to adjust pricing strategies,
which may result in a loss of customers and future market share. On the other hand, if FF follows the downward price adjustment trend,
its ability to generate revenues and achieve profitability may be adversely affected. Any of the foregoing may harm FF’s business,
prospects, results of operations and financial condition.
FF faces competition from multiple sources, including new and
established domestic and international competitors, and expects to face competition from others in the future, including competition from
companies with new technology. This fierce competition may impair FF’s revenues, increase its costs to acquire new customers, and
hinder its ability to acquire new customers.
The automotive market in the United States,
China, and the European Union, which are FF’s target markets, is and will remain highly competitive. A significant and growing number
of established and new automobile manufacturers, as well as other companies, have entered or are reported to have plans to enter the alternative
fuel vehicle market, including hybrid, plug-in hybrid and fully electric vehicles, as well as the market for autonomous driving technology
and applications. In some cases, such competitors have announced an intention to produce electric vehicles exclusively at some point in
the future. FF directly competes with other pure-play electric vehicle companies targeting the high-end market segment, and also competes
to a lesser extent with new energy vehicles (“NEVs”) and internal combustion engine (“ICE”) vehicles in the mid-
to high-end market segment offered by traditional OEMs. In light of the increased demand and regulatory push for and technology changes
in connection with the alternative fuel vehicles, FF expects competition in the industry to intensify with more new players in the future,
including companies with new technology.
Many of FF’s current and potential competitors,
particularly international competitors, have significantly greater financial, technical, manufacturing, marketing, distribution and other
resources than FF, and are able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and
support of their products than FF. In order to acquire customers and better compete, FF may have to incur significant expenses for marketing
and business development activities and discounts. Any inability to successfully compete with new or existing competitors may prevent
FF from attracting new customers and result in loss of market share. By the time FF starts delivering FF 91, a substantial portion of
the market share may have already been taken by FF’s competitors. There can be no assurance that FF will be able to compete successfully
in global and local markets, failure of which may materially and adversely affect FF’s business, prospects, financial condition
and results of operations.
FF’s go-to-market and sales strategy, including its self-owned
and partner-owned stores and showrooms as well as FF’s online web platform, will require substantial investment and commitment of
resources and are subject to numerous risks and uncertainties.
FF intends to establish online and offline marketing,
sales, and after-sales channels, which consist of its self-owned stores, partner-owned stores and showrooms and an online web platform.
FF plans to distribute its vehicles in certain key markets through its direct stores, while establishing a distribution model of direct
sales and partner-owned stores and showrooms in other markets. Users will be able to place orders and purchase FF’s vehicles exclusively
through an online platform while assigning the transaction to a specific store or showroom. Establishing FF’s direct stores rather
than exclusively distributing its vehicles though partner-owned stores will require significant capital expenditures and may result in
reduced or slower expansion of FF’s distribution and sales systems in the key markets compared to a traditional dealership system.
FF expects the partner-owned stores and showrooms
(such partners “FF Partners” and such stores or showrooms “FF Partner Stores and showrooms”), will be compensated
from the sales and services that are conducted online and from the capital upside of the FF equity that the retail partners will receive
as an incentive for making their initial investment in stores of showrooms. However, FF cannot assure that its partner business model
will be as attractive as that of traditional OEMs and thus that FF will be able to scale up its network to an adequate size. In addition,
FF is not in a position to guarantee that it will be able to generate sufficient traffic to FF’s online web platform or to attract
enough users to place orders. Moreover, FF will be competing with automakers with well-established distribution channels, which places
significant risk to the successful implementation of FF’s business plan.
If FF is unable to roll out and establish a broad
network covering both online and offline channels that fully meet customers’ expectations, consumer experience could be adversely
affected, which could in turn materially and adversely affect FF’s business, financial condition, results of operations and prospects.
Implementing the FF business model is subject to numerous significant challenges, including obtaining permits and approvals from
government authorities, and FF may not be successful in addressing these challenges. In addition, dealer trade associations may mount
challenges to FF’s distribution strategy by challenging the legality of FF’s operations in court and employing administrative
and legislative processes to attempt to prohibit or limit FF’s ability to operate. All these would have a material and adverse effect
on FF’s business, prospects, results of operations and financial condition.
Difficult economic conditions, financial or economic crises,
or the perceived threat of such a crisis, including a significant decrease in consumer confidence, may affect consumer purchases of premium
items, such as FF’s electric vehicles.
Sales of premium consumer products, such as FF
91 and other electric vehicles, depend in part on discretionary consumer spending and therefore may decline based on adverse changes in
general economic conditions. The global economy and financial markets experience significant disruptions from time to time, constantly
facing new challenges, including the recent uncertainties over the impact of Brexit, ongoing trade disputes and tariffs, and the impact
of the COVID-19 pandemic and the related economic policies taken by various governments around the world. It is unclear whether these
challenges will be successfully addressed and what effects they may have. There is considerable uncertainty over the long-term effects
of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the
world’s leading economies. Any prolonged slowdown in economic development might lead to tighter credit markets, increased market
volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors.
Specifically, as a result of the COVID-19 pandemic,
difficult macroeconomic conditions, such as decreases in per capita income and disposable income, increased and prolonged unemployment,
a decline in consumer confidence, and/or reduced spending by businesses could have a material adverse effect on future investor interest
or customer demand for FF’s vehicles. In response to the perceived uncertainty in economic conditions, consumers might delay, reduce
or cancel purchases of such electric vehicles. Potential customers may seek to reduce spending by foregoing luxurious new energy vehicles.
Decreased demand for FF vehicles, particularly in the United States and China, could negatively affect the business, prospects, financial
condition and results of operations of FF.
FF faces risks related to natural disasters, health epidemics
and pandemics, terrorist attacks, civil unrest and other circumstances outside its control, including the current COVID-19 pandemic, which
could significantly disrupt FF’s operations.
The occurrence of unforeseen or catastrophic
events, including the emergence of an epidemic, pandemic or other widespread health emergency, civil unrest, terrorist attacks or natural
disasters could create economic and financial disruptions. These types of events could lead to operational difficulties, impair FF’s
ability to manage its business and expose FF’s business activities to significant losses. FF’s management and operational
teams are based in the United States and China. FF has a manufacturing facility in Hanford, California, and plans to partner with
a contract manufacturer in South Korea. FF is also exploring other potential contract manufacturing options in addition to the contract
manufacturer in South Korea. Additionally, FF may establish manufacturing through a joint venture in China and/or other regions for certain
future vehicle models. An unforeseen or catastrophic event in any of these regions could adversely impact FF’s operations.
Most recently, there has been a pandemic caused
by a novel coronavirus known as COVID-19. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears,
market downturns, and restrictions on business and individual activities has created significant volatility in the global economy and
has led to reduced economic activity. The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall
supply chain of vehicle manufacturers and suppliers, and has led to a global decrease in vehicle sales in markets around the world.
The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place
orders, and business shutdowns. For example, FF’s employees based in California have been subject to stay-at-home orders from state
and local governments. These measures may adversely impact FF’s employees and operations and the operations of FF’s suppliers
and business partners, and could negatively impact the construction schedule of FF’s manufacturing facility and the production schedule
of FF 91. In addition, various aspects of FF’s business and manufacturing facility cannot be conducted remotely. These measures
by government authorities may remain in place for a significant period of time and could adversely affect FF’s construction and
manufacturing plans, sales and marketing activities, and business operations.
The spread of COVID-19 has caused FF to modify
its business practices, including limiting employee travel, requiring all non-essential personnel to work from home, and canceling or
reducing physical participation in meetings, events and conferences. Further action may be required by government authorities or the Company
to ensure the health and safety of FF’s employees, customers, suppliers, vendors and business partners. There is no assurance that
such actions will be sufficient to mitigate the risks posed by the virus or be satisfactory to government authorities. If significant
portions of FF’s workforce are unable to work effectively, including due to illness, quarantines, social distancing, government
actions or other restrictions in connection with the COVID-19 pandemic, FF’s business prospects, financial condition and results
of operations will be negatively impacted.
On April 17, 2020, the Company entered into a Paycheck
Protection Program Promissory Note (“PPP Note”) with East West Bank under the Paycheck Protection Program of the recently
enacted Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The Company received total proceeds of $9.2 million
from the PPP Note, which is due on April 17, 2022. In accordance with the requirements of the CARES Act, the Company used the proceeds
primarily for payroll costs, rent and utilities.
The extent to which the COVID-19 pandemic impacts
FF will depend on future developments which are highly uncertain and cannot be predicted, including, but not limited to the duration and
spread of the pandemic, its severity, the actions to contain the virus or treat its impact, the effectiveness and side effects of vaccines,
and how quickly and to what extent normal economic and operating activities can resume. The COVID-19 pandemic could limit the ability
of FF’s suppliers and business partners to perform, including third-party suppliers’ ability to provide components, materials
and service used for FF 91. FF may also experience an increase in the cost of raw materials. Even after the COVID-19 pandemic has subsided,
FF may continue to experience an adverse impact to its business as a result of the global economic impact and any lasting effects on the
global economy, including any recession that has occurred or may occur in the future.
If FF is unable to attract and/or retain key employees and hire
qualified personnel, its ability to compete could be harmed.
FF’s success depends substantially on the continued efforts of
its executive officers and key employees. If one or more of FF’s executive officers or key employees are unable or unwilling
to continue their services with FF, FF may not be able to replace them easily, in a timely manner, or at all. In addition, certain
FF employees received payment of bonuses at the Closing of the Business Combination in recognition of their reduced prior compensation
paid by Legacy FF that may increase the risk that they may terminate their employment with FF in the near term.
If any of FF’s executive officers or key
employees terminates his or her services, FF’s business may be negatively affected. In addition, FF may incur additional expenses
to recruit, train and retain qualified personnel. FF adopted a global partnership program to retain, and provide incentives for, certain
key management members. However, there is no guarantee that FF will be able to attract other qualified candidates to fill certain positions.
The failure to do so may lead to difficulties in effectively executing FF’s business strategies, and its business, prospects, financial
condition and results of operations could be materially and adversely affected. Furthermore, if any of FF’s executive officers
or key employees joins a competitor or forms a competing company, FF may lose know-how and be poorly positioned in the marketplace.
Unionization activities or labor disputes may disrupt FF’s
business and operations and affect its profitability.
Although none of our employees are currently represented
by organized labor unions, it is not uncommon for employees at companies in the automobile industry to belong to a union, which can result
in higher employee costs and increased risk of work stoppages. Although FF works diligently to provide the best possible work environment
for its employees, they could still decide to join or seek representation by organized labor unions, or FF may be required to become a
union signatory. FF’s business and operations as well as its profitability could be adversely affected if unionized activities such
as work stoppages occur, or if FF becomes involved in labor disputes or other actions filed by labor unions. Any unfavorable outcome in
such disputes could create a negative perception of how FF treats its employees.
If FF’s employees were to engage in strikes or other work
stoppages, or if third-party strikes or work stoppages cause supply chain interruptions, FF’s business, prospects, operations, financial
condition and liquidity could be materially adversely affected.
A strike or work stoppage by FF’s employees
or by employees of FF’s outsourcing partners or suppliers could have a material adverse effect on its business, prospects, operations,
financial condition and liquidity. Work stoppages at FF’s suppliers may cause supply chain interruptions, which could materially
and adversely impact FF’s operations given its limited, and in most cases, single-source supply chain. If a work stoppage occurs,
it could delay the manufacture and sale of FF’s products, disrupt its business and operations, or have an adverse effect on FF’s
cashflow, all of which could materially and adversely affect FF’s business, prospects, operating results, financial condition and
liquidity.
The discovery of defects in vehicles may result in delays in
new model launches, recall campaigns or increased warranty costs, which may adversely affect FF’s brand and result in a decrease
in the residual value of FF’s vehicles.
FF’s vehicles may contain design and manufacturing
defects. The design and manufacturing of FF’s vehicles are complex and could contain latent defects and errors, which may cause
its vehicles not to perform or operate as expected or even result in property damage, personal injuries or death. Furthermore, FF’s
vehicles use a substantial amount of third-party and in-house software codes and complex hardware to operate. Advanced technologies are
inherently complex, and defects and errors may be revealed over time. While FF has performed extensive internal testing on its vehicles
and the related software and hardware systems, and will continue this testing and evaluation, FF has a limited frame of reference by which
to assess the long-term performance of its vehicles and systems. There can be no assurance that FF will detect or fix the defects in a
timely manner.
The discovery of defects in FF’s vehicles
may result in delays in new model launches, recall campaigns, product liability claims or increased warranty costs and other expenses,
and may decrease the residual values of vehicles that are subject to leasing arrangements. FF might from time to time, voluntarily or
involuntarily, initiate vehicle recalls if any of FF’s vehicles, including any systems or parts sourced from suppliers and contractors,
prove to be defective or noncompliant with applicable laws and regulations. Such recalls, whether voluntary or involuntary or caused by
systems or components engineered or manufactured by FF or by suppliers and contractors, could require that FF incur significant costs
relating to logistics and/or repair. All of the foregoing could materially harm FF’s brand image, business, prospects, financial
condition and results of operations.
FF may become subject to product liability claims, which could
harm its financial condition and liquidity if FF is not able to successfully defend or insure against such claims.
FF may become subject to product liability claims,
which could harm its business, prospects, operating results and financial condition. The automotive industry experiences significant product
liability claims, and FF faces the inherent risk of exposure to claims in the event FF’s vehicles do not perform as expected or
experience a malfunction that results in property damage, personal injury and/or death. Such claims could divert FF’s financial
and other resources and cause disruption to its operations. Furthermore, a successful product liability claim against FF could result
in a substantial monetary award while generating significant negative publicity. FF’s insurance coverage might not be sufficient
to cover all potential product liability claims.
If FF is sued for infringing or misappropriating intellectual
property rights of third parties, litigation could be costly and time consuming and could prevent FF from developing or commercializing
its future products.
FF is subject to litigation risks from third parties
alleging infringement of their intellectual property, which could be time consuming and costly, regardless of whether the claims have
merit. Individuals, organizations and companies, including FF’s competitors, may hold or obtain patents, trademarks and/or other
proprietary rights that would prevent, limit or interfere with its ability to make, use, develop, sell and/or market FF’s vehicles
or components, and may bring claims alleging FF’s infringement of such rights. If FF is determined to have or believes there is
a high likelihood that FF has infringed upon a third party’s intellectual property rights, not only may FF be required to pay substantial
damages or settlement costs, but FF may also be required to cease sales of its vehicles, incorporate certain components into its vehicles,
or offer vehicles or other goods or services that incorporate or use the challenged intellectual property, seek a license from the holder
of the infringed intellectual property rights (which license may not be available on reasonable terms or at all), redesign the vehicles
or other goods or services, establish and maintain alternative branding for FF’s products and services, and/or alter FF’s
business strategy, all of which could prevent FF from developing or commercializing its vehicles and adversely and materially hamper its
business, prospects, financial condition and results of operations. In addition, any litigation or claims, whether or not valid, could
result in substantial costs, negative publicity, and diversion of resources and management attention.
FF may be subject to damages resulting from claims that FF or
its employees have wrongfully used or disclosed alleged trade secrets or other intellectual property rights of former employers of FF’s
employees.
Many of FF’s employees were previously employed
by other automotive companies or by suppliers to automotive companies. FF may be subject to claims that it or these employees have inadvertently
or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to
defend against these claims. If FF fails in defending such claims, in addition to paying monetary damages, it may lose valuable intellectual
property rights or personnel. A loss of key personnel or their work product could hamper or prevent FF’s ability to commercialize
its products, which could severely harm FF’s business, prospects, results of operations and financial condition. Even if FF is successful
in defending against these claims, litigation could result in substantial costs, negative publicity and demand on management resources,
which would materially adversely affect its business, prospects, brand, financial condition and results of operations.
FF has elected to protect some of its technologies as trade secrets
rather than as patents, however, this approach has certain risks and disadvantages.
FF has elected to protect many of its technological
developments as trade secrets rather than filing patent applications on them. If another person has filed or files in the future a patent
application on the same subject invention FF may be precluded from subsequently filing for its own patent on such invention. In addition,
if the other person’s patent application is granted, FF’s continued use of its technological development could then constitute
infringement of the other person’s patent. In that case FF could be forced to stop using the affected technology or to pay royalties
to continue using it. These risks are heightened for FF given the large number of patent filings in the industry.
Another risk of reliance upon trade secret protection
is that there is no guarantee that the efforts FF has made to keep its trade secrets secret will be successful. Trade secrets may be taken
or used without FF’s authorization or knowledge, including via information security breaches. It is difficult to detect that trade
secrets are being misappropriated, and it is very difficult and expensive to prove disclosure or unauthorized use in court and to obtain
an adequate remedy.
FF is dependent upon its proprietary intellectual properties.
FF considers its copyrights, trademarks, trade
names, internet domain names, patents and other intellectual property assets invaluable to its ability to develop and protect new technology,
grow its business and enhance FF’s brand recognition. FF has invested significant resources to develop its intellectual property
assets. Failure to successfully maintain or protect these assets could harm FF’s business. The steps FF has taken to protect its
intellectual property rights may not be adequate or prevent theft and use of its trade secrets by others or prevent competitors from copying
its newly developed technology. If FF is unable to protect its proprietary rights or if third parties independently develop or gain access
to similar technology, FF’s business, revenue, reputation and competitive position could be harmed. For example, the measures FF
takes to protect its intellectual property from unauthorized use by others may not be effective for various reasons, including the following:
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any patent applications FF submits may not result in the issuance
of patents;
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the scope of FF’s issued patents may not be broad enough
to protect its proprietary rights;
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FF’s issued patents may be challenged and/or invalidated
by its competitors or others;
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the costs associated with enforcing patents, confidentiality
and invention agreements and/or other intellectual property rights may make aggressive enforcement impracticable;
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current and future competitors may circumvent FF’s
patents;
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FF’s in-licensed patents may be invalidated, or the
owners of these patents may breach their license arrangements; and
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even if FF obtains a favorable outcome in litigation asserting
its rights, FF may not be able to obtain an adequate remedy, especially in the context of unauthorized persons copying or reverse engineering
FF’s products or technology.
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FF may need to resort to litigation to enforce
its intellectual property rights if its intellectual property rights are infringed or misappropriated, which could be costly and time
consuming. Additionally, protection of FF’s intellectual property rights in different jurisdictions may vary in their effectiveness.
FF has little patent coverage anywhere in the world except the United States and China. Implementation and enforcement of Chinese
intellectual property-related laws historically has been considered to be deficient and ineffective. Moreover, with FF’s ownership
of patents limited mostly to those issued in China and the United States, FF may find it impossible to prevent competitors from copying
its patented advancements in vehicles manufactured and sold elsewhere.
Despite FF’s efforts to protect its proprietary
rights, third parties may still attempt to copy or otherwise obtain and use its intellectual property or seek court declarations that
such third parties’ intellectual property does not infringe upon FF’s intellectual property rights, or they may be able to
independently develop technologies that are the same as or similar to FF’s technologies.
FF may not be able to obtain patent protection on certain of
its technological developments, and may face better-funded competitors with formidable patent portfolios.
FF may not be able to obtain patent protection
for certain of its technological developments because some of its existing applications were abandoned and applicable filing deadlines
for seeking to protect such technologies may have passed in the United States and around the world. Also, FF has elected to protect
some of its technologies as trade secrets rather than as patents. However, this approach risks the wrongful disclosure and use of FF’s
trade secrets by departing employees and others. FF has delayed filing for patent protection on certain of its technological developments
in recent years due to financial constraints. Because patents are granted on a first-to-file basis, a delay in patent filings, such as
this, can result in other companies filing for and obtaining the same inventions either independently derived or otherwise. In addition,
inventions not subject to an earlier filing date as disclosed in an active application can result in FF’s inventions or patents
being “blocked” by prior art in the meantime. The consequences of the filing delays could place FF at a disadvantage relative
to competitors that have been continuously more active in filing patent applications and could leave FF unable to protect its technologies
that differentiate FF’s vehicles from the vehicles of its competitors. FF also faces better-funded competitors with formidable patent
portfolios and there can be no guarantee that one or more competitors has not and/or will not obtain patent protection on features necessary
to implement in FF’s vehicles.
FF is subject to stringent and changing laws, regulations, standards
and contractual obligations related to data privacy and security, and FF’s actual or perceived failure to comply with such obligations
could harm its reputation, subject it to significant fines and liability, or otherwise adversely affect FF’s business, prospects,
financial condition and results of operations.
FF plans to permit certain of its business partners
to collect, process, store, and in some cases transfer across borders, personally identifiable information concerning the drivers and
passengers of FF’s vehicles. Such information may include among other things faces, names, geolocation information, payment data,
and preferences. Although FF has adopted security policies and measures, including technology, to protect its customer information and
other proprietary data, it may be required to expend significant resources to comply with data breach requirements if third parties improperly
obtain and use personal information of FF’s customers or FF otherwise experiences a data loss with respect to its customers’
personal information.
FF plans to operate on a global basis, and thus
FF will face a significant burden to comply with data privacy and information security laws and regulations in the United States,
the State of California, China, Europe, and the rest of the world. Although FF endeavors to comply with all such laws and regulations,
as well as FF’s own policies and obligations under contracts with third parties, FF may at times fail to do so or be alleged to
have failed to do so. Any failure or perceived failure by FF to comply with such laws, regulations, policies, and obligations in one or
more jurisdictions could expose FF to litigation, awards, fines or judgments, civil and/or criminal penalties or negative publicity, and
could adversely affect FF’s business, financial condition, results of operations and prospects.
The global regulatory framework governing the
collection, processing, storage, use and sharing of personal information, is rapidly evolving and is likely to continue to be subject
to uncertainty and varying interpretations. In the United States, certain state laws may be more stringent or broader in scope,
or offer greater individual rights, with respect to sensitive and personal information than federal, international or other state laws,
and such laws may differ from each other, which may complicate compliance efforts. For example, California enacted the California Consumer
Privacy Act of 2018 (“CCPA”) which went into effect in January 2020 and became enforceable by the California Attorney
General in July 2020, and which, among other things, requires companies covered by the legislation to provide new disclosures to
California consumers and afford such consumers new rights of access and deletion for personal information, as well as the right to opt
out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action
for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of,
and risks associated with, data breach litigation. Additionally, a new California ballot initiative, the California Privacy Rights Act
(“CPRA”) was passed in November 2020. Effective starting on January 1, 2023, the CPRA imposes additional obligations
on companies covered by the legislation and will significantly modify the CCPA, including by expanding consumers’ rights with respect
to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and
enforce the CCPA and the CPRA. The effects of the CCPA and the CPRA are potentially significant and may require FF to modify its data
collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential
exposure to regulatory enforcement and/or litigation. Internationally, many jurisdictions have established their own data security and
privacy legal framework with which FF or its clients may need to comply, including, but not limited to, the European Union, or EU. The
EU’s data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance
and risk to FF’s business. In China, the Personal Information Protection Law was passed on August 20, 2021 (which will become effective
on November 1, 2021), imposing restrictions on entities that collect and process personal data and sensitive information about subjects
in China.
Failure by FF, whether actual or perceived, to
comply with federal, state or international privacy, data protection or security laws or regulations could result in regulatory or litigation-related
actions against FF, legal liability, fines, damages and other costs, and could adversely affect its business, financial condition, results
of operations and prospects.
FF is subject to cybersecurity risks relating to its various
systems and software, or that of any third party that FF relies upon, and any failure, cyber event or breach of security could prevent
FF from effectively operating its business, harm its reputation or subject FF to significant liability.
FF and the business partners storing its data are
routinely subject to cybersecurity threats and attacks. Information security risks have increased in recent years in part because of the
proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists, state-sponsored
actors, and other external parties. FF’s vehicles contain complex IT systems and software to support interactive and other functions.
FF maintains policies, procedures and technological safeguards and has implemented policy, procedural, technical, physical and administrative
controls intended to prevent unauthorized access to its IT networks and vehicles’ systems. However, unauthorized persons may attempt
to gain unauthorized access to modify, alter, insert malicious code and use such networks and systems. In the event FF’s or FF business
partners’ data system protection efforts are unsuccessful and such systems or the data systems of vehicles are compromised, FF could
suffer substantial harm.
FF cannot entirely eliminate the risk of improper
or unauthorized access to or disclosure of data or personal information, other security events that impact the integrity or availability
of FF’s data systems and operations, or the related costs FF may incur to mitigate the consequences from such events. Additionally,
FF cannot guarantee that its insurance coverage would be sufficient to cover all losses. Moreover, FF has limited control over and limited
ability to monitor FF’s third-party business partners that collect, store, and process information, including personally identifiable
information, on FF’s behalf. They and their systems could be the subject of cyberattacks, just as FF could, and they may or may
not put into practice the policies and safeguards they should in order to comply with applicable laws, regulations, and their contractual
obligations to FF. A vulnerability in a third-party business partner’s software or systems, a failure of FF’s third-party
business partner’s safeguards, policies or procedures, or a breach of a third-party business provider’s software or systems
could result in the compromise of the confidentiality, integrity or availability of FF’s systems or vehicles or the data stored
by FF’s business partners.
To the extent that FF’s vehicles are commercialized,
there can be no assurance that these vulnerabilities related to FF’s systems and software will not be exploited in the future before
they can be identified, or that FF’s remediation efforts will be successful. A major breach of FF’s network security and systems
could have negative consequences for its business, prospects, financial condition and results of operation including possible fines, penalties
and damages, reduced customer demand for FF’s vehicles and harm to its reputation and brand. Any cyberattacks, unauthorized access,
disruption, damage or control of FF’s IT networks and systems or any loss or leakage of data or information stored in its systems
could result in disruption of FF’s operations and legal claims or proceedings. In addition, regardless of their veracity, reports
of cyberattacks to our networks, systems or data, as well as other factors that may result in the perception that FF’s networks,
systems or data are vulnerable to “hacking,” could further negatively affect FF’s brand and harm its business, prospects,
financial condition and results of operation.
FF may not be able to obtain regulatory approval for its vehicles.
Motor vehicles are subject to substantial regulation
under international, federal, state and local laws. Vehicles produced by FF will be required to comply with the applicable safety, product
and other standards and regulations in FF’s targeted markets. For example, FF’s vehicles in the United States will be
subject to numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including
all applicable Federal Motor Vehicle Safety Standards (“FMVSS”). Rigorous testing and the use of approved materials and equipment
are among the requirements for achieving federal certification. In addition, FF’s vehicles sold in China must pass various tests
and undergo a certification process and be affixed with the China Compulsory Certification (“CCC”), before delivery from the
factory and sale, and such certification is also subject to periodic renewal. FF may fail to obtain or renew the required certification
or regulatory approval for its vehicles, which may prevent FF from delivering, selling and/or importing/exporting its vehicles, and therefore
materially and adversely affect its business, results of operations, financial condition and prospects.
FF and its manufacturing partners may be subject to increased
environmental and safety or other regulation resulting in higher costs, cash expenditures, and/or sales restrictions.
As a manufacturing company, including with
respect to FF’s current Hanford, California facility, its potential future facility with a third-party manufacturer in South Korea
and other potential contract manufacturing options, and its proposed joint venture in China, FF and its manufacturing partners are or
will be subject to complex environmental, manufacturing, health and safety laws and regulations at numerous jurisdictional levels in
the U.S., South Korea and other locations where they may expand operations, including laws relating to the use, handling, storage, recycling,
disposal and human exposure to hazardous materials and relating to the construction, expansion and maintenance of their facilities. The
costs of compliance, including remediating contamination if any is found on FF or its manufacturing partner’s properties, and any
changes to their operations mandated by new or amended laws, may be significant. FF and/or its manufacturing partners may be required
to incur additional costs to comply with any changes to such regulations, and any failures to comply could result in significant expenses,
delays or fines. FF and its manufacturing partners will be subject to laws, regulations and standards applicable to the supply, manufacture,
import, sale and service of automobiles in different jurisdictions and relating to vehicle safety, fuel economy and emissions, among
other things, in different jurisdictions which often may be materially different from each other. As a result, FF and/or its manufacturing
partners may need to make additional investments in the applicable vehicles and systems to ensure regulatory compliance.
Additionally, there is a variety of international,
federal and state regulations that may apply to autonomous vehicles, which include many existing vehicle standards that were not originally
intended to apply to vehicles that may not have a driver. For example, there are currently no federal U.S. regulations pertaining to the
safety of autonomous vehicles; however, NHTSA has established recommended guidelines. Certain states have legal restrictions on autonomous
vehicles, and many other states are considering them. Such regulations continue to rapidly change, which increases the likelihood of a
patchwork of complex or conflicting regulations. This could result in higher costs and cash expenditures, or may delay products or restrict
self-driving features and availability, any of which could adversely affect our business, prospects, financial condition and results of
operation.
FF may be subject to anti-corruption, anti-bribery, anti-money
laundering, economic sanctions and other similar laws and regulations, and non-compliance with such laws and regulations could subject
FF to civil, criminal and administrative penalties, remedial measures and legal expenses, all of which could adversely affect FF’s
business, prospects, results of operations, financial condition and reputation.
FF is or will be subject to laws with respect to
anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and other similar laws and regulations in various
jurisdictions in which FF conducts, or in the future may conduct, activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”)
and other anti-corruption laws and regulations. The FCPA prohibits FF and its officers, directors, employees and business partners acting
on its behalf, including agents, from offering, promising, authorizing or providing anything of value to a “foreign official”
for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The
FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets
and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect FF’s
business, prospects, results of operations, financial condition and reputation.
FF’s policies and procedures designed to
ensure compliance with these regulations may not be sufficient, and its directors, officers, employees, representatives, consultants,
agents, and business partners could engage in improper conduct for which FF may be held responsible. Non-compliance with anti-corruption,
anti-bribery, anti-money laundering or financial and economic sanctions laws could subject FF to adverse media coverage, investigations,
and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which
could materially and adversely affect FF’s business, prospects, results of operations, financial condition and reputation.
Increases in costs, disruption of supply or shortage of materials
used to manufacture FF’s vehicles, in particular for lithium-ion cells or electronic components, could harm its business.
FF incurs significant costs related to procuring
components and raw materials required to manufacture its vehicles. FF may experience cost increases, supply disruption and/or shortages
relating to components and raw materials, which could materially and adversely impact its business, prospects, financial condition and
operating results. FF uses various components and raw materials in its business, such as steel, aluminum, and lithium battery cells. The
prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for
these materials, including as a result of increased production of electric vehicles by FF’s competitors, as well as unforeseeable
events such as the COVID-19 pandemic.
For instance, FF is exposed to multiple risks relating
to lithium battery cells or electronic components, including but not limited to: (i) an increase in the cost, or decrease in the
available supply, of materials used in the battery cells, such as lithium, nickel, cobalt and manganese; (ii) disruption in the supply
of battery cells or electronic components due to quality issues or recalls by battery cell or electronic component manufacturers; and
(iii) the inability or unwillingness of FF’s current battery cell or electronic component manufacturers to build or operate
battery cell or electronic components manufacturing plants to supply the numbers of lithium cells or electronic components required to
support the growth of the electric vehicle industry as demand for such battery cells or electronic components increases.
FF’s business is dependent on the continued
supply of battery cells for the battery packs used in its vehicles and other electronic components. While FF believes several sources
of the battery cells are available for such battery packs, it has to date fully qualified only one supplier for the battery cells used
in such battery packs and have very limited flexibility in changing battery cell suppliers. Additionally, FF has not approved secondary
sources for the key sourced components used in FF 91. Any disruption in the supply of battery cells or electronic components from such
suppliers could disrupt production of FF’s vehicles until such time as a different supplier is fully qualified. There can be no
assurance that FF would be able to successfully retain alternative suppliers on a timely basis, on acceptable terms or at all.
Furthermore, tariffs or shortages in petroleum
and other economic conditions may result in significant increases in freight charges and material costs. In addition, a growth in popularity
of electric vehicles without a significant expansion in battery cell production capacity could result in shortages which would result
in increased materials costs to FF negatively impact its business, prospects, financial condition and results of operations. Substantial
increases in the prices for FF’s raw materials or components would increase its operating costs, and could reduce the margins if
FF cannot recoup the increased costs through increased vehicle prices. Any attempts to increase product prices in response to increased
material costs could result in a decrease in sales and therefore materially and adversely affect FF’s brand, business, prospects,
financial condition and operating results.
FF may be subject to risks associated with autonomous driving
technology.
FF 91 is designed with autonomous driving functionalities
and FF plans to continue its research and development efforts in autonomous driving technology. However, such functionality is relatively
new and poses risks, such as from defective software performance or unauthorized access or security attacks by other persons. The safety
of such technologies also depends in part on user interaction, and users may not be accustomed to using such technologies. Such failures
could lead to accidents, injury and death. For example, there have already been fatal accidents caused by autonomous driving vehicles
developed by other leading market players. Any accidents involving self-driving vehicles — even if involving those of FF’s
competitors — may result in lawsuits, liability and negative publicity and increase calls for more restrictive laws and regulations
governing self-driving vehicles or to keep in place laws and regulations in locations that do not permit drivers to employ the self-driving
functionality. Any of the foregoing could materially and adversely affect FF’s business, results of operations, financial condition,
reputation and prospects.
Autonomous driving technology is also subject to
considerable regulatory uncertainty as the law evolves to catch up with the rapidly evolving nature of the technology itself, all of which
are beyond FF’s control. Also see “FF and its manufacturing partners may be subject to increased environmental and safety
or other regulation resulting in higher costs, cash expenditures, and/or sales restrictions.”
Developments in new energy technology or improvements in the
fuel economy of internal combustion engines or significant reduction in gas prices may materially and adversely affect FF’s business,
prospects, financial condition and results of operation.
Significant developments in alternative technologies,
such as advanced diesel, ethanol, or compressed natural gas or improvements in the fuel economy of the internal combustion engine or significant
reduction in gas prices may materially and adversely affect FF’s business, prospects, financial condition and results of operation
in ways FF does not currently anticipate. Other fuels or sources of energy, such as hydrogen fuel cells, may emerge as customers’
preferred alternative to battery electric vehicles. FF is currently a pure battery electric vehicle company. Any failure by FF to develop
new or enhanced technologies or processes, or to react to changes in existing technologies or consumer preferences, could result in the
loss of competitiveness of FF’s vehicles, decreased revenue and a loss of market share to competitors.
FF’s vehicles will make use of lithium-ion battery cells,
which have been observed to catch fire or vent smoke and flame.
FF’s vehicles will make use of lithium-ion
battery cells. It has been reported that on rare occasions, lithium-ion cells can rapidly release the energy they store by venting smoke
and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While FF has designed the battery enclosure
and management system in its battery pack to be actively and continuously monitoring all battery modules over the current voltage and
temperature conditions of the battery pack to prevent such incidents, a field or testing failure of our vehicles or battery packs could
occur, which could subject FF to product liability claims, product recalls, or redesign efforts, and lead to negative publicity. Moreover,
any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity for FF and FF’s
products.
In addition, FF will need to store a significant
number of lithium-ion cells at its facilities. Any mishandling of battery cells may cause disruption to business operations and cause
damage and injuries.
FF may not be able to guarantee customers access to efficient,
economical and comprehensive charging solutions.
FF has not built any commercial charging infrastructure,
and FF’s customers will have to rely on private and publicly accessible charging infrastructure, which is generally considered to
be insufficient, especially in China. Although FF has developed its proprietary and patented battery pack system with leading battery
energy density of 187 Wh/kg (without coolant) and high charging capability of up to 200kW, FF may not have competitive advantages in terms
of proprietary charging infrastructure or holistic charging solutions. Some competitors may provide charging services via self-owned charging
infrastructure, battery swapping and charging vehicles, which FF may not be able to deliver.
The charging services FF may provide could fail
to meet the expectations and demands of FF’s customers, who may lose confidence in FF and its vehicles. This may also deter potential
customers from purchasing FF’s vehicles. In addition, even if FF has the ability and plan to build its own charging infrastructure,
it may not be cost-effective and FF may face difficulties in finding proper locations and obtaining relevant government permits and approvals.
To the extent FF is unable to meet its customers’ expectations or demand, or faces difficulties in developing efficient, economical
and comprehensive charging solutions, FF’s reputation, business, financial condition and results of operations may be materially
and adversely affected.
FF will face risks associated with international operations,
including possible unfavorable regulatory, political, currency, tax and labor conditions, which could harm its business, prospects, financial
condition and results of operations.
FF has a global footprint with domestic and international
operations and subsidiaries. Accordingly, FF is subject to a variety of legal, political and regulatory requirements and social,
environmental and economic conditions over which FF has little control. For example, FF may be impacted by trade policies, environmental
conditions, political uncertainty and economic cycles involving the United States and China, which are inherently unpredictable.
FF is subject to a number of risks particularly associated with international business activities that may increase FF’s costs,
impact its ability to sell vehicles and require significant management attention. These risks include conforming FF’s vehicles to
various international regulatory and safety requirements as well as charging and other electric infrastructures, organizing local operating
entities, difficulty in establishing, staffing and managing foreign operations, challenges in attracting customers, hedging against foreign
exchange risk, compliance with foreign labor laws and restrictions, and foreign government taxes, regulations and permit requirements,
FF’s ability to enforce its contractual rights, trade restrictions, customs regulations, tariffs and price or exchange controls,
and preferences of foreign nations for domestically manufactured products. If FF does not sufficiently address any of these challenges,
its business, prospects, financial condition and results of operations may be materially and adversely affected.
FF might not obtain and maintain sufficient insurance coverage,
which could expose FF to significant costs and business disruption.
To the extent FF commercializes its vehicles, FF
may only obtain and maintain a limited liability insurance coverage for its products and business operations. A successful liability claim
against FF due to injuries suffered by the users of its vehicles or services could materially and adversely affect FF’s business,
prospects, financial condition, results of operations and reputation. In addition, FF does not have any business disruption insurance.
Any business disruption event could result in substantial cost and diversion of resources.
Government financial support, incentives and policies for electric
vehicles are subject to change. Discontinuation of any of the government subsidies or imposition of any additional taxes or surcharges
could adversely affect FF’s business, prospects, financial condition and results of operations.
Government financial support and subsidies are
critical to electric vehicle sales and changing consumer behaviors. Any reduction, discontinuation, elimination or discriminatory application
of government financial support, subsidies and economic incentives because of policy changes, fiscal tightening, or the perceived success
of electric vehicles or other reasons may result in the diminished competitiveness of the electric vehicle industry generally or FF’s
electric vehicles in particular. Competitors who have already rolled out their electric vehicles before the phase-out or discontinuation
of these incentives may be able to expand their customer base more effectively, which could place FF at a competitive disadvantage. While
certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available
in the past, there is no guarantee that these programs will be available in the future. If current tax incentives are not available in
the future, or if additional taxes or surcharges are imposed, FF’s business, prospects, financial condition and results of operations
could be harmed.
FF may engage in direct-to-consumer leasing or financing arrangements
in the future which will expose FF to credit, compliance and residual value risks, the failure of which to manage may materially harm
FF’s business, prospects, financial condition and results of operation.
FF expects the availability of financing or leasing
programs to be important for its potential customers and may offer financing or leasing arrangements for its vehicles or collaborate with
third parties to provide such arrangements in the future. However, FF may not be able to obtain adequate funding for its future financing
or leasing programs or offer terms acceptable to potential customers. If FF is unable to provide compelling financing or leasing arrangements
for its vehicles, it may be unable to grow the vehicle orders and deliveries, which could materially and adversely harm FF’s business,
prospects, financial condition and results of operations.
Additionally, if FF does not successfully monitor
and comply with applicable national, state, and/or local consumer protection laws and regulations governing these transactions, FF may
become subject to enforcement actions or penalties, either of which may harm its business and reputation.
Moreover, offering leasing or financing arrangements
will expose FF to risks commonly associated with the extension of credit. Credit risk is the potential loss that may arise from any failure
in the ability or willingness of the customer to fulfil its contractual obligations when they fall due. In the event of a widespread economic
downturn or other catastrophic event, FF’s customers may be unable or unwilling to satisfy their payment obligations on a timely
basis or at all. Moreover, competitive pressure and challenging markets may increase credit risk through loans and leases to financially
weak customers and extended payment terms. If a significant number of FF’s customers default, FF may incur credit losses and/or
have to recognize impairment charges with respect to the underlying assets, which may be substantial. Any such credit losses and/or impairment
charges could adversely affect FF’s business, prospects, operating results or financial condition.
Further, in lease arrangements, the profitability
of any vehicles returned to FF at the end of their leases depends on FF’s ability to accurately project such vehicles’ residual
values at the outset of the leases, and such values may fluctuate prior to the end of their terms depending on various factors such as
supply and demand of FF’s used vehicles, economic cycles, and the pricing of new vehicles. FF may incur substantial losses if its
vehicles’ fair market value deteriorates faster than projected.
FF’s founder, Mr. Yueting Jia (YT Jia), is closely associated
with the image and brand of FF. Circumstances affecting YT Jia’s reputation, and investor and public perception of his role
and influence in FF, may shape FF’s brand and ability to do business. Additionally, YT Jia may continue to be subject to certain
restrictions in China if not all creditors participating in YT Jia’s restructuring plan comply with the requirement to request removal
of YT Jia from such restrictions.
FF’s founder, Mr. YT Jia, has previously
been the subject of negative press related to his debts and has significant influence over FF’s management and operations. In December 2019,
YT Jia was also determined by the Shenzhen Stock Exchange of China to be unsuitable for a position as director, supervisor or executive
officer of public listed companies in China as a result of violation by Leshi Information Technology Co., Ltd. (“LeTV”), a
public company founded and controlled by YT Jia in China, of several listing rules of Shenzhen Stock Exchange, including procedural non-compliance
for the provision of funding and guarantees by LeTV to other affiliated companies founded by YT Jia, discrepancies in LeTV’s forecast
and financials, and procedurally improper use of proceeds from LeTV’s public offering. Additionally, as the controlling shareholder
and the former chairman of LeTV, YT Jia, received a notice from China Securities Regulatory Commission (“CSRC”) in April 2021
notifying the CSRC’s decision to impose an administrative fine of RMB241.2 million and a permanent ban from entry into the securities
market on YT Jia as a result of LeTV’s misrepresentation in the registration document of its IPO and its financial statements, fraud
in connection with a private placement, and other violations of securities law and listing requirements. In January 2021, YT Jia,
as the former executive director and chairman of Coolpad Group Limited (SEHK: 2369) (“Coolpad”) received a decision from the
Listing Committee of The Stock Exchange of Hong Kong Limited (the “HKSE Listing Committee”) that YT Jia and another former
executive director of Coolpad had breached their undertakings to the HKSE Listing Committee in connection with Coolpad’s failure
to comply with the Hong Kong listing rules requirement to timely announce certain disclosable transactions (such as advancement of
money, provision of financial assistance, or certain related party transactions) and timely publish its financial results. HKSE Listing
Committee determined that YT Jia’s retention of office on the board of Coolpad would have been prejudicial to the interests of investors.
YT Jia appealed the decision on January 15, 2021.
As the Founder and the Chief Product and User Ecosystem
Officer of FF, YT Jia’s image will be closely associated with its brand. The media’s focus on negative coverage could materially
and adversely affect FF’s valuation and investors’ confidence. Such negative publicity could also solicit inquiries from securities
regulatory bodies in the relevant jurisdictions where FF does business. While YT Jia completed a Chapter 11 restructuring plan with
respect to his personal debts and claims in June 2020 and received a discharge order on March 4, 2021 with an effective discharge
date as of February 3, 2021, according to which all distributions, rights, and treatment that are provided in the plan will be in exchange
for, and in complete satisfaction, settlement, discharge, and release of, all claims against the debtor of any nature whatsoever, whether
known or unknown, or against the assets or properties of YT Jia that arose before the discharge date, there is no assurance that such
negative publicity, although not directly related to FF, would not adversely affect FF’s business, prospects, brand, financial condition
and results of operations.
Additionally, as a condition for the creditors to receive distribution
from the trust established as part of the restructuring plan, creditors are required to request Chinese Courts to remove YT Jia from the
list of dishonest judgment debtors (“China Debtor List”) and lift any consumption or travel restrictions (“China Restrictions”)
that are currently imposed on YT Jia by the Chinese courts. As of January 17, 2021, creditors of more than 80% of the total allowed claims
in the restructuring plan confirmed submitted such a request to the Chinese courts. However, there may be risks that other holders who
had not yet submitted such a request would not submit the request or that the Chinese courts do not approve such a request. If YT Jia
cannot be removed from such restrictions, he will not be able to make certain consumptions or actions deemed as “high consumption”
which will nevertheless be necessary for him to work in China, such as taking a plane. If YT Jia cannot be removed from the China Debtor
List, in addition to the restriction applies to consumption restriction, he cannot be a director, supervisor or other executive officer
of the Company in China.
FF Global, which is governed by an executive committee consisting
of eight members, may exert influence over the management of FF through its issuance of equity interests as additional compensation to
the management of FF.
As described below in this prospectus under the
caption “Partnership Program,” FF established a partnership program (the “Partnership Program”) through FF Global
Partners LLC (“FF Global”) in July 2019. FF Global controls Pacific Technology Holding LLC, which indirectly holds approximately
37.4% of FF’s outstanding voting power on a fully-diluted basis as of the date hereof. The members and managers of FF Global are
treated as “partners” or “preparatory partners” from FF’s internal governance perspective. FF Global is
managed by its executive committee (the “FF Global Executive Committee”), which currently consists of eight managers —
YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip Bethell and Dr. Carsten Breitfeld. A majority of these
managers (excluding Dr. Carsten Breitfeld, who does not yet have voting rights because he has not met the tenure eligibility requirement
and once he satisfies the tenure requirement in September 2022, subject to election by the partners of FF Global, he will become a voting
manager) is required to approve any actions of FF Global. The managers, except for Chaoying Deng, are nominated by the partners of FF
Global from the existing partners that satisfy certain qualifications and elected by all partners by plurality voting according to the
policy and procedures adopted by the committee.
FF Global may issue equity interests to members
of FF management and FF employees as additional incentives to attract and retain talent of FF. The decisions on the issuance of FF Global
equity interests to FF management and employees are made by the FF Global Executive Committee, which consists of voting members that are
not the NEOs and different from the members of the compensation committee of the FF board of directors. Certain of FF’s current
management (including most of the executive officers of FF) and other FF employees participate in the Partnership Program as members in
FF Global. By controlling the decision making regarding additional incentives to be granted to the management and employees of FF, FF
Global and its executive committee may exert influence over the management of FF outside the FF board of directors. FF Global’s
interests may conflict with the interests of FF.
FF is subject to legal proceedings and claims arising in the
ordinary course of business.
FF has been and continues to be involved in
legal proceedings and claims in the ordinary course of FF’s business. Outcome of any litigation is inherently uncertain. For
example, FF has been involved in litigation with contractors and suppliers over its past due payments. Although FF has been making efforts
to settle these disputes, including establishing a vendor trust secured by certain of FF’s assets in April 2019, there are
two active legal proceedings pending in connection therewith as of the date hereof in the U.S. FF’s PRC Subsidiaries are involved
in 86 proceedings or disputes in China. Substantially all of the claims arose out of those subsidiaries’ ordinary course of business,
involving lease contracts, third-party suppliers or vendors, or labor disputes. The amounts claimed by the parties in the disputes involving
FF’s PRC Subsidiaries range from $1,000 to $5.2 million. If one or more of those legal matters were resolved against FF in a reporting
period for amounts above management’s expectations, FF’s business prospects, financial condition and operating results could
be materially adversely affected.
Further, regardless of whether the results of the
legal proceedings are favorable to FF, they could still result in substantial costs, negative publicity and diversion of resources and
management attention, which could materially affect FF’s business, prospects, financial condition and results of operations.
Risks Related to FF’s Operations in
China
FF faces various economic, operational and
legal risks specific to China because of our corporate structure, our current operations in China and our plan to have significant operations
in China in the future, including the following:
Changes
in the political and economic policies of the PRC government may materially and adversely affect FF’s business, financial condition
and results of operations and may result in our inability to sustain our growth and expansion strategies.
As part of FF’s dual-market strategy,
substantial aspects of its business and operations may be based in China in the future, which will increase FF’s sensitivity to
the economic, operational and legal risks specific to China. For example, China’s economy differs from the economies of most developed
countries in many aspects, including, but not limited to, the degree of government involvement, level of corruption, control of capital
investment, reinvestment control of foreign exchange, control of intellectual property, allocation of resources, growth rate and development
level. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic
reform, including the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business
enterprises, which are generally viewed as a positive development for foreign business investment, a substantial portion of productive
assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating
industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth
through allocating resources, controlling payments of foreign currency-denominated obligations, setting monetary policy, and providing
preferential treatment to particular industries or companies.
While China’s economy has experienced
significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the
rate of growth has been slowing down, particularly in view of the effects of government actions to address the effects of the COVID-19
pandemic, which resulted in significant closures of businesses during a significant portion of 2020. Some of the governmental measures
may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations
may be adversely affected by government control over capital investments or changes in tax regulations. Higher inflation could adversely
affect our results of operations and financial condition. Furthermore, certain operating costs and expenses, such as employee compensation
and office operating expenses, may increase as a result of higher inflation. In addition, the PRC government has implemented in the past
certain measures to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead
to a reduction in demand for our products and services, and consequently have a material adverse effect on our businesses, financial
condition and results of operations.
It is unclear whether and how FF’s current
or future business, prospects, financial condition or results of operations may be affected by changes in China’s economic, political
and social conditions and in its laws, regulations and policies. In addition, many of the economic reforms carried out by the Chinese
government are unprecedented or experimental and are expected to be refined and improved over time. This refining and improving process
may not necessarily have a positive effect on FF’s operations and business development.
Uncertainties with respect to the Chinese legal system, regulations
and enforcement policies could have a material adverse effect on FF.
FF’s operations in China are governed by
PRC laws and regulations. As the PRC legal system continues to rapidly evolve,
the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve
uncertainties. In addition, any new PRC laws or changes in PRC laws and regulations related to, among other things, foreign investment
and manufacturing in China could have a material adverse effect on our business and our ability to operate our business in China.
From time to time, our PRC Subsidiaries may
have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the
outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore,
the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or
at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime
after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual
property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely
affect our business, impede our PRC Subsidiaries’ operations and reduce the value of your investment in FF.
Recently, the General Office of the State Council
and another PRC authority jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to
Law” (the “Opinions”), which was promulgated on July 6, 2021. The Opinions emphasized the need to strengthen the administration
over illegal securities activities, the need to strengthen the supervision over overseas listings by PRC-based companies and the need
to revise the special provisions of the State Council on overseas issuance and listing of shares by those companies. Effective measures,
such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of PRC-based companies,
and cybersecurity and data privacy protection requirements and similar matters. On July 10, 2021, the Cyberspace Administration of China
issued a revised draft of the Measures for Cybersecurity Review for public comments, which required that, among others, in addition to
“operators of critical information infrastructure,” any “data processor” controlling personal information of
more than one million users which seeks to list on a foreign stock exchange should also be subject to cybersecurity review, and further
elaborated the factors to be considered when assessing the national security risks of the relevant activities. We do not believe our
PRC Subsidiaries are among the “operators of critical information infrastructure” or “data processors” as mentioned
above; however, the revised draft of the Measures for Cybersecurity Review is in the process of being formulated and the Opinions remain
unclear on how they will be interpreted, amended and implemented by the relevant PRC governmental authorities. Thus, it is still uncertain
how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory
approvals to maintain our listing. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring
that we obtain their approvals for this offering and any follow-on offering, we may be unable to obtain such approvals which could significantly
limit or completely hinder our ability to offer or continue to offer securities to our investors.
Furthermore, the PRC government may strengthen
oversight and control over offerings conducted overseas and/or foreign investment in issuers with substantial operations in China, like
us. Such actions taken by the PRC government may intervene or influence our PRC Subsidiaries’ operations at any time, which are
beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer
or continue to offer securities to you and reduce the value of such securities.
Uncertainties regarding the enforcement of
laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese
government may intervene or influence our PRC Subsidiaries’ operations at any time, or may exert more control over offerings conducted
overseas and/or foreign investment in issuers with substantial operations in China could result in a material change in our operations,
financial performance and/or the value of our Common Stock or impair our ability to raise money.
Fluctuations in exchange rates could result in foreign currency
exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our Common Stock in foreign currency
terms.
The value of the RMB against the U.S. dollar
and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign
exchange policy adopted by the PRC government. In August 2015, the People’s Bank of China (the “PBOC”), changed
the way it calculates the mid-point price of the RMB against the U.S. dollar, requiring the market-makers who submit for reference
rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency
rates. In 2018, the value of RMB appreciated by approximately 5.5% against the U.S. dollar; and in 2019, the RMB appreciated by
approximately 1.9% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy,
including any interest rate increases by the Federal Reserve, may impact the exchange rate between the RMB and the U.S. dollar in
the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including
from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater
fluctuation of the RMB against the U.S. dollar. However, the PRC government may still at its discretion restrict access to foreign
currencies for capital account or current account transactions in the future. Therefore, it is difficult to predict how market forces
or government policies may impact the exchange rate between the RMB and the U.S. dollar or other currencies in the future. In addition,
the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals. If
the exchange rate between the RMB and U.S. dollar fluctuates in an unanticipated manner, our results of operations and financial condition,
and the value of, and dividends payable on, our shares in foreign currency terms may be adversely affected.
Changes
in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business,
results of operations and financial condition.
FF’s
operations in China are subject to the laws and regulations of China, which continue to evolve. For example, on January 9, 2021, China’s
Ministry of Commerce (“MOFCOM”) issued the Rules on Blocking Improper Extraterritorial Application of Foreign Legislation
and Other Measures (the “Blocking Rules”), which established a blocking regime in China to counter the impact of foreign
sanctions on Chinese persons. The Blocking Rules have become effective upon issuance, but have only established a framework of implementation,
and the rules’ effects will remain unclear until the Chinese government provides clarity on the specific types of extraterritorial
measures to which the rules will apply. At this time, we do not know the extent to which the Blocking Rules will impact the operations
of our PRC Subsidiaries. There is no assurance that our PRC Subsidiaries will be able to comply fully with applicable laws and regulations
should there be any amendment to the existing regulatory regime or implementation of any new laws and regulations. In addition, the interpretations
of many laws and regulations are not always uniform and enforcement of these laws and regulations involve uncertainties.
The continuance of our PRC Subsidiaries’
operations depends upon compliance with, among other things, applicable Chinese environmental, health, safety, labor, social security,
pension and other laws and regulations. Failure to comply with such laws and regulations could result in fines, penalties or lawsuits.
Furthermore, our business and operations in
China entail the procurement of licenses and permits from the relevant authorities. Rapidly evolving laws and regulations and inconsistent
interpretations and enforcements thereof could impede our PRC Subsidiaries’ ability to obtain or maintain the required permits,
licenses and certificates required to conduct our businesses in China. Difficulties or failure in obtaining the required permits, licenses
and certificates could result in our PRC Subsidiaries’ inability to continue our business in China in a manner consistent with
past practice. In such an event, our business, results of operations and financial condition may be adversely affected.
FFIE is a holding company and, in the future, may rely on
dividends and other distributions on equity paid by the PRC Subsidiaries to fund any cash and financing requirements FFIE may have, and
the restrictions on PRC Subsidiaries’ ability to pay dividends or make other payments to FFIE could restrict its ability to satisfy
its liquidity requirements and have a material adverse effect on FFIE’s ability to conduct its business.
FFIE is a holding company and conducts all
of its business through its operating subsidiaries. FFIE may need to rely on dividends and other distributions paid by its operating
subsidiaries, including the PRC Subsidiaries, to fund any cash and financing requirements FFIE may have. Any limitation on the ability
of the PRC Subsidiaries to make payments to FFIE, including but not limited to foreign currencies control, could have a material and
adverse effect on FFIE’s business, prospects, financial condition and results of operation, including FFIE’s ability to conduct
business, or limit FFIE’s ability to grow. Current PRC regulations permit the PRC Subsidiaries to pay dividends to FFIE only
out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, the PRC
Subsidiaries are required to set aside at least 10% of their accumulated profits each year, if any, to fund certain reserve funds until
the total amount set aside reaches 50% of their registered capital. The PRC Subsidiaries may also allocate a portion of their after-tax
profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable
as cash dividends. Furthermore, if the PRC Subsidiaries incur debt on their own behalf, the instruments governing the debt may restrict
their ability to pay dividends or make other payments to FFIE. Any limitation on the ability of the PRC Subsidiaries to distribute dividends
or to make payments to FFIE may restrict its ability to satisfy its liquidity requirements.
In addition, the PRC Enterprise Income Tax
Law (the “EIT Law”), and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to
dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or
arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises
are incorporated.
The PRC government may continue to strengthen
its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions
falling under both the current account and the capital account. Any limitation on the ability of the PRC Subsidiaries to pay dividends
or make other kinds of payments to FFIE could materially and adversely limit FFIE’s ability to grow, make investments or acquisitions
that could be beneficial to FFIE’s business, pay dividends, or otherwise fund and conduct FFIE’s business.
Under the EIT Law, we may be classified as a PRC “resident
enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to
us and our non-PRC enterprise stockholders and have a material adverse effect on our results of operations and the value of your investment.
Under the EIT Law, as well as its implementing
rules, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident
enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its
worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has
material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and
properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation
(the “SAT”), specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups
will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments
that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties,
accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management
or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect
in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations
of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative
details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and
SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC
individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s
general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore
enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.
We do not believe that we, as a holding company
incorporated in Delaware, meet all of the conditions above, and thus we do not believe that we are a PRC resident enterprise. However,
if the PRC tax authorities determine that we are a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable
PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which
could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. However,
the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect
to the interpretation of the term “de facto management body.”
Finally, since there remains uncertainties
regarding the interpretation and implementation of the EIT Law and its implementation rules, it is uncertain whether, if we are regarded
as a PRC resident enterprise, any dividends payable by us to our investors and gains on the sale of our Common Stock would become subject
to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises (subject to the provisions of any applicable tax treaty).
It is unclear whether our non-PRC enterprise stockholders would be able to claim the benefits of any tax treaties between their country
of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your
investment in the Common Stock.
FF
and our stockholders face uncertainty with respect to indirect transfers of equity interests in China resident enterprises through transfer
of non-Chinese-holding companies. Enhanced scrutiny by the Chinese tax authorities may have a negative impact on potential acquisitions
and dispositions we may pursue in the future.
On February 3, 2015, the SAT issued the Bulletin
on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin 7. Pursuant to this Bulletin
7, an “indirect transfer” of assets, including non-publicly traded equity interests in a PRC resident enterprise, by non-PRC
resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have
a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains
derived from such indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, “PRC taxable assets”
include assets attributed to an establishment in China, immovable properties located in China, and equity investments in PRC resident
enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject
to PRC enterprise income taxes. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement,
features to be taken into consideration include, without limitation: whether the main value of the equity interest of the relevant offshore
enterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists
of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries
directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure;
the duration of existence of the shareholders, business model and organizational structure; the income tax payable abroad on the income
from the transaction of indirect transfer of PRC taxable assets; the replicability of the transaction by direct transfer of PRC taxable
assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect
offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the
PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of
25%. Where the underlying transfer relates to the immovable properties located in China or to equity investments in a PRC resident enterprise,
which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would
apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated
to make the transfer payments has the withholding obligation. Bulletin 7 does not apply to transactions of sale of shares by investors
through a public stock exchange where such shares were acquired from a transaction through a public stock exchange. On October 17, 2017,
the SAT promulgated the Announcement of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source,
or SAT Circular 37, which became effective on December 1, 2017 and was most recently amended on June 15, 2018. SAT Circular 37, among
other things, simplified procedures of withholding and payment of income tax levied on non-resident enterprises.
We face uncertainties as to the reporting and
other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale
of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed if our company is
transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions under
Bulletin 7 and SAT Circular 37. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries
may be requested to assist in the filing under Bulletin 7 and SAT Circular 37. As a result, we may be required to expend valuable resources
to comply with Bulletin 7 and SAT Circular 37 or to request the relevant transferors from whom we purchase taxable assets to comply with
these publications, or to establish that our company should not be taxed under these publications, which may have a material adverse
effect on our financial condition and results of operations.
PRC regulation of loans to and direct investments in PRC
entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital
contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our
business.
As an offshore holding company with PRC Subsidiaries,
FF may finance the operations of our PRC Subsidiaries by means of loans or capital contributions. As permitted under PRC laws and regulations,
in utilizing the proceeds of this offering, we may make loans to our PRC Subsidiaries subject to the approval from governmental authorities
and limitation of amount, or we may make additional capital contributions to our PRC Subsidiaries. Furthermore, loans by us to our PRC
Subsidiaries to finance its activities cannot exceed the statutory limits, which is either the difference between the registered capital
and the total investment amount of such enterprise or a multiple of its net assets in the previous year. In addition, a foreign-invested
enterprise (“FIE”), shall use its capital pursuant to the principle of authenticity and self-use within its business scope.
The capital of an FIE shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope
of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities
or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the
granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the
expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).
In light of the various requirements imposed
by PRC regulations on loans to, and direct investment in, the PRC Subsidiaries by offshore holding companies, and the fact that the PRC
government may at its discretion restrict access to foreign currencies for current account and capital account transactions in the future,
we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
on a timely basis, if at all, with respect to future loans by us to our PRC Subsidiaries or with respect to future capital contributions
by us to our PRC Subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from
this offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely
affect our liquidity and our ability to fund and expand our business.
The PRC government can take regulatory actions and make statements
to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities
market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement.
The
Chinese government has taken and continues to take regulatory actions and make statements to regulate business operations in China, sometimes
with little advance notice. Our ability to operate and to expand our operations in China in the future may be harmed by changes in its
laws and regulations, including those relating to foreign investment, cybersecurity and date protection, foreign currency exchange, taxation,
environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose
new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part
to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision
not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations
in the implementation of economic policies, could have a significant effect on economic conditions in China, or particular regions thereof,
and could require us to divest ourselves of any interest we then hold in Chinese properties.
As
such, our PRC Subsidiaries could be subject to regulation by various political and regulatory entities, including various local and municipal
agencies and government sub-divisions. Our PRC Subsidiaries may incur increased costs necessary to comply with existing and newly adopted
laws and regulations or penalties for any failure to comply. Our PRC Subsidiaries’ operations could be adversely affected, directly
or indirectly, by existing or future laws and regulations relating to their business or industry. Given that the Chinese government may
intervene or influence our PRC Subsidiaries’ operations at any time, it could result in a material change in our PRC Subsidiaries’
operation and the value of our Common Stock. Given recent statements by the Chinese government indicating an intent to exert more oversight
and control over offerings that are conducted overseas, any such action could significantly limit or completely hinder our ability to
offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Furthermore,
it is uncertain when and whether FF will be required to obtain permission from the PRC government to maintain its listing on U.S. exchanges
in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not
required to obtain permission from the PRC government to obtain such permission and has not received any denial to list on the U.S. exchange,
our operations could be adversely affected, directly or indirectly, by existing or future PRC laws and regulations relating to its business
or industry.
While the approval of PRC government authorities, including
the CSRC and CAC, are not currently required for this offering, they may be required in the future under a PRC regulation adopted in
August 2006, as amended, and, if required, we cannot assure you that we will be able to obtain such approval.
The Regulations on Mergers and Acquisitions
of Domestic Companies by Foreign Investors (the “M&A Rules”), adopted by six PRC regulatory agencies, requires an overseas
special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or
individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on
an overseas stock exchange. However, the application of the M&A Rules remains unclear. If CSRC approval is required, it is uncertain
whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for this offering
would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
Based on our understanding of the current PRC
law, rules and regulations, we believe that the CSRC’s approval is not required to maintain the listing and trading of our Common
Stock on NASDAQ, given that:
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the
CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are
subject to this regulation; and
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our
PRC Subsidiaries were not established by a merger with or an acquisition of any PRC domestic companies as defined under the M&A Rules.
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However, there remains some uncertainty as
to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and our analysis summarized above
is subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A
Rules or overseas offering approval. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the
same conclusion as we do.
In addition, the Opinions emphasized the need
to strengthen the administration over illegal securities activities, the need to strengthen the supervision over overseas listings by
PRC-based companies and the need to revise the special provisions of the State Council on overseas issuance and listing of shares by
those limited by shares companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken
to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements
and similar matters. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity
Review for public comments, which required that, among others, in addition to “operator of critical information infrastructure”,
any “data processor” controlling personal information of more than one million users which seeks to list in a foreign stock
exchange should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national
security risks of the relevant activities. We do not believe our PRC Subsidiaries are among the “operator of critical information
infrastructure” or “data processor” as mentioned above; however, the revised draft of the Measures for Cybersecurity
Review is in the process of being formulated and the Opinions remain unclear on how it will be interpreted, amended and implemented by
the relevant PRC governmental authorities. Thus, it is still uncertain how PRC governmental authorities will regulate overseas listing
in general and how it would affect us. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations
requiring that approvals for this offering and any follow-on offering, we may be unable to obtain such approvals which could significantly
limit or completely hinder our ability to offer or continue to offer securities to our investors. See “Uncertainties with respect
to the Chinese legal system, regulations and enforcement policies could have a material adverse effect on FF” for a detailed
discussion of a discussion regarding how the changes in the law and regulation and enforcement policies in China may affect us and our
operations.
The M&A Rules and certain other PRC regulations establish
complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue
growth through acquisitions in China.
The M&A Rules discussed in the preceding
risk factor and related regulations and rules concerning mergers and acquisitions established additional procedures and requirements
that could make merger and acquisition activities by foreign investors more time-consuming and complex. For example, the M&A Rules
require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic
enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact
on the national economic security, (iii) such transaction will lead to a change in control of a domestic enterprise which holds
a famous trademark or PRC time-honored brand, or (iv) or in circumstances where overseas companies established or controlled by PRC enterprises
or residents acquire affiliated domestic companies. Mergers, acquisitions or contractual arrangements that allow one market player to
take control of or to exert decisive impact on another market player must also be notified in advance to the MOFCOM when the threshold
under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the Prior Notification Rules, issued
by the State Council in August 2008 and further amended in September 2018 is triggered.
In addition, in 2011, the General Office of
the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign
investors. Also, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign
Investors, or the Rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign
investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors
may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review
by the MOFCOM, and the Rules prohibit any activities attempting to bypass a security review, including by structuring the transaction
through a proxy, re-investment through multiple levels, leases, loans or control through contractual control arrangement or offshore
transactions. Furthermore, NDRC and MOFCOM promulgated the Measures for the Security Review of Foreign Investments, effective from January
18, 2021, which require foreign investors or relevant parties to file a prior report before making a foreign investment if such investment
involves military related industry, national defense security or taking control of an enterprise in a key industry that concerns national
security; and if a foreign investment will or may affect national security, the standing working office organized by NDRC and MOFCOM
will conduct a security review to decide whether to approve such investment.
In the future, we may grow our business in
China by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules
to complete such transactions, if required, could be time-consuming, and any required approval processes, including obtaining approval
or clearance from the MOFCOM or its local counterparts and other relevant PRC authorities, may delay or inhibit our ability to complete
such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security”
or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations in the future
determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including
those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability
to expand our business or maintain or expand our market share in China through future acquisitions would as such be materially and adversely
affected.
FF may be adversely affected by the complexity, uncertainties
and changes in PRC regulations on internet-related business, automotive businesses and other business carried out by FF’s PRC Subsidiaries.
The Chinese government extensively regulates
the internet and automotive industries and other business carried out by the PRC Subsidiaries, such laws and regulations are relatively
new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it
may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
Several PRC regulatory authorities, such as
the State Administration for Market Regulation, the National Development and Reform Commission, MOFCOM, the Ministry of Industry
and Information Technology, or the MIIT, oversee different aspects of the electric vehicle business, and FF’s PRC Subsidiaries
will be required to obtain a wide range of government approvals, licenses, permits and registrations in connection with their operations
in China. For example, according to the Administrative Rules on the Admission of New Energy Vehicle Manufacturers and Products, according
to the Administrative Measures for the Entry of Manufacturers of New Energy Passenger Vehicles and the Products promulgated by the MIIT
on January 6, 2017, the MIIT is responsible for the national-wide administration of new energy vehicles and their manufacturers. The
manufacturers shall apply to the MIIT for the entry approval to become a qualified manufacturer in China and shall further apply to the
MIIT for the entry approval for the new energy passenger vehicles before commencing the manufacturing and sale of the new energy passenger
vehicles in China. Both of the new energy passenger vehicles and their manufacturers will be listed in the Announcement of the Vehicle
Manufacturers and Products issued by the MIIT from time to time, if they have obtained the entry approval from the MIIT. According to
the Management Measures for Automobile Sales promulgated by the MOFCOM in July 2017, corporate basic information filings must be made
by automobile dealers through the information system for the national automobile circulation operated by the MOFCOM within 90 days
after the receipt of a business license. Furthermore, the electric vehicle industry is relatively immature in China, and the government
has not adopted a clear regulatory framework to regulate the industry.
There are substantial uncertainties regarding the
interpretation and application of the existing PRC laws, regulations and policies and possible new laws, regulations or policies relating
to internet-related businesses as well as automotive businesses and companies. There is no assurance that FF will be able to obtain all
the permits or licenses related to its business in China, or will be able to maintain its existing licenses or obtain new ones. In the
event that the PRC government considers that FF was or is operating without the proper approvals, licenses or permits, promulgates new
laws and regulations that require additional approvals or licenses, or imposes additional restrictions on the operation of any part of
FF’s business, the PRC government has the power, among other things, to levy fines, confiscate FF’s income, revoke its business
licenses, and require FF to discontinue the relevant business or impose restrictions on the affected portion of its business. Any of these
actions by the PRC government may have a material adverse effect on FF’s business, prospects, financial condition and results of
operations.
We may be liable for improper use or appropriation of personal
information provided by others.
In the regular course of our business, we obtain
information about various aspects of our operations as well as regarding our employees and third parties. The integrity and protection
of FF, employee and third-party data are critical to our business. Our employees and third parties expect that we will adequately protect
their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect,
and to take adequate security measures to safeguard such information.
PRC regulators, including the Cyberspace Administration
of China, the Ministry of Industry and Information Technology, and the Ministry of Public Security, have been increasingly focused on
regulation in data security and data protection. PRC regulatory requirements regarding cybersecurity are evolving. For instance, various
regulatory bodies in China have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations.
The PRC Criminal Law, as most recently amended
in 2020, prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal
information obtained in performing duties or providing services or obtaining such information through theft or other illegal ways. On
November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cyber Security Law of the PRC (the “Cyber
Security Law”), which became effective on June 1, 2017.
Pursuant to the Cyber Security Law, network
operators must not, without users’ consent, collect and disclose their personal information, and may only collect users’
personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products
and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws
and regulations.
The Civil Code of the PRC provides legal basis
for privacy and personal information infringement claims under the Chinese civil laws.
In April 2020, the Chinese government promulgated
Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical
information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national
security.
On June 10, 2021, the Standing Committee of
the National People’s Congress of China (the “SCNPC”), promulgated the PRC Data Security Law, which took effect on
September 1, 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data
activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social
development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals
or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides
for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain
data and information.
On August 20, 2021, the SCNPC promulgated the
PRC Personal Information Protection Law, which will take effect on November 1, 2021. This legislation marks China’s first comprehensive
legal attempt to define personal information and regulate the storing, transferring, and processing of personal information. It restricts
the cross-border transfer of personal information and has major implications for companies that rely on data for their operations in
China.
In July 2021, the Cyberspace Administration
of China and other related authorities released the draft amendment to the Cybersecurity Review Measures for public comments. The draft
amendment proposes the following key changes:
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companies who are engaged in data processing are also subject
to the regulatory scope;
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the CSRC is included as one of the regulatory authorities
for purposes of jointly establishing the state cybersecurity review working mechanism;
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the operators (including both operators of critical information
infrastructure and relevant parties who are engaged in data processing) holding personal information of more than one million users and
seeking a listing outside China shall file for cybersecurity review with the Cybersecurity Review Office; and
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the risks of core data, material data or large amounts
of personal information being stolen, leaked, destroyed, damaged, illegally used or transmitted to overseas parties and the risks of
critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or
used maliciously shall be collectively taken into consideration during the cybersecurity review process.
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If the draft amendment is adopted into law
in the future, our PRC Subsidiaries may become subject to enhanced cybersecurity review. Certain internet platforms in China have been
reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of the date of this prospectus, we have
not been informed by any PRC governmental authority of any requirement that our PRC Subsidiaries file for a cybersecurity review. However,
if they are deemed to be a critical information infrastructure operator or a company that is engaged in data processing and holds personal
information of more than one million users, they could be subject to PRC cybersecurity review.
As there remains significant uncertainty in
the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, our PRC Subsidiaries could be subject to cybersecurity
review, and if so, they may not be able to pass such review. In addition, our PRC Subsidiaries could become subject to enhanced cybersecurity
review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review
procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension
of business, website closure, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions
to our PRC Subsidiaries, which may have material adverse effects on our business, financial condition or results of operations. As of
the date of this prospectus, our PRC Subsidiaries have not been involved in any investigations on cybersecurity review initiated by the
Cyber Administration of China or related governmental regulatory authorities, and they have not received any inquiry, notice, warning,
or sanction in such respect. We believe that our PRC Subsidiaries are in compliance with the aforementioned regulations and policies
that have been issued by the Cyber Administration of China. However, as uncertainties remain regarding the interpretation and implementation
of these laws and regulations, we cannot assure you that our PRC Subsidiaries will comply with such regulations in all respects and they
may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities.
Any independent registered public accounting firm operating in
China that FF uses as an auditor for its operations in China will not be permitted to be subject to inspection by the Public Company Accounting
Oversight Board (“PCAOB”), and as such, investors may be deprived of the benefits of such inspection.
Our principal auditor, the independent registered
public accounting firm that issued the audit report included elsewhere in this prospectus, as an auditor of companies that are traded
publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB
conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. The auditors of FF’s
PRC Subsidiaries are not registered with, and are not subject to inspection by, the PCAOB. Any independent registered public accounting
firm that FF uses as an auditor for its operations in China will not be permitted to be subject to inspection by PCAOB.
Inspections of other PCAOB-registered firms by
the PCAOB outside of China have identified deficiencies in their audit procedures and quality control procedures, which may improve future
audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audits and quality control procedures
of any auditors operating in China. As a result, investors may be deprived of the benefits of PCAOB inspections to the extent that certain
portions of financial statements are prepared by auditors in China. The inability of the PCAOB to conduct inspections of auditors in
China makes it more difficult to evaluate the effectiveness of the China-based audit procedures or quality control procedures as compared
to auditors outside of China that are subject to PCAOB inspections. Existing or potential investors could lose confidence in our reported
financial information and the quality of our financial statements because the financial statements with respect to FF’s PRC Subsidiaries
were subject to audit by auditors not inspected by the PCAOB.
The lack of PCAOB inspections with respect
to FF’s operations in China may subject existing and potential investors to additional risks in light of the changing regulatory
framework. As part of a continued regulatory focus in the United States on limited access to business books and records and audit work
papers caused by the protection of state secrets and national security laws in China, the Holding Foreign Companies Accountable Act (“HFCA”)
was enacted in December 2020. The major purpose of the HFCA is to avail U.S. regulators of access to review audits for companies in the
same manner in which they review those of firms in any other nation. The HFCA provides that, among other requirements, to the extent
that the PCAOB has been unable to inspect a reporting issuer’s auditor for three consecutive years, the SEC shall prohibit its
stock from being traded on any national securities exchange or any over-the-counter markets in the United States. Such legislation efforts
could cause investor uncertainty for both affected foreign issuers and transnational companies with operations in China including FF.
Further, new laws and regulations or changes in laws and regulations in both the U.S. and PRC could affect our ability to maintain our
listing on NASDAQ, which could materially impair the market for and market price of our Common Stock.
U.S. regulatory bodies may be limited in their ability to
conduct investigations or inspections of our operations in China.
The
SEC, the U.S. Department of Justice and other U.S. authorities may also have difficulties in bringing and enforcing actions against our
PRC Subsidiaries or the directors or executive officers of our PRC Subsidiaries. The SEC has stated that there are significant legal
and other obstacles to obtaining information needed for investigations or litigation in China. China has recently adopted a revised securities
law that became effective on March 1, 2020, Article 177 of which provides, among other things, that no overseas securities regulator
is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without
governmental approval in China, no entity or individual in China may provide documents and information relating to securities business
activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas regulators, which
could present significant legal and other obstacles to obtaining information needed for investigations and litigation conducted outside
of China.
There
may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments
or bringing original actions in China based on United States or other foreign laws against us and our management.
We
currently have operations, and plan to have significant operations and assets in the future, in China. As a result, it may not be possible
to effect service of process within the United States or elsewhere outside of China with regard to persons or assets relating to our
operations in China, including actions arising under applicable U.S. federal and state securities laws. In addition, there are significant
legal and other obstacles in China to providing information needed for regulatory investigations or litigation initiated by regulators
outside China. Overseas regulators may have difficulties in conducting investigations or collecting evidence within China. It may also
be difficult for investors to bring a lawsuit against us or our directors or executive officers based on U.S. federal securities laws
in a Chinese court. Moreover, China does not have treaties with the United States providing for the reciprocal recognition and enforcement
of judgments of courts. Therefore, even if a judgment were obtained against us or our management for matters arising under U.S. federal
or state securities laws or other applicable U.S. federal or state law, it may be difficult to enforce such a judgment with respect to
our operations or assets in China.
Risks Related to Our Common Stock
We do not currently intend to pay dividends on our Class A
Common Stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A
Common Stock.
Faraday Future Intelligent Electric Inc. has no
direct operations and no significant assets other than the ownership of the stock of its subsidiaries. As a result, Faraday Future Intelligent
Electric Inc. will depend on its subsidiaries for distributions, loans and other payments to generate the funds necessary to meet our
financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our Class A Common
Stock. Applicable state law and contractual restrictions, including in agreements governing the current or future indebtedness of FF,
as well as the financial condition and operating requirements of FF, may limit our ability to obtain cash from FF. Thus, we do not expect
to pay cash dividends on our Class A Common Stock. Any future dividend payments are within the absolute discretion of our board of directors
and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial
condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash
needs, provisions of applicable law and other factors that our board of directors may deem relevant.
There can be no assurance that FF will be able to comply with
the continued listing standards of NASDAQ.
If NASDAQ delists FF’s shares from trading
on its exchange for failure to meet the applicable listing standards, we and our stockholders could face significant material adverse
consequences including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our Common Stock is a “penny stock”
which will require brokers trading in our Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading
activity in the secondary trading market for shares of our Common Stock;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain
additional financing in the future.
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FF may be required to take write-downs or write-offs, or FF may
be subject to restructuring, impairment or other charges that could have a significant negative effect on FF’s business, prospects,
financial condition, results of operations and the trading price of FF’s securities, which could cause you to lose some or all of
your investment.
Factors outside of FF’s control may, at any
time, arise. As a result of these factors, FF may be forced to later write-down or write-off assets, restructure its operations, or incur
impairment or other charges that could result in FF reporting losses. Even though these charges may be non-cash items and therefore not
have an immediate impact on FF’s liquidity, the fact that FF reports charges of this nature could contribute to negative market
perceptions about FF or its securities. In addition, charges of this nature may cause FF to be unable to obtain future financing on favorable
terms or at all.
If the Business Combination’s benefits do not meet the
expectations of investors or securities analysts, the market price of FF’s securities may decline.
If the perceived benefits of the Business Combination
do not meet the expectations of investors or securities analysts, the market price of FF’s securities (including the Class A Common
Stock) may decline.
In addition, fluctuations in the trading price
of FF’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there was
not a public market for Legacy FF’s ordinary shares. Accordingly, the valuation ascribed to Legacy FF may not be indicative of the
price that will prevail in the trading market following the Business Combination. If an active market for FF’s securities develops
and continues, the trading price of FF’s securities could be volatile and subject to wide fluctuations in response to various factors,
some of which are beyond FF’s control.
Any of the factors listed below could have a material
adverse effect on your investment in FF’s securities, and FF’s securities may trade at prices significantly below the price
paid by you. In such circumstances, the trading price of FF’s securities may not recover and may experience a further decline.
Factors affecting the trading price of FF’s securities may include:
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actual or anticipated fluctuations in FF’s financial
results or the financial results of companies perceived to be similar to it;
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changes in the market’s expectations about FF’s
operating results;
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success of competitors;
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FF’s operating results failing to meet the expectation
of securities analysts or investors in a particular period;
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FF’s ability to attract and retain senior management
or key operating personnel, and the addition or departure of key personnel;
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changes in financial estimates and recommendations by securities
analysts concerning FF or the transportation industry in general;
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operating and share price performance of other companies
that investors deem comparable to FF;
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FF’s ability to market new and enhanced products and
technologies on a timely basis;
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changes in laws and regulations affecting FF’s business;
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FF’s ability to meet compliance requirements;
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commencement of, or involvement in, threatened or actual
litigation and government investigations;
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changes in FF’s capital structure, such as future issuances
of securities or the incurrence of additional debt;
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the volume of FF’s Common Stock available for public
sale;
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any change in FF’s board of directors or management;
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actions taken by FF’s directors, executive officers
or significant stockholders such as sales of FF’s Common Stock, or the perception that such actions could occur; and
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general economic and political conditions such as recessions,
interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
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Broad market and industry factors may materially
harm the market price of FF’s securities irrespective of FF’s operating performance. The stock markets in general have experienced
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies
affected. The trading prices and valuations of these stocks, and of FF’s securities, may not be predictable. A loss of investor
confidence in the market for electric vehicle manufacturers’ stocks or the stocks of other companies which investors perceive to
be similar to FF could depress FF’s share price regardless of FF’s business, prospects, financial conditions or results of
operations. A decline in the market price of FF’s securities also could adversely affect FF’s ability to issue additional
securities and FF’s ability to obtain additional financing in the future.
FF’s ability to use net operating loss carryforwards and
other tax attributes may be limited in connection with the Business Combination or other ownership changes.
Legacy FF has net operating loss carryforwards
for U.S. federal and state, as well as non-U.S., income tax purposes that are potentially available to offset future taxable income, subject
to certain limitations (including the limitations described below). If not utilized, U.S. federal net operating loss carryforward amounts
generated prior to January 1, 2018 will begin to expire 20 years after the tax year in which such losses originated. Non-U.S. and
state net operating loss carryforward amounts may also be subject to expiration. Realization of these net operating loss carryforwards
depends on the future taxable income of FF, and there is a risk that the existing carryforwards of FF could expire unused and be unavailable
to offset future income tax liabilities, which could materially and adversely affect FF’s operating results.
Under Section 382 of the Code, if a corporation undergoes an “ownership
change” (generally defined as a greater than 50% change (by value) in the ownership of its equity by certain stockholders over a
three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and certain other pre-change
tax attributes to offset its post-change income may be limited. The applicable rules generally operate by focusing on changes in ownership
among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company, as well as changes
in ownership arising from new issuances of stock by the Company. Legacy FF may have experienced ownership changes in the past and FF may
have experienced an ownership change as a result of the Business Combination. FF may also experience ownership changes in the future as
a result of changes in the ownership of its stock, which may be outside our control. Accordingly, FF’s ability to utilize its net
operating loss carryforwards could be limited by such ownership changes, which could result in increased tax liability to FF, potentially
decreasing the value of its stock.
There are additional limitations found under Sections 269,
383, and 384 of the Code that may also limit the use of net operating loss carryforwards that may apply and result in increased tax liability
to FF, potentially decreasing the value of FF’s stock. In addition, a “Separate Return Limitation Year”, or SRLY, generally
encompasses all separate return years of a U.S. federal consolidated group member (or predecessor in a Section 381 or other transaction),
including tax years in which it joins a consolidated return of another group. According to Treasury Regulation Section 1.1502-21,
net operating losses of a member that arise in a SRLY may be applied against consolidated taxable income only to the extent of the loss
member’s cumulative contribution to the consolidated taxable income. As a result, this SRLY limitation may also increase FF’s
tax liability (by reducing the carryforward of certain net operating losses that otherwise might be used to offset the amount of taxable
gain), potentially decreasing the value of FF’s stock.
As a result of the Business Combination, FF’s tax obligations
and related filings may have become significantly more complex and subject to greater risk of audit or examination by taxing authorities,
and outcomes resulting from such audits or examinations could adversely impact our business, prospects, financial condition and results
of operations, including our after-tax profitability and financial results.
FF’s operations are subject to significant
income, withholding and other tax obligations in the United States and may become subject to taxes in numerous additional state,
local and non-U.S. jurisdictions with respect to our income, operations and subsidiaries related to those jurisdictions. In addition,
FF now has international supplier and customer relationships and may expand operations to multiple jurisdictions, including jurisdictions
in which the tax laws, their interpretation or their administration may not be favorable. Additionally, future changes in tax law or regulations
in any jurisdiction in which FF operates or will operate could result in changes to the taxation of FF’s income and operations,
which could cause our after-tax profitability to be lower than anticipated. FF’s after-tax profitability could be subject to volatility
or affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds (including refunds
of value added taxes) and other benefits to reduce FF’s tax liabilities, (b) changes in the valuation of FF’s deferred
tax assets and liabilities, (c) expected timing and amount of the release of any tax valuation allowances, (d) tax treatment
of stock-based compensation, (e) changes in the relative amount of our earnings subject to tax in the various jurisdictions in which
FF operates or has subsidiaries, (f) the potential expansion of FF’s business into or otherwise becoming subject to tax in
additional jurisdictions, (g) changes to FF’s existing intercompany structure (and any costs related thereto) and business
operations, (h) the extent of FF’s intercompany transactions and the extent to which taxing authorities in the relevant jurisdictions
respect those intercompany transactions and (i) FF’s ability to structure its operations in an efficient and competitive manner.
Due to the complexity of multinational tax obligations and filings, FF may have a heightened risk related to audits or examinations by
U.S. federal, state, local and non-U.S. taxing authorities. Outcomes from these audits or examinations could have an adverse effect on
our business, prospects, financial condition and results of operations, including our after-tax profitability and financial condition.
FF’s after-tax profitability may also be
adversely impacted by changes in the relevant tax laws and tax rates, treaties, regulations, administrative practices and principles,
judicial decisions and interpretations thereof, in each case, possibly with retroactive effect. Additionally, the Multilateral Convention
to Implement Tax Treaty Related Measures to Prevent BEPS recently entered into force among the jurisdictions that have ratified it, although
the United States has not yet entered into this convention. These recent changes could negatively impact FF’s taxation,
especially if FF expands its relationships and operations internationally.
FF’s failure to timely and effectively implement controls
and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on its business.
The standards required for a public company under
Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of Legacy FF as a privately-held company.
Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory
compliance and reporting requirements that are now applicable after the consummation of the Business Combination. If FF is not able to
implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, it may not be able to assess
whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could
harm investor confidence and the market price of its securities.
The unaudited pro forma condensed financial information included
herein may not be indicative of what FF’s actual financial position or results of operations would have been.
The unaudited pro forma condensed financial information
included herein is presented for illustrative purposes only and is not necessarily indicative of what FF’s actual financial position
or results of operations would have been had the Business Combination been completed on the dates indicated.
We may issue additional shares of Common Stock or preferred shares,
which would dilute the interest of our stockholders.
We may, in the future, issue a substantial number
of additional shares of Common Stock or preferred stock. The issuance of additional shares of Common Stock or preferred stock:
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may significantly dilute the equity interest of investors;
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may subordinate the rights of holders of Common Stock if
preferred stock is issued with rights senior to those afforded our Common Stock;
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could cause a change of control if a substantial number of
shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards,
if any, and could result in the resignation or removal of our present officers and directors; and
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may adversely affect prevailing market prices for our Common
Stock.
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Our Amended and Restated Charter provides, subject to limited
exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation
matters, which could limit our stockholders’ ability to obtain a chosen judicial forum for disputes with us or our directors, officers,
employees or stockholders.
Our Amended and Restated Charter requires to the
fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach
of fiduciary duty and other similar actions may be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject
matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring
any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our certificate
of incorporation. In addition, our Amended and Restated Charter and Amended and Restated Bylaws provide that the federal district courts
of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities
Act and the Exchange Act.
In March 2020, the Delaware Supreme Court
issued a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under
the Securities Act to be brought in federal court is facially valid under Delaware law. It is unclear whether this decision will be appealed,
or what the final outcome of this case will be. We intend to enforce this provision, but we do not know whether courts in other jurisdictions
will agree with this decision or enforce it.
This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, other employees or
stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision
contained in our Amended and Restated Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition.
Charter documents and Delaware law could prevent a takeover that
stockholders consider favorable and could also reduce the market price of our stock.
Our Amended and Restated Charter and Amended and
Restated Bylaws contain provisions that could delay or prevent a change in control of FF. These provisions could also make it more difficult
for stockholders to elect directors and take other corporate actions. These provisions include:
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authorizing our board of directors to issue preferred stock
with voting or other rights or preferences that could discourage a takeover attempt or delay changes in control;
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prohibiting cumulative voting in the election of directors;
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limiting the adoption, amendment or repeal of our Amended
and Restates Bylaws or the repeal of the provisions of our certificate of incorporation regarding the election and removal of directors
without the required approval of at least two-thirds of the shares entitled to vote at an election of directors;
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prohibiting stockholder action by written consent; and
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limiting the persons who may call special meetings of stockholders.
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These provisions may frustrate or prevent any attempts
by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our
board of directors, which is responsible for appointing the members of our management. In addition, the provisions of Section 203
of the “DGCL” govern FF. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding
voting stock, from merging or combining with FF for a certain period of time without the consent of its board of directors. These and
other provisions in our Amended and Restated Charter and Amended and Restated Bylaws and under Delaware law could discourage potential
takeover attempts, reduce the price investors might be willing to pay in the future for shares of Class A Common Stock and result
in the market price of Class A Common Stock being lower than it would be without these provisions. For more information, see the
section of this registration statement captioned “Description of Securities — Certain Anti-Takeover Provisions
of Delaware Law.”
Claims for indemnification by our directors and officers may
reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our Amended and Restated Charter and Amended and
Restated Bylaws provides that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of
the DGCL, our Amended and Restated Bylaws and our indemnification agreements that we entered into with our directors and officers provide
that:
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We will indemnify our directors and officers for serving
FF in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware
law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe such person’s conduct was unlawful;
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We may, in our discretion, indemnify employees and agents
in those circumstances where indemnification is permitted by applicable law;
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We will be required to advance expenses, as incurred, to
our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay
such advances if it is ultimately determined that such person is not entitled to indemnification;
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The rights conferred in our Amended and Restated Bylaws are not exclusive,
and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance
to indemnify such persons; and
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We may not retroactively amend our amended and restated bylaw
provisions to reduce our indemnification obligations to directors, officers, employees and agents.
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Concentration of ownership may have the effect of delaying or
preventing a change in control.
Legacy FF’s stakeholders collectively
own 217,954,597 shares or 67.2% of our outstanding Common Stock as of September 20, 2021. In addition, FF Top Holding LLC (f/k/a FF Top
Holding Ltd.) (“FF Top”), which holds 19.7% of our outstanding Common Stock as of the same date, has entered into voting
agreements with certain FF stockholders pursuant to which FF Top will vote as a proxy of all of the Class A Common Stock owned by
such FF stockholders subject to certain limitations. As a result, FF Top exercises voting power over 37.4% of our outstanding Common
Stock as of September 20, 2021. Under the Shareholder Agreement, FF Top is also entitled to nominate a number of directors based on its
voting power with respect to FF’s outstanding Common Stock, entitling FF Top to nominate four out of nine directors to the
board of FF. As a result, FF’s equity holders, particularly FF Top, may have the ability to determine the outcome of corporate
actions of FF requiring stockholder approval. This concentration of ownership may have the effect of delaying or preventing a change
in control and might adversely affect the market price of our Class A Common Stock.
Upon FF achieving an equity market capitalization of $20 billion,
the Class B Common Stock held by FF Top will convert from one vote per share to ten votes per share, which will entitle it to have
substantial influence over FF’s corporate matters.
FF has adopted a dual-class share structure
such that its common shares consist of Class A Common Stock and Class B Common Stock, and FF Top, an entity controlled by FF’s
existing management and employees, beneficially own, directly or indirectly all of the Class B Common Stock, representing 67.2%
of FF’s outstanding common shares and the voting power of such shares. In respect of matters requiring the votes of stockholders,
each share of Class A Common Stock will be entitled to one vote and each share of Class B Common Stock will initially be entitled
to one vote until FF’s volume weighted average total equity market capitalization achieves $20 billion for a period of 20 consecutive
trading days, after which each share of Class B Common Stock will be entitled to ten votes. If FF Top obtains such enhanced voting
rights, it would have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or
substantially all of the assets of FF, election of directors and other significant corporate actions. FF Top could take actions that
are not in the best interest of FF or its other stockholders. This mechanism may discourage, delay or prevent a change in control, which
could have the effect of depriving other stockholders of FF of the opportunity to receive a premium for their shares as part of a sale
of our Company.
Upon the conversion of Class B Common Stock held by FF Top from
one vote per share to ten votes per share, NASDAQ may consider FF to be a “controlled company” within the meaning of the NASDAQ
listing standards and, as a result, FF may qualify for exemptions from certain corporate governance requirements.
So long as more than 50% of the voting power for
the election of directors of FF is held by an individual, a group or another company, FF will qualify as a “controlled company”
under NASDAQ listing requirements. While FF does not currently qualify as a controlled company, after such time as FF at the end of any
20 consecutive trading days, has a volume weighted average total equity market capitalization of at least $20 billion, holders of
shares of the Class B Common Stock will be entitled to ten votes for each such share, which will cause Legacy FF stakeholders to own 88.2%
of the voting control of FF and FF may qualify as a controlled company. As a controlled company, FF would be exempt from certain NASDAQ
corporate governance requirements, including those that would otherwise require the board of FF to have a majority of independent directors
and require that FF establish a compensation committee comprised entirely of independent directors, or otherwise ensure that the compensation
of FF’s executive officers and nominees for directors are determined or recommended to the board of directors by the independent
members of the board of directors. While FF does not currently intend to rely on any of these exemptions, the board of FF following the
market capitalization event may elect to rely on such exemptions if FF is considered a “controlled company,” and to the extent
it relies on one or more of these exemptions, holders of FF’s capital stock will not have the same protections afforded to stockholders
of companies that are subject to all of NASDAQ s corporate governance requirements.
Our dual-class structure may depress the trading price of our
Class A Common Stock.
We cannot predict whether our dual-class structure
will result in a lower or more volatile market price of our Class A Common Stock or in adverse publicity or other adverse consequences.
For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain
of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public
companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are
excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple-class structures. As
a result, the dual-class structure of our Common Stock may cause stockholder advisory firms to publish negative commentary about our corporate
governance practices or otherwise seek to cause FF to change our capital structure. Any such exclusion from indices or any actions or
publications by stockholder advisory firms critical of our corporate governance practices or capital structure could adversely affect
the value and trading market of our Class A Common Stock.
If securities or industry analysts do not publish research or
reports about our business or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our Class A Common
Stock will depend on the research and reports that securities or industry analysts publish about us or our business. Currently, we do
not have any analyst coverage and may not obtain analyst coverage in the future. In the event we obtain analyst coverage, we will not
have any control over such analysts. If one or more of the analysts who cover FF downgrade our shares or change their opinion of our shares,
our share price would likely decline. If one or more of these analysts cease coverage of FF or fail to regularly publish reports on FF,
we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
FF’s ability to pay dividends in the future will be subject
to its subsidiaries’ ability to distribute cash to it.
We do not anticipate that FF’s board of directors
will declare dividends in the foreseeable future. If FF decides to declare dividends in the future, as a holding company, it will require
dividends and other payments from its subsidiaries to meet such cash requirements. In addition, minimum capital requirements may indirectly
restrict the amount of dividends paid upstream, and repatriations of cash from FF’s subsidiaries may be subject to withholding,
income and other taxes in various applicable jurisdictions. If FF’s subsidiaries are unable to distribute cash to it and it is unable
to pay dividends, the Class A Common Stock may become less attractive to investors and the price of its shares of Common Stock may become
volatile.
FF will incur significant increased expenses and administrative
burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.
Following the consummation of the Business Combination,
FF now faces increased legal, accounting, administrative and other costs and expenses as a public company that Legacy FF did not incur
as a private company. The Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act, including the requirements of Section 404, to the
extent applicable to FF, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges,
impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs
and make certain activities more time consuming. A number of those requirements will require that we carry out activities Legacy FF has
not done previously. For example, FF will create new board committees and adopt new internal controls and disclosure controls and procedures.
In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those
requirements are identified (for example, if FF identifies additional material weaknesses or significant deficiency in the internal control over
financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect
our reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks
associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board
of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase
legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will
require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives.
Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which
could further increase costs.
Furthermore, the need to establish the corporate
infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could
prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes
to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a publicly
traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.
For as long as we remain an “emerging growth
company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not “emerging growth companies.” We may remain an “emerging growth company”
until the earliest of (i) the last day of our fiscal year following July 24, 2025 (the fifth anniversary of the consummation of PSAC’s
initial public offering), (ii) the last day of the fiscal year in which the market value of our shares of Common Stock that are held
by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (iii) the last day of the fiscal year in which we have
total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation) or (iv) the date on which
we have issued more than $1.0 billion in non-convertible debt in the prior three-year period. Further, there is no guarantee that the
exemptions available to us under the JOBS Act will result in significant savings. To the extent we choose not to use exemptions from various
reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact earnings.
The JOBS Act permits “emerging growth
companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies
that are not emerging growth companies. The reduced reporting requirements applicable to use may make our shares of Common Stock less
attractive to investors.
FF qualifies as an “emerging growth company”
as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, FF is eligible for and intends to take
advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth
companies for as long as it continues to be an emerging growth company, including, but not limited to, (a) not being required to
comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act, (b) reduced disclosure obligations
regarding executive compensation in FF’s periodic reports and proxy statements and (c) exemptions from the requirements of
holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved. As a result, FF’s stockholders may not have access to certain information they may deem important. FF will remain an emerging
growth company until the earliest of (i) the last day of our fiscal year following July 24, 2025 (the fifth anniversary of the consummation of PSAC’s
initial public offering), (ii) the last day of the fiscal year in which the market value of our shares of Common Stock that are held by
non-affiliates exceeds $700 million as of June 30 of that fiscal year, (iii) the last day of the fiscal year in which we have total annual
gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation) or (iv) the date on which we have issued more
than $1.0 billion in non-convertible debt in the prior three-year period. We cannot predict whether investors will find FF’s securities less attractive because it will rely on these exemptions.
If some investors find FF’s securities less attractive as a result of its reliance on these exemptions, the trading prices of FF’s
securities may be lower than they otherwise would be, there may be a less active trading market for FF’s securities and the trading
prices of FF’s securities may be more volatile.
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 an election to opt out is irrevocable. We have 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, we, 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 FF’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. We cannot predict if investors will find our shares of Common Stock less attractive because we will rely on these exemptions. If
some investors find our shares of Common Stock less attractive as a result, there may be a less active market for our shares of Common
Stock and our share price may be more volatile.
If we do not develop and implement all required accounting practices
and policies, we may be unable to provide the financial information required of a U.S. publicly traded company in a timely and reliable
manner.
If we fail to develop and maintain effective internal
controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports
that a U.S. publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies could penalize
us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and hurt our reputation
and could thereby impede our ability to implement our growth strategy. In addition, any such delays or deficiencies could result in our
failure to meet the requirements for listing of our shares of Common Stock on a national securities exchange.
USE OF PROCEEDS
All of the Class A Common Stock and Warrants offered
by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts.
The Company will not receive any of the proceeds from these sales.
The Company will receive up to an aggregate of
approximately $284 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. The Company
expects to use the net proceeds from the exercise of the Warrants for general corporate purposes, which may include temporary or permanent
repayment of our outstanding indebtedness. The Company will have broad discretion over the use of proceeds from the exercise of the Warrants.
There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants.
The Selling Securityholders will pay any underwriting
fees, discounts and selling commissions incurred by such Selling Securityholders in disposing of their Class A Common Stock. Pursuant
to a registration rights agreement entered into by the Company and certain stockholders of the Company, the Company will bear all other
costs, fees and expenses incurred in effecting the registration of the Class A Common Stock covered by this prospectus, including, without
limitation, all registration and filing fees, NASDAQ listing fees and fees and expenses of counsel and independent registered public accountants.
DETERMINATION OF OFFERING PRICE
The offering price of the shares of the Class A
Common Stock underlying the Warrants offered hereby is determined by reference to the exercise price of the Public Warrants and Private
Warrants of $11.50 per share and the exercise price of the ATW NPA Warrants of $10.00 per share. The Public Warrants are listed on the
NASDAQ under the symbol “FFIEW.”
We cannot currently determine the price or prices
at which shares of our Class A Common Stock may be sold by the Selling Securityholders under this prospectus.
MARKET INFORMATION FOR CLASS A COMMON STOCK
AND DIVIDEND POLICY
Market Information
Our shares of Class A Common Stock and Public
Warrants are currently listed on the NASDAQ under the symbols “FFIE” and “FFIEW,” respectively. Prior to the
consummation of the Business Combination, our common stock and warrants were listed on the NASDAQ under the symbols “PSACU,”
“PSAC,” and “PSACW,” respectively. As of September 20, 2021, there were 233 holders of record of our Class A
Common Stock, two holders of record of our Public Warrants, one holder of Private Warrants and four holders of ATW NPA Warrants.
Dividend Policy
We have not paid any cash dividends on our Class
A Common Stock or the Warrants to date. Our board of directors may from time to time consider whether or not to institute a dividend policy.
It is our present intention to retain any earnings for use in our business operations and accordingly, we do not anticipate our board
of directors declaring any dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon our
revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within
the discretion of our board of directors. Further, our ability to declare dividends will also be limited by restrictive covenants contained
in our debt agreements.
Securities Authorized for Issuance Under Equity Incentive Plan
At
the special meeting of PSAC’s stockholders held on July 20, 2021, the stockholders of the Company considered and approved the Faraday
Future Intelligent Electric Inc. 2021 Stock Incentive Plan (the “Incentive Plan”). The Incentive Plan was previously
approved, subject to stockholder approval, by the PSAC board of directors. The Incentive Plan became effective immediately upon the consummation
of the Business Combination on July 21, 2021. Pursuant to the Incentive Plan, 49,573,570 shares of Class A Common Stock have been reserved
for issuance under the Incentive Plan.
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Unless the context indicates otherwise, for
purposes of this section only, “FF” refers to FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited
liability incorporated under the laws of the Cayman Islands, together with its consolidated subsidiaries, prior to the Business Combination.
The Company is providing the
following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business
Combination and related transactions. The following unaudited pro forma condensed combined financial information presents the combination
of the financial information of PSAC and FF adjusted to give effect to the Business Combination and related transactions. The following
unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X
as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
The historical financial information
of PSAC was derived from the unaudited condensed financial statements of PSAC as of June 30, 2021 and for the six months ended June 30,
2021 and the period from February 11, 2020 (Inception) through June 30, 2020, and from the audited financial statements of PSAC as of
December 31, 2020 and for the period from February 11, 2020 (inception) through December 31, 2020, included elsewhere in this prospectus.
The historical financial information of FF was derived from the unaudited condensed consolidated financial statements of FF as of June
30, 2021 and for the six months ended June 30, 2021 and 2020, and from the audited consolidated financial statements of FF as of December
31, 2020 and for the years ended December 31, 2020 and 2019, included elsewhere in this prospectus. This information should be read together
with PSAC’s and FF’s unaudited condensed financial statements and audited financial statements and related notes, and other
financial information included elsewhere in this prospectus.
The Business Combination has
been accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under
this method of accounting, PSAC has been treated as the “accounting acquiree” and FF as the “accounting acquirer”
for financial reporting purposes. FF was determined to be the accounting acquirer primarily because FF stakeholders collectively own a
majority of the outstanding shares of the combined company as of the closing of the merger (67.2% after redemptions of public stockholders
of PSAC, see the pro forma common shares table below), FF management have nominated seven of the nine board of directors as of
the closing of the merger, and FF’s management continue to manage the combined company. Additionally, FF’s business comprised
the ongoing operations of the combined company immediately following the consummation of the Business Combination. Accordingly, for accounting
purposes, the Business Combination has been treated as the equivalent of FF issuing shares for the net assets of PSAC, followed by a recapitalization.
Accordingly, the consolidated assets, liabilities, and results of operations of FF has become the historical financial statements of the
Company, and PSAC’s assets, liabilities and results of operations has been consolidated with FF beginning on the acquisition date.
The unaudited pro forma condensed
combined balance sheet as of June 30, 2021 assumes that the Business Combination and related transactions occurred on June 30, 2021. The
unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and for the year ended December
31, 2020 gives pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2020. FF and
PSAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to
eliminate activities between the companies.
These unaudited pro forma
condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have
been obtained had the Business Combination and related transactions actually been completed on the assumed date or for the periods presented,
or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions
and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from
the assumptions within the accompanying unaudited pro forma condensed combined financial information. FF will incur additional costs after
the Business Combination in order to satisfy its obligations as an SEC-reporting public company.
The Business Combination and Related Transactions
The aggregate merger consideration for the Business Combination was
$2,286.0 million, payable in the form of shares of Class A Common Stock valued at $10.00 per share, as well as contingent consideration
of up to 25,000,000 additional shares of Class A Common Stock in the aggregate in two equal tranches upon the occurrence of each
Earnout Triggering Event (as defined in the Merger Agreement) (the “Earnout Shares”):
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The minimum earnout of 12,500,000
additional shares is triggered if the surviving company common stock VWAP is greater than $13.50 for any period of twenty (20) trading
days out of thirty (30) consecutive trading days (the “Minimum Target Shares”) during the five-year period following
the Closing; and
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The maximum earnout of an additional 12,500,000 additional shares is triggered if the surviving company common stock VWAP is greater than $15.50 for any period of twenty (20) trading days out of thirty (30) consecutive trading days during the five-year period following the Closing, (the “Maximum Target Shares”) plus the Minimum Target Shares, if not previously issued.
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The Earnout Shares have been
recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity. Because the Business
Combination is accounted for as a reverse recapitalization, the issuance of the Earnout Shares has been treated as a deemed dividend and
since FF does not have retained earnings, the issuance is recorded within additional-paid-in-capital (“APIC”) and has a net
nil impact on APIC. FF determined the fair value of the Earnout Shares to be $293.9 million based on a valuation using a Monte Carlo simulation
with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility. The unaudited pro forma condensed
combined financial statements do not reflect pro forma adjustments related to the recognition of the Earnout Shares because there is no
net impact on stockholders’ equity on a pro forma combined basis.
Upon the terms and subject to the conditions set forth in the Merger
Agreement, at the Closing, PSAC, Merger Sub and Legacy FF caused Merger Sub to be merged with and into Legacy FF (the “Merger”),
with Legacy FF continuing as the surviving company under the Companies Act (which is sometimes hereinafter referred to for the periods
at and after the Effective Time as the “Surviving Company”) following the Merger, being a wholly-owned subsidiary of Acquiror
and the separate corporate existence of Merger Sub has ceased. The Merger has been consummated in accordance with the Merger Agreement
and the Companies Act. The pro forma adjustments giving effect to the Business Combination and related transactions are summarized below,
and are discussed further in the footnotes to these unaudited pro forma condensed combined financial statements:
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the merger of Merger Sub, a wholly-owned subsidiary of PSAC, with and into Legacy FF, with Legacy FF continuing as the surviving company;
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the consummation of the Business Combination and reclassification of cash held in PSAC’s trust account to cash and cash equivalents, net of redemptions (see below);
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the consummation of the Private Placement;
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the repayment of FF liabilities and the conversion of certain FF liabilities to equity;
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the conversion of the Redeemable Preference Shares and Class B Preferred Shares (“FF Preferred Stock”) to permanent equity;
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the accounting for transaction costs incurred by both PSAC and FF; and
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the issuance of equity awards to FF employees.
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The unaudited pro forma condensed
combined financial information also reflects the redemption into cash of PSAC’s common stock by public stockholders of PSAC who
elected to exercise their redemption rights for a total of 20,600 shares and an aggregate payment of $0.2 million.
The Legacy FF stakeholders
hold 217,954,597 of the Class A and Class B public shares immediately after the Business Combination, which approximates a 67.2% ownership
level. The following summarizes the pro forma common shares outstanding (excluding the potential dilutive effect of warrants and the Earnout
Shares as further described in Note 4):
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Class A
Shares
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Class B
Shares
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%
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Stockholders
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Former FF stakeholders
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153,954,009
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64,000,588
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67.2
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%
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Private Shares(1)
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6,618,943
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—
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2.0
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%
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Riverside Management Group (RMG) Fee(2)
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690,000
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—
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0.2
|
%
|
PSAC public stockholders
|
|
|
22,956,968
|
|
|
|
—
|
|
|
|
7.1
|
%
|
Private Placement
|
|
|
76,140,000
|
|
|
|
—
|
|
|
|
23.5
|
%
|
Total shares of FF common stock outstanding at closing of the Transaction
|
|
|
260,359,920
|
|
|
|
64,000,588
|
|
|
|
100.0
|
%
|
|
(1)
|
PSAC
equity known as the Founder Shares and the private units, which include Representative Shares and Private Placement Units issued by PSAC.
|
|
(2)
|
Equity
issued to RMG in exchange for services as financial partner and advisor to PSAC; but excludes the shares being issued to RMG of which
an equal amount of shares of the Sponsor are being forfeited.
|
The following unaudited pro
forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for
the six months ended June 30, 2021 and for the year ended December 31, 2020 are based on the historical financial statements of PSAC and
FF. The unaudited pro forma adjustments are based on information currently available, assumptions, and estimates underlying the unaudited
pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present
the accompanying unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
(in thousands, except share data)
|
|
As
of
June 30,
2021
|
|
|
|
|
|
|
|
|
As
of
June 30,
2021
|
|
|
|
FF
(Historical)
|
|
|
Property
Solutions
Acquisition
Corp.
(Historical)
|
|
|
Transaction
Accounting
Adjustments
|
|
|
|
|
|
Pro
Forma
Combined
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
52,527
|
|
|
$
|
18
|
|
|
$
|
229,789
|
|
|
|
3A
|
|
|
$
|
806,899
|
|
|
|
|
|
|
|
|
|
|
|
|
761,400
|
|
|
|
3D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115,881
|
)
|
|
|
3E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(65,981
|
)
|
|
|
3I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,610
|
)
|
|
|
3I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,900
|
)
|
|
|
3J
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,257
|
)
|
|
|
3F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(206
|
)
|
|
|
3B
|
|
|
|
|
|
Restricted
cash
|
|
|
5,721
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
5,721
|
|
Deposits
|
|
|
6,574
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
6,574
|
|
Prepaid
expenses and other current assets
|
|
|
5,084
|
|
|
|
108
|
|
|
|
8,380
|
|
|
|
3F
|
|
|
|
13,572
|
|
Total
current assets
|
|
|
69,906
|
|
|
|
126
|
|
|
|
762,734
|
|
|
|
|
|
|
|
832,766
|
|
Property
and equipment, net
|
|
|
287,718
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
287,718
|
|
Cash
and marketable securities held in Trust Account
|
|
|
—
|
|
|
|
229,789
|
|
|
|
(229,789
|
)
|
|
|
3A
|
|
|
|
—
|
|
Other
non-current assets
|
|
|
11,749
|
|
|
|
—
|
|
|
|
(2,689
|
)
|
|
|
3I
|
|
|
|
9,060
|
|
Total
assets
|
|
$
|
369,373
|
|
|
$
|
229,915
|
|
|
$
|
530,256
|
|
|
|
|
|
|
$
|
1,129,544
|
|
Liabilities
and stockholders’ (deficit) equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
67,486
|
|
|
$
|
—
|
|
|
$
|
(17,466
|
)
|
|
|
3E
|
|
|
$
|
47,694
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,326
|
)
|
|
|
3F
|
|
|
|
|
|
Accrued
expenses and other current liabilities
|
|
|
59,721
|
|
|
|
1,981
|
|
|
|
(9,592
|
)
|
|
|
3E
|
|
|
|
50,210
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,900
|
)
|
|
|
3J
|
|
|
|
|
|
Related
party accrued interest
|
|
|
47,274
|
|
|
|
—
|
|
|
|
(3,618
|
)
|
|
|
3E
|
|
|
|
9,314
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,342
|
)
|
|
|
3F
|
|
|
|
|
|
Accrued
interest
|
|
|
50,776
|
|
|
|
—
|
|
|
|
(35,080
|
)
|
|
|
3F
|
|
|
|
2,010
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,358
|
)
|
|
|
3F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(328
|
)
|
|
|
3E
|
|
|
|
|
|
Related
party notes payable
|
|
|
207,755
|
|
|
|
500
|
|
|
|
(28,112
|
)
|
|
|
3E
|
|
|
|
9,788
|
|
|
|
|
|
|
|
|
|
|
|
|
(170,355
|
)
|
|
|
3F
|
|
|
|
|
|
Notes
payable, current portion
|
|
|
297,454
|
|
|
|
—
|
|
|
|
(56,765
|
)
|
|
|
3E
|
|
|
|
81,771
|
|
|
|
|
|
|
|
|
|
|
|
|
(158,918
|
)
|
|
|
3F
|
|
|
|
|
|
Vendor
payables in trust
|
|
|
109,574
|
|
|
|
—
|
|
|
|
(81,317
|
)
|
|
|
3F
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,257
|
)
|
|
|
3F
|
|
|
|
|
|
Total
current liabilities
|
|
|
840,040
|
|
|
|
2,481
|
|
|
|
(641,734
|
)
|
|
|
|
|
|
|
200,787
|
|
Capital
leases, less current portion
|
|
|
38,040
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
38,040
|
|
Other
liability, less current portion
|
|
|
7,880
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
7,880
|
|
Notes
payable, less current portion
|
|
|
36,172
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
36,172
|
|
Convertible
note - related party
|
|
|
|
|
|
|
480
|
|
|
|
(480
|
)
|
|
|
3F
|
|
|
|
—
|
|
Warrant
Liability
|
|
|
|
|
|
|
6,606
|
|
|
|
|
|
|
|
|
|
|
|
6,606
|
|
Total
liabilities
|
|
$
|
922,132
|
|
|
$
|
9,567
|
|
|
$
|
(642,214
|
)
|
|
|
|
|
|
$
|
289,485
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
convertible preferred stock, $0.00001 par value; 470,588,235 shares authorized, issued and outstanding as of June 30, 2021; redemption
amount of $800,000 as of June 30, 2021
|
|
|
724,823
|
|
|
|
—
|
|
|
|
(724,823
|
)
|
|
|
3G
|
|
|
|
—
|
|
Class A-1
convertible preferred stock, $0.00001 par value; 87,617,555 shares authorized and 57,513,413 shares issued and outstanding as
of June 30, 2021
|
|
|
96,048
|
|
|
|
—
|
|
|
|
(96,048
|
)
|
|
|
3G
|
|
|
|
—
|
|
Class A-2
convertible preferred stock, $0.00001 par value; 158,479,868 shares authorized and 19,546,600 shares issued and outstanding
as of June 30, 2021
|
|
|
38,311
|
|
|
|
—
|
|
|
|
(38,311
|
)
|
|
|
3G
|
|
|
|
—
|
|
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET — (Continued)
(in thousands, except share data)
|
|
As of
June 30,
2021
|
|
|
|
|
|
|
|
As of
June 30,
2021
|
|
|
|
FF
(Historical)
|
|
|
Property
Solutions
Acquisition
Corp.
(Historical)
|
|
|
Transaction
Accounting
Adjustments
|
|
|
|
|
Pro Forma
Combined
|
|
Class B convertible preferred stock, $0.00001 par value; 600,000,000 shares authorized, 452,941,177 issued and outstanding as of June 30, 2021; redemption amount of $1,106,988 as of June 30, 2021
|
|
|
697,643
|
|
|
|
—
|
|
|
|
(697,643
|
)
|
|
3G
|
|
|
—
|
|
Common stock subject to possible redemption, 22,977,568 shares at redemption value
|
|
|
—
|
|
|
|
229,776
|
|
|
|
(229,776
|
)
|
|
3C
|
|
|
—
|
|
Stockholders’ (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
Class A Common stock, $0.0001 par value; 750,000,000 shares authorized
|
|
|
|
|
|
|
1
|
|
|
|
2
|
|
|
3C
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
3F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
3H
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
3G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common stock, $0.0001 par value; 10,000,000 shares authorized
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
3F
|
|
|
1
|
|
Class A ordinary stock, $0.00001 par value; 400,000,000 shares authorized; 65,022,387 shares issued and outstanding as of June 30, 2021
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
—
|
|
Class B ordinary stock, $0.00001 par value; 180,000,000 shares authorized; 150,052,834 shares issued and outstanding as of June 30, 2021
|
|
|
1
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
3H
|
|
|
—
|
|
Additional paid-in capital
|
|
|
416,504
|
|
|
|
5,817
|
|
|
|
724,822
|
|
|
3G
|
|
|
3,499,603
|
|
|
|
|
|
|
|
|
|
|
|
|
697,642
|
|
|
3G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,048
|
|
|
3G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,311
|
|
|
3G
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229,774
|
|
|
3C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,246
|
)
|
|
3H
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761,400
|
|
|
3D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,670
|
)
|
|
3I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
504,554
|
|
|
3F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,900
|
|
|
3K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,046
|
|
|
3L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,907
|
|
|
3M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(206
|
)
|
|
3B
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(6,650
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
(6,650
|
)
|
Accumulated deficit
|
|
|
(2,519,439
|
)
|
|
|
(15,246
|
)
|
|
|
15,246
|
|
|
3H
|
|
|
(2,652,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(24,610
|
)
|
|
3I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,046
|
)
|
|
3L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,900
|
)
|
|
3K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,907
|
)
|
|
3M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(2,109,584
|
)
|
|
|
(9,428
|
)
|
|
|
2,959,071
|
|
|
|
|
|
840,059
|
|
Total liabilities, preferred stock, and stockholders’ (deficit) equity
|
|
|
369,373
|
|
|
|
229,915
|
|
|
|
530,256
|
|
|
|
|
|
1,129,544
|
|
See accompanying notes to unaudited pro forma condensed
combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
(in thousands, except share and per share data)
|
|
Six
Months
Ended
June 30,
2021
|
|
|
Six
Months
Ended
June 30,
2021
|
|
|
|
|
|
|
|
Six
Months
Ended
June 30,
2021
|
|
|
|
FF
(Historical)
|
|
|
Property
Solutions
Acquisition
Corp.
(Historical)
|
|
|
Transaction
Accounting
Adjustments
|
|
|
|
|
Pro Forma
Combined
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
—
|
|
|
$
|
1,327
|
|
|
$
|
—
|
|
|
|
|
$
|
1,327
|
|
Research and development
|
|
|
15,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,394
|
|
Sales and marketing
|
|
|
4,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,267
|
|
General and administrative
|
|
|
27,423
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
27,423
|
|
Loss on disposal of property and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
47,084
|
|
|
|
1,327
|
|
|
|
—
|
|
|
|
|
|
48,411
|
|
Loss from operations
|
|
|
(47,084
|
)
|
|
|
(1,327
|
)
|
|
|
|
|
|
|
|
|
(48,411
|
)
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
|
(35,912
|
)
|
|
|
—
|
|
|
|
35,912
|
|
|
3GG
|
|
|
—
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
(1,735
|
)
|
|
|
—
|
|
|
|
1,735
|
|
|
3GG
|
|
|
—
|
|
Change in fair value of convertible note
|
|
|
—
|
|
|
|
(280
|
)
|
|
|
—
|
|
|
|
|
|
(280
|
)
|
Change in fair value of warrants
|
|
|
—
|
|
|
|
(5,975
|
)
|
|
|
—
|
|
|
|
|
|
(5,975
|
)
|
Transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Other expense, net
|
|
|
(1,835
|
)
|
|
|
—
|
|
|
|
1,590
|
|
|
3JJ
|
|
|
(245
|
)
|
Interest earned on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
38
|
|
|
|
(38
|
)
|
|
3AA
|
|
|
—
|
|
Related party interest expense
|
|
|
(12,798
|
)
|
|
|
—
|
|
|
|
11,599
|
|
|
3BB
|
|
|
(1,199
|
)
|
Interest expense
|
|
|
(28,933
|
)
|
|
|
—
|
|
|
|
17,172
|
|
|
3BB
|
|
|
(11,761
|
)
|
Loss before income taxes
|
|
|
(128,297
|
)
|
|
|
(7,544
|
)
|
|
|
67,970
|
|
|
|
|
|
(67,871
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
3DD
|
|
|
(3
|
)
|
Net loss
|
|
$
|
(128,300
|
)
|
|
$
|
(7,544
|
)
|
|
$
|
67,970
|
|
|
|
|
$
|
(67,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, Common stock subject to possible redemption
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
|
|
|
|
22,195,523
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock – basic and diluted
|
|
|
|
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding – basic and diluted
|
|
|
|
|
|
|
7,320,988
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Class A and Class B – basic and diluted
|
|
$
|
(0.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.21
|
)
|
Weighted average shares outstanding – Class A and Class B – basic and diluted
|
|
|
213,329,158
|
|
|
|
|
|
|
|
111,031,350
|
|
|
4
|
|
|
324,360,508
|
|
See accompanying notes to unaudited pro forma condensed
combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS — (Continued)
(in thousands, except share and per share data)
|
|
Year Ended
December 31,
2020
|
|
|
Period From
February 11,
2020
(Inception)
Through
December 31,
2020
|
|
|
|
|
|
|
|
Year Ended
December 31, 2020
|
|
|
|
FF
(Historical)
|
|
|
Property
Solutions
Acquisition
Corp.
(Historical Restated)
|
|
|
Transaction
Accounting
Adjustments
|
|
|
|
|
Pro Forma
Combined
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
—
|
|
|
$
|
2,218
|
|
|
$
|
—
|
|
|
|
|
$
|
2,218
|
|
Research and development
|
|
|
20,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,186
|
|
Sales and marketing
|
|
|
3,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,672
|
|
General and administrative
|
|
|
41,071
|
|
|
|
—
|
|
|
|
24,610
|
|
|
3CC
|
|
|
86,627
|
|
|
|
|
|
|
|
|
|
|
|
|
6,900
|
|
|
3EE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,046
|
|
|
3FF
|
|
|
|
|
Loss on disposal of property and equipment
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Total operating expenses
|
|
|
64,939
|
|
|
|
2,218
|
|
|
|
45,556
|
|
|
|
|
|
112,713
|
|
Loss from operations
|
|
|
(64,939
|
)
|
|
|
(2,218
|
)
|
|
|
(45,556
|
)
|
|
|
|
|
(112,713
|
)
|
Change in fair value measurement of related party notes payable and notes payable
|
|
|
(8,948
|
)
|
|
|
—
|
|
|
|
8,948
|
|
|
3GG
|
|
|
—
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
3,872
|
|
|
|
|
|
|
|
(3,872
|
)
|
|
3HH
|
|
|
—
|
|
Gain (loss) on extinguishment of related party notes payable, notes payable and vendor payables in trust, net
|
|
|
2,107
|
|
|
|
|
|
|
|
(90,014
|
)
|
|
3II
|
|
|
(87,907
|
)
|
Change in fair value of warrants
|
|
|
|
|
|
|
(476
|
)
|
|
|
|
|
|
|
|
|
(476
|
)
|
Other expense, net
|
|
|
(5,455
|
)
|
|
|
—
|
|
|
|
4,055
|
|
|
3JJ
|
|
|
(1,400
|
)
|
Interest earned on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
100
|
|
|
|
(100
|
)
|
|
3AA
|
|
|
—
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
3AA
|
|
|
—
|
|
Related party interest expense
|
|
|
(38,995
|
)
|
|
|
—
|
|
|
|
38,625
|
|
|
3BB
|
|
|
(370
|
)
|
Interest expense
|
|
|
(34,724
|
)
|
|
|
—
|
|
|
|
28,044
|
|
|
3BB
|
|
|
(6,680
|
)
|
Loss before income taxes
|
|
|
(147,082
|
)
|
|
|
(2,585
|
)
|
|
|
(59,879
|
)
|
|
|
|
|
(209,546
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
3DD
|
|
|
(3
|
)
|
Net loss
|
|
$
|
(147,085
|
)
|
|
$
|
(2,585
|
)
|
|
$
|
(59,879
|
)
|
|
|
|
$
|
(209,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, Common stock subject to possible redemption
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
|
|
|
|
21,779,604
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock – basic and diluted
|
|
|
|
|
|
$
|
(0.40
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding – basic and diluted
|
|
|
|
|
|
|
6,452,794
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – Class A and Class B – basic and diluted
|
|
$
|
(2.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.65
|
)
|
Weighted average shares outstanding – Class A and Class B – basic and diluted
|
|
|
49,261,411
|
|
|
|
|
|
|
|
275,099,097
|
|
|
4
|
|
|
324,360,508
|
|
See accompanying notes to unaudited pro forma condensed
combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
NOTE 1 — BASIS OF PRESENTATION
The Business Combination has
been accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under
this method of accounting, PSAC has been treated as the “accounting acquiree” and FF as the “accounting acquirer”
for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination has been treated as the equivalent of
FF issuing shares for the net assets of PSAC, followed by a recapitalization. The net assets of PSAC have been stated at historical cost,
with no goodwill or other intangible assets recorded. Operations prior to the Business Combination have been those of FF.
The unaudited pro forma condensed
combined balance sheet as of June 30, 2021 assumes that the Business Combination and related transactions occurred on June 30, 2021. The
unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and for the year ended December
31, 2020 gives pro forma effect to the Business Combination as if it had been completed on January 1, 2020. These periods are presented
on the basis that FF is the acquirer for accounting purposes.
The pro forma adjustments
reflecting the consummation of the Business Combination and related transactions are based on certain currently available information
and certain assumptions and methodologies that PSAC believes are reasonable under the circumstances. The unaudited condensed pro forma
adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.
Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be
material. PSAC believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects
of the Business Combination and related transactions based on information available to management at the time and that the pro forma adjustments
give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed
combined financial information assumes that PSAC’s Private Warrants have been classified as liabilities and PSAC’s Public
Warrants have been classified as a component of equity upon completion of the Business Combination.
The Vendor Trust contains
interests held by vendors related to approximately $8.4 million of purchase orders for goods and services not yet provided. Management
is currently evaluating with its suppliers and contractors whether these interests will be settled with PSAC equity. Due the uncertainly
resulting from the ongoing negotiations, no adjustment has been made in the pro forma financial statements.
The unaudited pro forma condensed
combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings
that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily
indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions
taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of
the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of PSAC and
FF.
NOTE 2 — ACCOUNTING POLICIES
Management has performed a comprehensive review of the two entities’
accounting policies. Based on its analysis, the Company’s management did not identify any differences that would have a material
impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial
information does not assume any differences in accounting policies.
NOTE 3 — ADJUSTMENTS TO UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed
combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has
been prepared for informational purposes only.
The following unaudited pro
forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final
rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786
replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction
Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are
reasonably expected to occur (“Management’s Adjustments”). PSAC elected not to present Management’s Adjustments
and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. FF
and PSAC did not have any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required
to eliminate activities between the companies.
The pro forma combined provision
for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated
income tax returns during the periods presented. The Company has not reflected the income tax benefit in the pro forma statement of operations,
as the Company does not believe that the income tax benefit is realizable and records a full valuation allowance against all deferred
tax assets.
The unaudited pro forma condensed
combined financial statements do not reflect pro forma adjustments related to the recognition of the Earnout Shares because there is no
net impact on stockholders’ equity on a pro forma combined basis.
The pro forma basic and diluted
earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of
FF’s shares outstanding, assuming the Business Combination and related transactions occurred on January 1, 2020.
Adjustments to Unaudited Pro Forma Condensed
Combined Balance Sheet
The adjustments included in
the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as follows:
|
(A)
|
Reflects
the reclassification of $229.8 million held in PSAC’s trust account to cash and cash equivalents.
|
|
(B)
|
Reflects
the reduction in cash and PSAC’s additional-paid-in-capital in the amount of $0.2 million related to the redemption of 20,600 PSAC
public stockholders.
|
|
(C)
|
Reflects
the reclassification of PSAC’s common stock subject to possible redemption into permanent equity.
|
|
(D)
|
Reflects
cash proceeds from the concurrent Private Placement in the amount of $761.4 million and corresponding offset to additional-paid-in-capital.
|
|
(E)
|
Reflects
the repayment of $115.9 million of FF liabilities at the time of closing are comprised of the following:
|
|
●
|
related
party notes payable of $28.1 million and related accrued interest of $3.6 million;
|
|
●
|
notes
payable of $56.8 million and related accrued interest of $0.3 million;
|
|
●
|
accrued
employee back payments of $9.6 million; and
|
|
●
|
vendor
payments of $17.5 million which reduce accounts payable.
|
|
(F)
|
Reflects
the conversion of $495.7 million of FF liabilities into fully vested shares of PSAC common stock and the settlement of $28.3 million
of vendor payables in trust with cash. The liabilities of FF as of June 30, 2021 which will convert to equity at the time of closing
are comprised of the following:
|
|
●
|
related
party notes payable of $170.4 million and the related accrued interest of $34.3 million;
|
|
●
|
notes
payable of $158.9 million and the related accrued interest of $35.1 million;
|
|
●
|
vendor
payables in trust of $94.7 million, which represents the vendor payables in trust of $109.6 million, net of $28.3 million of vendor payables
in trust that will be settled in cash, including the related accrued interest of $13.4 million; and
|
|
●
|
critical
vendors of $2.3 million.
|
Additionally, reflects an
adjustment to other current assets and additional paid in capital of $8.4 million related to purchase orders in the vendor trust that
will be prepaid at the time of closing with fully vested shares of PSAC common stock.
Also, reflects the conversion
of a PSAC related party note payable of $0.5 million into fully vested shares of PSAC common stock.
Using an estimated exchange
ratio of 0.14130, the $496.2 million of FF and PSAC liabilities will convert into approximately 31.2 million PSAC shares upon the consummation
of the Qualified SPAC Merger.
|
(G)
|
Reflects
the conversion of the FF Preferred Stock into permanent equity in accordance with the Business Combination Agreement.
|
|
(H)
|
Reflects
the elimination of PSAC’s retained earnings and FF’s par value of common shares upon consummation of the Business Combination.
|
|
(I)
|
Reflects
an adjustment of $90.6 million to reduce cash and $2.7 million to reduced deferred offering costs for transaction costs expected to be
incurred by PSAC and FF in relation to the Business Combination and Private Placement, including advisory, banking, printing, legal and
accounting services. As part of the Business Combination, $24.6 million was expensed and recorded in accumulated deficit, and the remaining
$68.7 million was determined to be equity issuance costs and offset to additional-paid-in-capital.
|
|
(J)
|
Reflects
the settlement of $1.9 million of accrued offering cost incurred during the PSAC IPO due upon completion of the business combination.
|
|
(K)
|
Reflects
the issuance of PSAC equity shares to Riverside for management fees.
|
|
(L)
|
Reflects
the issuance of $14.0 million of fully vested equity awards issued to employees upon consummation of the Business Combination as compensation
for prior service.
|
|
(M)
|
Reflects
a loss on extinguishment of related party notes payable, notes payable and vendor payables in trust, net as a result of certain notes
payable and vendor payables settled with PSAC common stock as part of the Business Combination. The settlement of these payables including
accrued and unpaid interest was treated as an extinguishment that resulted in a loss because the fair value of the PSAC common stock
issued to extinguish the debt exceeded the carrying value of the payables. The loss was calculated using the fair value of the PSAC common
stock at the July 21, 2021 closing stock price of $13.78. The loss on extinguishment is reflected as an increase to accumulated deficit
and APIC.
|
Adjustments to Unaudited Pro Forma Condensed
Combined Statement of Operations
The pro forma adjustments
included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended
December 31, 2020 are as follows:
|
(AA)
|
Elimination
of interest income and unrealized gain on the Trust Account.
|
|
(BB)
|
Elimination
of interest expense which is comprised of ‘third party’ interest expense relating to notes payable and the vendor trust,
‘debt issuance costs’ recorded in interest expense, and related party interest expense on FF liabilities converted to PSAC
shares or paid down with cash at the closing of the Business Combination.
|
The remaining interest expense
in the Unaudited Pro Forma Condensed Combined Financial Information relates to notes payable that will remain outstanding, capital lease
interest, and interest related to accounts payable invoices.
For the Six Months Ended June 30, 2021
|
|
|
|
Third Party Interest Expense
|
|
$
|
15,583
|
|
Related Party Interest Expense
|
|
|
11,599
|
|
Debt Issuance Costs Recorded in Interest Expense
|
|
|
1,589
|
|
For the Year Ended December 31, 2021
|
|
|
|
|
Third Party Interest Expense
|
|
$
|
23,482
|
|
Related Party Interest Expense
|
|
|
38,625
|
|
Debt Issuance Costs Recorded in Interest Expense
|
|
|
4,562
|
|
|
(CC)
|
Reflects
the estimated transaction costs of $24.6 million as if incurred on January 1, 2020, the date the Business Combination occurred for the
purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.
|
|
(DD)
|
The
net effect of all adjustments impacting the pro forma statement of operations results in a reduction of the income tax benefit of approximately
$15.0 million for the year ended December 31, 2020 and $17.0 million for the six months ended June 30, 2021 based on the application
of the blended statutory tax rate of 25%. However, the Company has not reflected the income tax benefit in the pro forma statement of
operations, as the Company does not believe that the income tax benefit is realizable and records a full valuation allowance against
all deferred tax assets.
|
|
(EE)
|
Reflects
the expense of $6.9 million related to the issuance of new equity awards related to Riverside management fees. 690,000 Class A shares
of PSAC were issued to Riverside in exchange for services as financial partner and advisor to PSAC at $10.00 per share. This is a non-recurring
item.
|
|
(FF)
|
Reflects
the expense of $14.0 million related to the issuance of new equity awards granted to employees upon consummation of the Business Combination.
The new equity awards are fully vested and are intended to compensate employees for temporary reductions in salary that occurred prior
to the Business Combination. The $14.0 million amount will convert at $10.00 per share into Class A shares of PSAC resulting in the issuance
of 1.4 million shares. This is a non-recurring item.
|
|
(GG)
|
Elimination
of change in fair value measurement of related party notes payable and notes payable.
|
|
(HH)
|
Elimination
of change in fair value measurement of The9 Conditional Obligation.
|
|
(II)
|
Reflects
the following adjustments to gain (loss) on extinguishment of related party notes payable, notes payable and vendor payables in trust,
net:
|
|
●
|
Elimination
of historical gain on extinguishment of $2.1 million of related party notes payable, notes payable and vendor payables in trust, net;
|
|
●
|
Reflects
a loss on extinguishment of related party notes payable, notes payable and vendor payables in trust, net in the amount of $87.9 million
as a result of certain notes payable and vendor payables, including accrued and unpaid interest being extinguished with PSAC common stock
as part of the Business Combination (See 3M).
|
|
(JJ)
|
Elimination of change in foreign currency loss related to related party notes payable, notes payable, and vendor payables in trust from other expense.
|
NOTE 4 — EARNINGS PER SHARE
Represents the net earnings
per share calculated under the two-class method using the historical weighted average outstanding shares and the issuance of additional
shares in connection with the Business Combination and Private Placement, assuming the shares were outstanding since January l, 2020.
The Company used the two-class method to compute net income per common share, because it had issued multiple classes of common stock.
The two-class method requires earnings for the period to be allocated between multiple classes of common stock based upon their respective
rights to receive distributed and undistributed earnings. As the Business Combination and Private Placement are being reflected as if
they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted
net loss per share assumes that the shares issuable relating to the Business Combination and Private Placement have been outstanding for
the entire period presented. If the maximum number of shares are redeemed, this calculation is retroactively adjusted to eliminate such
shares for the entire period.
The unaudited pro forma condensed
combined financial information has been prepared for the six months ended June 30, 2021:
|
|
(in thousands, except
share and per share data)
|
|
|
|
Class A
Shares
|
|
|
Class B
Shares
|
|
Stockholders
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
Net loss
|
|
$
|
(54,482
|
)
|
|
$
|
(13,392
|
)
|
|
|
|
|
|
|
|
|
|
Denominator(1)
|
|
|
|
|
|
|
|
|
Former FF stakeholders
|
|
|
153,954,009
|
|
|
|
64,000,588
|
|
Private Shares(3)
|
|
|
6,618,943
|
|
|
|
—
|
|
Riverside Management Group (RMG) Fee(2)
|
|
|
690,000
|
|
|
|
—
|
|
PSAC public stockholders
|
|
|
22,956,968
|
|
|
|
—
|
|
Third party investors in PIPE Investment
|
|
|
76,140,000
|
|
|
|
—
|
|
Total shares of FF common stock outstanding at closing of the Transaction
|
|
|
260,359,920
|
|
|
|
64,000,588
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.21
|
)
|
|
$
|
(0.21
|
)
|
The unaudited pro forma condensed
combined financial information has been prepared for the year ended December 31, 2020:
|
|
(in thousands, except
share and per share data)
|
|
|
|
Class A
Shares
|
|
|
Class B
Shares
|
|
Stockholders
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
Net loss
|
|
$
|
(168,202
|
)
|
|
$
|
(41,347
|
)
|
|
|
|
|
|
|
|
|
|
Denominator(1)
|
|
|
|
|
|
|
|
|
Former FF stakeholders
|
|
|
153,954,009
|
|
|
|
64,000,588
|
|
Private Shares(3)
|
|
|
6,618,943
|
|
|
|
—
|
|
Riverside Management Group (RMG) Fee(2)
|
|
|
690,000
|
|
|
|
—
|
|
PSAC public stockholders
|
|
|
22,956,968
|
|
|
|
—
|
|
Third party investors in PIPE Investment
|
|
|
76,140,000
|
|
|
|
—
|
|
Total shares of FF common stock outstanding at closing of the Transaction
|
|
|
260,359,920
|
|
|
|
64,000,588
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.65
|
)
|
|
$
|
(0.65
|
)
|
|
(1)
|
Due to the uncertain timing of the Earnout Triggering Events, the denominator
excludes the effect of the Earnout Shares.
|
|
(2)
|
Equity
issued to RMG in exchange for services as financial partner and advisor to PSAC but excludes the shares being issued to RMG of which
an equal amount of shares of the Sponsor are being forfeited.
|
|
(3)
|
PSAC
equity known as the Founder Shares and the private units, which include Representative Shares and Private Placement Units issued by PSAC.
|
PSAC had 23,572,119 warrants
as of June 30, 2021 and December 31, 2020. Each warrant entitles the holder to purchase one share of common stock at $11.50 per one share.
These warrants are not exercisable until 30 days after the closing of the Business Combination. As the combined company is in a loss
position in 2021 and 2020, any shares issued upon exercise of these warrants would have an anti-dilutive effect on earnings per share
and, therefore, have not been considered in the calculation of pro forma net loss per common share.
FF had 10,198,958 warrants
as of June 30, 2021 and 1,930,147 warrants as of December 31, 2020. Each warrant entitles the holder to purchase one share of common stock
at $2.72 per one share. As the combined company is in a loss position in 2021 and 2020, any shares issued upon exercise of these warrants
would have an anti-dilutive effect on earnings per share and, therefore, have not been considered in the calculation of pro forma net
loss per common share.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion
and analysis is intended to help the reader understand FF’s results of operations and financial condition. This discussion and
analysis is provided as a supplement to, and should be read in conjunction with, FF’s consolidated financial statements and FF’s
unaudited condensed consolidated financial statements and notes thereto included elsewhere in this prospectus. Some of the information
contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to FF’s
plans and strategy for FF’s business, includes forward-looking statements that involve risks and uncertainties. FF’s actual
results may differ materially from management’s expectations as a result of various factors, including but not limited to those
discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements.”
The objective of this section is to provide investors an understanding of the financial drivers and levers in FF’s business and
describe the financial performance of the business.
Overview
FF is a California-based, global, shared, intelligent
mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry.
On July 21, 2021 (the “Closing Date”),
Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp. (“PSAC”)), a Delaware corporation, 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 PSAC, PSAC Merger Sub Ltd., an exempted company with limited liability
incorporated under the laws of the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and Legacy FF. Pursuant
to the terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy FF surviving the merger as a wholly-owned
subsidiary of the Company (the “Business Combination”).
Upon the consummation of the Business Combination
(the “Closing”), PSAC changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent Electric Inc.
(the “Company”), and the Company’s Class A Common Stock began trading on The Nasdaq Global Select Market (the “NASDAQ”)
under the ticker symbol “FFIE.”
With headquarters in Los Angeles, California,
FF designs and engineers next-generation, smart, electric, connected vehicles. FF intends to manufacture vehicles at its production facility
in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing partner in South
Korea. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer in South Korea. FF
has additional engineering, sales, and operational capabilities in China and plans to develop its manufacturing capability in China through
a joint venture or other arrangements.
Since its founding, FF has created major innovations
in technology and products, and a user-centered business model. These innovations enable FF to set new standards in luxury and performance
that will redefine the future of intelligent mobility.
FF’s innovations in technology include its
proprietary Variable Platform Architecture (“VPA”), propulsion system, and Internet Artificial Intelligence (“I.A.I”)
system. The following combination of capabilities of FF’s products, technology, team, and business model distinguish FF from its
competitors:
|
●
|
FF
has designed and developed a breakthrough mobility platform — its proprietary VPA.
|
|
●
|
FF’s
propulsion system provides a leading competitive edge in acceleration and range, enabled by an industry-leading inverter design, battery
pack gravimetric energy density, and battery pack gravimetric power density.
|
|
●
|
FF’s
advanced I.A.I. technology offers high-performance computing, high speed internet connectivity, Over the Air (“OTA”) updating,
an open ecosystem for third party application integration, and a Level 3 autonomous driving-ready system, in addition to several other
proprietary innovations that enable FF to build an advanced highly personalized user experience.
|
|
●
|
Since
inception, FF has developed a portfolio of intellectual property, established its proposed supply chain, and assembled a global team
of automotive and technology experts and innovators to achieve its goal of redefining the future of the automotive industry. As of the
date of this report, FF has filed over 880 patents, and has been granted over 550 patents.
|
|
●
|
FF’s
B2C (business-to-consumer) passenger vehicle launch pipeline over the next five years includes the FF 91 series, FF 81 series, and
FF 71 series.
|
|
●
|
FF
intends to commercially launch the FF 91 during July 2022. FF believes that the FF 91 is the first fully connected car with individual
connectivity that will provide each passenger a unique and personalized experience.
|
|
●
|
FF
plans to commercially launch its second passenger vehicle, the FF 81, in 2023, which will be a premium, mass market electric vehicle
positioned to compete against the Tesla Model S, Tesla Model X, the BMW 5-series, and the Nio ES8.
|
|
●
|
FF
plans to develop a mass market passenger vehicle, the FF 71. FF expects to launch the FF 71 in 2025. The FF 71 will integrate full connectivity
and advanced technology into a smaller vehicle size and is positioned to compete against the Tesla Model 3, Tesla Model Y, and the BMW
3-series.
|
|
●
|
FF
plans to develop a Smart Last Mile Delivery (“SLMD”) vehicle to address the high-growth, last-mile delivery opportunity,
particularly in Europe, China and the U.S. FF’s modular VPA facilitates entry into the last-mile delivery segment, allowing FF
to expand its total addressable market and avenues of growth. FF plans to launch the FF SLMD vehicles in 2024.
|
FF has adopted a hybrid manufacturing strategy
consisting of its refurbished manufacturing facility in Hanford, California as well as collaborating with a reputable contract manufacturing
partner in South Korea. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer
in South Korea. FF has established a framework agreement to explore the possibility of additional manufacturing capacity in China through
a joint venture. All passenger vehicles as well as the SLMD vehicle are expected to be available for sales in the U.S., China, and Europe.
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, and any such election
to not take advantage of the extended transition period is irrevocable.
The Company is an “emerging growth company”
as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of the extended
transition period for new or revised financial accounting standards. Following the Closing Date, the Company expects to remain an emerging
growth company at least through the end of 2021 and the Company expects to continue to take advantage of the benefits of the extended
transition period, although it 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.
Segment Information
FF has determined that FF operates as one reportable
segment, which is the design, development, manufacturing, engineering, sale and distribution of electric vehicles and related products
in the global market.
Impact of COVID-19 on FF’s Business
There continues to be worldwide impact from the
COVID-19 pandemic. The impact of COVID-19 includes changes in consumer and business behavior, pandemic fears, market downturns, restrictions
on business, and individual activities have created significant volatility in the global economy and have led to reduced economic activity.
The spread of COVID-19 has also created a disruption in the manufacturing, delivery and overall supply chain of vehicle manufacturers
and suppliers and has led to a global decrease in vehicle sales in markets around the world.
The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place
orders, and business shutdowns. For example, FF’s employees based in California have been subject to stay-at-home orders from state
and local governments. These measures may adversely impact FF’s employees and operations, the operations of FF’s suppliers
and business partners, and could negatively impact the construction schedule of FF’s manufacturing facility and the production schedule
of the FF 91. In addition, various aspects of FF’s business and manufacturing facility cannot be conducted remotely. These measures
by government authorities may remain in place for a significant period of time and could adversely affect FF’s construction and
manufacturing plans, sales and marketing activities, and business operations.
In response to the pandemic, Congress passed the
Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the United States Small Business
Administration. In 2020, FF received a Paycheck Protection Program (“PPP”) loan in the amount of $9.2 million. Under the terms
of the CARES Act, recipients can apply for and receive forgiveness for all or a portion of loans granted under the PPP. Such forgiveness
is determined, based on the use of the loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited
to, payroll costs (as defined under the PPP), mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”),
and on the maintenance of employment and compensation levels during the eight-week period following the funding of the PPP Loan. No assurance
is provided that we will be able to obtain forgiveness of the PPP Loan in whole or in part.
The vaccine is currently being administered. Any
resurgence may slow down FF’s ability to ramp-up FF’s production program on time to satisfy investors and potential customers.
Any delay to production will delay FF’s ability to launch the FF 91 and begin generating revenue. The COVID-19 pandemic could limit
the ability of FF’s suppliers and business partners to perform, including third party suppliers’ ability to provide components
and materials used in the FF 91. FF may also experience an increase in the cost of raw materials. FF does not anticipate any material
impairments as a result of COVID-19; however, FF will continue to evaluate conditions on an ongoing basis. Even after the COVID-19 pandemic
has subsided, FF may continue to experience an adverse impact to its business as a result of the global economic impact and any lasting
effects on the global economy, including any recession that has occurred or may occur in the future. Refer to the section of this prospectus
titled “Risk Factors” for a full discussion of the risks associated with the COVID-19 pandemic.
Business Combination
On January 27, 2021, Legacy
FF, PSAC, and PSAC Merger Sub Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and
a wholly-owned subsidiary of PSAC (“Merger Sub”) entered into the Agreement and Plan of Merger (as amended, the
“Merger Agreement”).
On July 21, 2021 (the
“Closing Date”), the Company consummated the Business Combination pursuant to the Merger Agreement. Pursuant to the
terms of the Merger Agreement, Merger Sub merged with and into Legacy FF, with Legacy FF surviving the merger as a wholly-owned
subsidiary of PSAC. Upon the consummation of the Business Combination (the “Closing”), PSAC changed its name from
Property Solutions Acquisition Corp. to Faraday Future Intelligent Electric Inc. Upon completion of the Business Combination, Legacy
FF became the successor registrant with the SEC, meaning that Legacy FF’s financial statements for previous periods will be
disclosed in the registrant’s future periodic reports filed with the SEC. In connection with the closing of the Business
Combination and the PIPE Financing on July 21, 2021, the Company received cash aggregating $991.1 million.
Concurrently with the Merger Agreement, PSAC 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 purchased, and PSAC sold to such Subscription Investors, an aggregate of 76,140,000 shares of Company
Class A Common Stock for a purchase price of $10 per share, or an aggregate of $761.4 million in gross cash proceeds (the “Private
Placement”). Pursuant to the Subscription Agreements, PSAC 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
Date.
As part of the Closing, total direct and incremental
transaction costs aggregated $93.3 million, of which $24.6 million was expensed as part of the Business Combination and the remaining
$68.7 million was recorded to additional paid in capital as equity issuance costs.
In conjunction with the Closing, and through the
date that the unaudited Condensed Consolidated Financial Statements were available to be issued, the Company paid $144.9 million in cash
and issued 25,869,594 shares of Company Class A Common Stock to settle liabilities of the Company, including: (i) notes payable principal
amounts of $116.5 million and accrued interest of $12.4 million; (ii) related party notes payable principal amounts of $60.1 million and
accrued interest of $8.6 million; (iii) interest in the Vendor Trust of $130.7 million, including payables of $110.0 million and purchase
orders in the amount of $8.4 million related to goods and services yet to be received, and accrued interest thereon of $14.5 million;
(iv) $19.8 million of amounts due to vendors; and (v) $23.6 million due to active and former employees. The Company concluded that the
settlement of the related party notes payable and notes payables with shares of Company Class A Common Stock is substantive and therefore
was accounted as an extinguishment. Accordingly, the Company will record a loss upon extinguishment of the notes payable and related party
notes payable of $90.5 million in its condensed consolidated financial statements for the three and nine months ending September 30, 2021.
Pursuant to the terms of the Merger Agreement,
the outstanding shares of Legacy FF held by FF Top Holding LLC (f/k/a FF Top Holding Ltd.) (“FF Top”)) converted into 64,000,588
shares of Company Class B Common Stock following the Business Combination. All other outstanding shares of Legacy FF converted into 128,084,555
shares of Company Class A Common Stock following the Business Combination.
Holders of 20,600 shares of PSAC common stock 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 per share, or $0.2 million. At Closing, each non-redeemed outstanding share of PSAC common stock was converted into one share of Company Class A Common
Stock.
In conjunction with the Closing, the outstanding
warrants issued to a US-based investment firm in conjunction with notes payable issued on various dates were adjusted to increase the
shares allowed to be purchased from 10,198,958 shares of Company Class A Common Stock to 19,016,865 shares of Company Class A Common Stock
in accordance with the anti-dilution provision included in the warrant agreements, as described in Note 9. Notes Payable to FF’s
unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus.
While the legal acquirer in the Merger Agreement
was PSAC, for financial accounting and reporting purposes under GAAP, Legacy FF was the accounting acquirer and the Business Combination
was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting,
and the financial statements of the combined entity represent the continuation of the financial statements of Legacy FF in many respects.
Under this method of accounting, PSAC was treated as the “acquired” company. For accounting purposes, Legacy FF was deemed
to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Legacy FF (i.e.,
a capital transaction involving the issuance of stock by PSAC for the stock of Legacy FF). Accordingly, the consolidated assets, liabilities,
and results of operations of Legacy FF became the historical financial statements of the Company, and PSAC’s assets, liabilities,
and results of operations were consolidated with Legacy FF’s on July 21, 2021. Operations prior to the Business Combination will
be presented as those of FF in future reports. The net assets of PSAC were recognized at historical cost (which is expected to be consistent
with carrying value), with no goodwill or other intangible assets recorded.
In addition, until the fifth
anniversary of the Closing Date of the Business Combination, Legacy FF stockholders are entitled under the Merger Agreement to contingent
consideration of up to 25,000,000 additional shares of Company Class A Common Stock in the aggregate in two equal tranches upon the occurrence
of each earnout triggering event (the “Earnout Shares”), defined as follows in the Merger Agreement:
|
●
|
The
minimum earnout of 12,500,000 additional shares is triggered if the Company’s Class A Common Stock volume weighted average price
(“VWAP”), as defined in the Merger Agreement, is greater than $13.50 per share for any period of twenty (20) trading days
out of thirty (30) consecutive trading days (the “Minimum Target Shares”); and
|
|
●
|
The
maximum earnout of an additional 12,500,000 additional shares is triggered if the Company Class A Common Stock VWAP is greater than $15.50
for any period of twenty (20) trading days out of thirty (30) consecutive trading days, plus the Minimum Target Shares, if not previously
issued.
|
The Earnout Shares have been recognized at fair
value upon the closing of the Business Combination and classified in Stockholders’ Deficit. Because the Business Combination is
accounted for as a reverse recapitalization, the issuance of the Earnout Shares will be treated as a deemed dividend and since the Company
does not have retained earnings, the issuance will be recorded within APIC. The Company determined the fair value of the Earnout Shares
at the Closing Date to be $293.9 million based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock
price, term, dividend yield, risk-free rate, and volatility.
As a result of the Business Combination, FF became
the successor to an SEC-registered and NASDAQ-listed company which will require FF to hire additional personnel, implement procedures
and processes to address public company regulatory requirements and customary practices. FF expects to incur additional annual expenses
as a public company for, among other things, directors’ and officers’ liability insurance, director fees, internal and external
accounting, legal and administrative resources, including increased audit and legal fees.
On June 24, 2021, the registration statement on
Form S-4 (File No. 333-255027), initially filed on April 5, 2021, relating to the Business Combination was declared effective by the SEC,
and on July 20, 2021, PSAC held a special meeting of PSAC stockholders at which the Business Combination was approved.
Recent Developments
FF accomplished the following major milestones
during the six months ended June 30, 2021:
|
1.
|
Strengthened FF’s leadership team and announced post-closing of the Business Combination Board of Directors:
|
|
a.
|
Named
global post-closing Board of Directors following the recent signing of the Merger Agreement with PSAC.
|
|
b.
|
Appointed industry veteran Xuefeng (“Chris”) Chen as CEO of FF China to solidify US-China dual home market strategy.
|
|
2.
|
Notes
payable financing:
|
|
a.
|
FF raised net proceeds of $111.6 million in notes payable financing to help advance the Company’s efforts towards FF 91 delivery.
|
|
3.
|
Conversion
of related party notes and notes payable to equity:
|
|
a.
|
Legacy FF converted $90.9
million of its related party notes payable and notes payable to equity.
|
|
a.
|
Completed winter testing activities in Michigan and Minnesota to validate various vehicle systems.
|
|
b.
|
Selected NVIDIA Drive Orin to power its flagship FF 91 luxury EV for next generation autonomous driving.
|
|
5.
|
Joint
Venture opportunities:
|
|
a.
|
FF entered into a cooperation framework agreement and a license agreement with Geely that set forth the major commercial understanding of the proposed cooperation among the parties in the areas of potential investment into the JV, engineering, technology, and contract manufacturing support.
|
|
6.
|
Capacity
Reservation Agreement:
|
|
a.
|
The Company entered into a Capacity Reservation Agreement with a certain vendor, under which the vendor will reserve sufficient resources, facilities, and capacity to manufacture and supply up to 250,000 FF-81 electric vehicles between 2023-2030.
|
Subsequent to June 30, 2021, the Company accomplished
the following milestones:
|
a.
|
The Company Announced 300 invite-only, limited-edition FF 91 Futurist Alliance Edition model and new reservation plan for FF 91 Futurist model, with a fully-refundable deposit of $5,000 and $1,500, respectively. New FF Intelligent App and FF.com will be the online reservation platforms;
|
|
b.
|
The Company raised approximately $1 billion in gross proceeds as part of the Business Combination to promote FF 91’s delivery which is anticipated to be during July 2022, marking the last sprint towards production for manufacturing, supply chain, user ecosystem, and other related areas with the goal to be the leader in its market segment; and
|
|
c.
|
Legacy FF converted: (i)
related party notes payable with an aggregate principal balance of $130.5 million and accrued interest of $30.0 million, notes
payable with principal balance of $56.0 million and accrued interest of $17.2 million into 119,191,029 shares of Class A-2 Preferred
Stock; (ii) notes payable with an aggregate principal balance of $17.6 million and accrued interest of $5.4 million into 15,792,771
shares of Class A-1 Preferred Stock; and (iii) notes payable with a principal balance of $1.5 million and accrued interest of $0.7
million into 1,281,976 shares of Class A-3 Preferred Stock.
|
|
d.
|
In conjunction with the Business Combination and through the date that the unaudited Condensed Consolidated Financial Statements were available to be issued, the Company paid $144.9 million in cash and issued 25,869,594 shares of Company Class A Common Stock to settle liabilities of the Company, including: (i) notes payable principal amounts of $116.5 million and accrued interest of $12.4 million; (ii) related party notes payable principal amounts of $60.1 million and accrued interest of $8.6 million; (iii) interest in the Vendor Trust of $130.7 million, including payables of $110.0 million and purchase orders in the amount of $8.4 million related to goods and services yet to be received, and accrued interest thereon of $14.5 million; (iv) $19.8 million of amounts due to vendors; and (v) $23.6 million due to active and former employees.
|
Components of FF’s Results of Operations
Key Factors Affecting Operating Results
FF’s 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 of this prospectus titled “Risk Factors.”
Faraday Future Vehicle Launch
FF expects to derive revenue from the FF 91, which
is anticipated to launch during July 2022. FF plans to build out and manufacture the FF 91 in its own manufacturing facility in Hanford,
California. Additionally, the FF 81, the FF 71, and the SLMD electrical vehicle models are in development and are planned to be released
after the FF 91.
Production and Operations
FF expects to incur significant operating costs
that will impact its future profitability, including research and development expenses as it introduces new models and improves existing
models; capital expenditures for the expansion of its manufacturing capacities; additional operating costs and expenses for production
ramp-up; raw material procurement costs; general and administrative expenses as it scales its operations; interest expense from debt financing
activities; and selling and distribution expenses as it builds its brand and markets its vehicles. In addition, it may incur significant
costs in connection with its services once it delivers the FF 91, including servicing and warranty costs. FF’s ability to become
profitable in the future will depend on its ability to successfully market its vehicles and control its costs.
To date, FF has not yet sold any electric vehicles.
As a result, FF will require substantial additional capital to develop products and fund operations for the foreseeable future. Until
FF can generate sufficient revenue from product sales, FF expects to finance operations through a combination of existing cash on hand,
public offerings, private placements, and debt financings. The amount and timing of future funding requirements will depend on many factors,
including the pace and results of development efforts. Any delays in the successful completion of manufacturing facilities will impact
FF’s ability to generate revenue. For additional discussion of FF’s ability to continue as a going concern, see the section
titled “Liquidity and Capital Resources” in Note 2 of the notes to FF’s unaudited condensed consolidated financial
statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus and for further details on liquidity,
please see the “Liquidity and Capital Resources” section below.
Revenues
FF is a development stage company and has not generated
any revenue to date. FF’s anticipated introduction of the FF 91, its first vehicle launch, is expected to generate the majority
of FF’s future revenue while other vehicles are in development.
Operating Expenses
Research and Development
Research and development activities represent a
significant part of FF’s business. FF’s research and development efforts focus on the design and development of FF’s
electric vehicles and continuing to prepare its prototype electric vehicles to exceed industry standards for compliance, innovation, and
performance. Additionally, research and development expenses consist of personnel-related costs (including salaries, bonuses, benefits,
and stock-based compensation) for FF’s employees focused on research and development activities, other related costs, depreciation,
and an allocation of FF’s general overhead. FF expects research and development expenses to increase as FF continues to develop
its vehicles. FF anticipates an increase in activities in the U.S. and China, where FF’s research and development operations are
primarily located.
Sales and Marketing
Sales and marketing expenses consist primarily
of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for FF’s employees focused on sales
and marketing, costs associated with sales and marketing activities, and an allocation of FF’s general overhead. Marketing activities
are those related to introducing FF’s brand and its electric vehicle prototypes to the market. FF expects selling and marketing
expenses to continue to increase as FF brings its electric vehicles to market and seeks to generate sales.
General and Administrative
General and administrative expenses consist primarily
of personnel-related costs, (including salaries, bonuses, benefits, and stock-based compensation) for 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 FF’s 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. FF expects its general and
administrative expenses to increase as FF continues to grow its business. FF also anticipates that it will incur additional costs for
employees and third-party consulting services related to its preparations to become and operate as a public company.
Change in Fair Value Measurement of Related Party Notes Payable,
Notes Payable, and Warrant Liabilities
Change in fair value measurement of related party
notes payable, notes payable and warrant liabilities consists of the charges and gains to fair value measurements of certain financial
instruments which FF has elected to hold at fair value. FF expects changes in fair value measurement of related party notes payable and
notes payable activity to decrease with the Business Combination as the majority of the liabilities converted to equity
or were paid in cash.
Related Party Interest Expense
Related party interest expense consists of interest
expense on notes payable with related parties. FF expects related party interest expense to decrease significantly, as the majority of
related party notes payable converted to equity upon completion of the Business Combination.
Interest Expense
Interest expense primarily consists of interest
on outstanding notes payable, capital leases, certain supplier payables, and vendor payables in trust. FF expects interest expense to
decrease significantly, as the majority of notes payable and all of the vendor payables in trust converted to equity upon completion of
the Business Combination.
Other Expense, net
Other expense, 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 denominated in foreign currency and the settlements of invoices denominated in currencies other than
the functional currency. FF expects other expense to fluctuate as FF continues to transact internationally.
Results of Operations (in thousands)
To date, FF has not generated any revenue from
the design, development, manufacturing, engineering, sale, or distribution of its electric vehicles. Please refer to the section of this
prospectus titled “Risk Factors” for a full discussion on the risks and uncertainties related to costs.
Comparison of the Three Months Ended June 30, 2021 and 2020
|
|
Three Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Research and development
|
|
$
|
8,673
|
|
|
$
|
4,222
|
|
Sales and marketing
|
|
|
2,585
|
|
|
|
166
|
|
General and administrative
|
|
|
16,430
|
|
|
|
11,952
|
|
Total operating expenses
|
|
|
27,688
|
|
|
|
16,340
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(27,688
|
)
|
|
|
(16,340
|
)
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
|
(10,730
|
)
|
|
|
585
|
|
Interest expense
|
|
|
(9,077
|
)
|
|
|
(7,281
|
)
|
Related party interest expense
|
|
|
(3,728
|
)
|
|
|
(8,388
|
)
|
Other expense, net
|
|
|
(1,552
|
)
|
|
|
(278
|
)
|
Loss before income taxes
|
|
|
(52,775
|
)
|
|
|
(31,702
|
)
|
Income tax provision
|
|
|
—
|
|
|
|
—
|
|
Net loss
|
|
$
|
(52,775
|
)
|
|
$
|
(31,702
|
)
|
Research and Development
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Research and development
|
|
$
|
8,673
|
|
|
$
|
4,222
|
|
|
$
|
4,451
|
|
|
|
105.4
|
%
|
The increase in research and development expense
for the three months ended June 30, 2021 was primarily due to increases in personnel and compensation related expenses of $5,872 due to
increased headcount and an increase of $1,493 primarily related to professional services, employee benefits, and depreciation of headquarters
facilities. These increases were partially offset by a vendor refund of $2,002 received during the three months ended June 30, 2021.
Sales and Marketing
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Sales and marketing
|
|
$
|
2,585
|
|
|
$
|
166
|
|
|
$
|
2,419
|
|
|
|
1,457.2
|
%
|
The increase in sales and marketing expense for
the three months ended June 30, 2021 was primarily due to increases in personnel and compensation related expenses of $1,435, employee
benefit expenses of $121 due to increases in headcount, and an increase of $426 primarily related to professional services, employee benefits,
and depreciation of headquarters facilities.
General and Administrative
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
General and administrative
|
|
$
|
16,430
|
|
|
$
|
11,952
|
|
|
$
|
4,478
|
|
|
|
37.5
|
%
|
The increase in general and administrative expense
for the three months ended June 30, 2021 was primarily due to an increase in accrued legal expense related to a settlement agreement in
the amount $6,309, expenses for professional services consisting of general corporate compliance and other legal matters related to the
merger aggregating $1,693, and personnel and compensation related expenses of $1,457 due to increases in headcount. This increase was
partially offset by an employee bonus program of $4,683 that was recorded in general and administrative expense for the three months ended
June 30, 2020 with no such charges occurring in the same period in 2021.
Change in Fair Value Measurement of Related Party Notes Payable,
Notes Payable, and Warrant Liabilities
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
$
|
(10,730
|
)
|
|
$
|
585
|
|
|
$
|
(11,315
|
)
|
|
|
(1,934.2
|
)%
|
The decrease in the change in the adjustment to
fair value for related party notes payable, notes payable, and warrant liabilities for the three months ended June 30, 2021, as compared
to the same period in 2020, related to the remeasurements of certain notes payable, which FF elected to account for using the fair value
option. The Company uses the yield method when valuing the related party notes payable and notes payable and the decrease in the fair
value is primarily due to a change in the credit spreads of the Company. During the three months ended June 30, 2020 the Company experienced
liquidity difficulties, when compared to the same period in 2021, which delayed the execution of its strategic plans, causing the liability
to slightly decrease. Additionally, debt issuance costs increased $664 due to new notes and warrants issued during the three months ended
June 30, 2021.
Interest Expense
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Interest expense
|
|
$
|
(9,077
|
)
|
|
$
|
(7,281
|
)
|
|
$
|
(1,796
|
)
|
|
|
24.7
|
%
|
The increase in interest expense for the three
months ended June 30, 2021, was primarily due to an increase in the Company’s notes payable principal balance of $301,172 as of
June 30, 2021 compared to a balance of $142,714 as of June 30, 2020. The debt issuance costs were expensed because Legacy FF elected
the fair value option on the notes issued during the three months ended June 30, 2021.
Related Party Interest Expense
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Related party interest expense
|
|
$
|
(3,728
|
)
|
|
$
|
(8,388
|
)
|
|
$
|
4,660
|
|
|
|
(55.6
|
)%
|
The decrease in related party interest expense
for the three months ended June 30, 2021 as compared to the same period in 2020 was primarily due to certain related party notes payable
ceasing to accrue interest on March 31, 2021. These related party notes payable of $90,869 and related party accrued interest of $43,490
converted into 57,513,413 shares of Class A-1 Convertible Preferred Stock and 19,546,600 Class A-2 Convertible Preferred Stock.
Other Expense, Net
|
|
Three Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Other expense, net
|
|
$
|
(1,552
|
)
|
|
$
|
(278
|
)
|
|
$
|
(1,274
|
)
|
|
|
458.3
|
%
|
The increase in other expense, net for the
three months ended June 30, 2021 as compared to the same period in 2020 was primarily due to the loss on foreign exchange related to
a note payable held in RMB that is remeasured at the end of each period.
Comparison of the Six Months Ended June 30, 2021 and 2020
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Operating expenses
|
|
|
|
|
|
|
Research and development
|
|
$
|
15,394
|
|
|
$
|
11,184
|
|
Sales and marketing
|
|
|
4,267
|
|
|
|
1,470
|
|
General and administrative
|
|
|
27,423
|
|
|
|
18,732
|
|
Total operating expenses
|
|
|
47,084
|
|
|
|
31,386
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(47,084
|
)
|
|
|
(31,386
|
)
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
|
(35,912
|
)
|
|
|
8,662
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
(1,735
|
)
|
|
|
—
|
|
Interest expense
|
|
|
(28,933
|
)
|
|
|
(15,672
|
)
|
Related party interest expense
|
|
|
(12,798
|
)
|
|
|
(16,650
|
)
|
Other expense, net
|
|
|
(1,835
|
)
|
|
|
(751
|
)
|
Loss before income taxes
|
|
|
(128,297
|
)
|
|
|
(55,797
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
—
|
|
Net loss
|
|
$
|
(128,300
|
)
|
|
$
|
(55,797
|
)
|
Research and Development
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Research and development
|
|
$
|
15,394
|
|
|
$
|
11,184
|
|
|
$
|
4,210
|
|
|
|
37.6
|
%
|
The increase in research and development expense
for the six months ended June 30, 2021 was primarily due to increases in personnel and compensation related expenses of $4,378 due to
increases in headcount and an increase of $2,027 primarily related to professional services, employee benefits, and depreciation of headquarters
facilities. These increases were partially offset by a vendor refund of $2,002 received during the six months ended June 30,2021.
Sales and Marketing
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Sales and marketing
|
|
$
|
4,267
|
|
|
$
|
1,470
|
|
|
$
|
2,797
|
|
|
|
190.3
|
%
|
The increase in sales and marketing expense for
the six months ended June 30, 2021 was primarily due to an increase in personnel and compensation related expenses of $1,631 related to
increases in headcount and an increase of $585 primarily related to professional services, employee benefits, and depreciation of headquarters
facilities.
General and Administrative
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
General and administrative
|
|
$
|
27,423
|
|
|
$
|
18,732
|
|
|
$
|
8,691
|
|
|
|
46.4
|
%
|
The increase in general and administrative expense
for the six months ended June 30, 2021 was primarily due to accrued legal expense related to a settlement agreement of $6,309, an increase
in professional services consisting of general corporate compliance and other legal matters of $2,436, and an increase in personnel and
compensation related expenses of $2,795 due to increases in headcount. This increase was partially offset by an employee bonus program
in the amount of $4,683 that was recorded in general and administrative expense for the six months ended June 30, 2020 with no such charges
occurring in the same period in 2021.
Change in Fair Value Measurement of Related Party Notes Payable
and Notes Payable and Warrant Liabilities
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
$
|
(35,912
|
)
|
|
$
|
8,662
|
|
|
$
|
(44,574
|
)
|
|
|
(514.6
|
)%
|
The change in fair value of related party
notes payable, notes payable, and warrant liabilities for six months ended June 30, 2021 as compared to the same period in 2020
related to the remeasurements of certain term notes payable agreements, which FF elected to measure using the fair value option.
Legacy FF uses the yield method when valuing the related party notes payable and notes payable. The increase in the fair value is
primarily due to a change in the credit spreads of Legacy FF. Due the increased probability of the close of the Business
Combination, the credit spreads tightened, causing the liability to increase. In addition, there was a change in the fair value of
the warrant liabilities of $2,880 and debt issuance costs of $10,204 related to notes issued and fair valued during the six months
ended June 30, 2021. During the six months ended June 30, 2020, Legacy FF experienced liquidity difficulties when compared to the
same period in 2021, which delayed the execution of its strategic plans, causing the liability to decrease in that period.
Change in Fair Value Measurement of The9 Conditional Obligation
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
$
|
(1,735
|
)
|
|
$
|
—
|
|
|
$
|
(1,735
|
)
|
|
|
(100.0
|
)%
|
The change in fair value of The9 Conditional Obligation
for the six months ended June 30, 2021, was due to a fair value adjustment to The9 Conditional Obligation of $1,735. For the six months
period ended June 30, 2020, there was no comparable activity.
Interest Expense
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Interest expense
|
|
$
|
(28,933
|
)
|
|
$
|
(15,672
|
)
|
|
$
|
(13,261
|
)
|
|
|
84.6
|
%
|
The increase in interest expense for the six months
ended June 30, 2021 as compared to the same period in 2020 was primarily due to the issuance of new notes at higher interest rates and
an increase in unpaid principal balance of $158,458. Approximately $70,000 of notes issued during the six months ended June 30, 2021
bore interest ranging from 12.75% to 14%. In addition, Legacy FF recorded the fair value of the warrant liability at inception of $5,000.
Related Party Interest Expense
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Related party interest expense
|
|
$
|
(12,798
|
)
|
|
$
|
(16,650
|
)
|
|
$
|
3,852
|
|
|
|
(23.1
|
)%
|
The decrease in related party interest expense
for the six months ended June 30, 2021 as compared to the same period in 2020 was due certain related party notes payable ceasing to accrue
interest on March 31, 2021. These related party notes payable of $90,869 and related party accrued interest of $43,490 converted into
57,513,413 shares of Class A-1 Convertible Preferred Stock and 19,546,600 Class A-2 Convertible Preferred Stock.
Other Expense, Net
|
|
Six Months Ended
June 30,
|
|
|
Change
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
Other expense, net
|
|
$
|
(1,835
|
)
|
|
$
|
(751
|
)
|
|
$
|
(1,084
|
)
|
|
|
144.3
|
%
|
The increase in other expense, net for the six
months ended June 30, 2021 as compared to the same period in 2020, was primarily due to an increase of loss on foreign exchange related
to a note payable held in RMB that is remeasured at the end of each period.
Comparison of the Years Ended December 31, 2020 and 2019
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
Research and development
|
|
$
|
20,186
|
|
|
$
|
28,278
|
|
Sales and marketing
|
|
|
3,672
|
|
|
|
5,297
|
|
General and administrative
|
|
|
41,071
|
|
|
|
71,167
|
|
Loss on disposal of asset held for sale
|
|
|
—
|
|
|
|
12,138
|
|
Gain on cancellation of land use rights
|
|
|
—
|
|
|
|
(11,467
|
)
|
Loss on disposal of property and equipment
|
|
|
10
|
|
|
|
4,843
|
|
Total operating expenses
|
|
|
64,939
|
|
|
|
110,256
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(64,939
|
)
|
|
|
(110,256
|
)
|
Gain on expiration of put option
|
|
|
—
|
|
|
|
43,239
|
|
Change in fair value measurement of related party notes payable and notes payable
|
|
|
(8,948
|
)
|
|
|
(15,183
|
)
|
Change in fair value measurement of The9 conditional obligation
|
|
|
3,872
|
|
|
|
—
|
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net
|
|
|
2,107
|
|
|
|
—
|
|
Other expense, net
|
|
|
(5,455
|
)
|
|
|
—
|
|
Related party interest expense
|
|
|
(38,995
|
)
|
|
|
(34,074
|
)
|
Interest expense
|
|
|
(34,724
|
)
|
|
|
(25,918
|
)
|
Loss before income taxes
|
|
|
(147,082
|
)
|
|
|
(142,192
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Net loss
|
|
$
|
(147,085
|
)
|
|
$
|
(142,195
|
)
|
Research and Development
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Research and development
|
|
$
|
20,186
|
|
|
$
|
28,278
|
|
|
$
|
(8,092
|
)
|
|
|
(28.6
|
)%
|
The decrease in research and development expense
for the year ended December 31, 2020 was primarily due to a decrease in personnel expenses of $7,804 due to a decrease in headcount and
temporary salary reductions, a decrease in materials of $200 and a decrease of other expenses such as depreciation expense, software subscriptions,
freight and delivery costs and repairs and maintenance of $153.
Sales and Marketing
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Sales and marketing
|
|
$
|
3,672
|
|
|
$
|
5,297
|
|
|
$
|
(1,625
|
)
|
|
|
(30.7
|
)%
|
The decrease in sales and marketing expense for
the year ended December 31, 2020 was primarily due to a decrease in personnel expense of $1,653 related to a decrease in headcount and
temporary salary reductions.
General and Administrative
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
General and administrative
|
|
$
|
41,071
|
|
|
$
|
71,167
|
|
|
$
|
(30,096
|
)
|
|
|
(42.3
|
)%
|
The decrease in general and administrative expense
for the year ended December 31, 2020 was primarily due to a decrease of personnel expenses of $9,211 due to a decrease in headcount and
temporary salary reductions; professional services consisting of general corporate compliance and other legal matters of $6,010; a decrease
in rent and related expenses of $5,907 and a decrease in other administrative expenses which include information technology, software
subscriptions, travel and entertainment and depreciation expense, of $6,546.
Loss on Disposal of Asset Held for Sale
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Loss on disposal of asset held for sale
|
|
|
—
|
|
|
|
12,138
|
|
|
|
(12,138
|
)
|
|
|
(100.0
|
)%
|
In 2019, land and related improvements for property
owned in Las Vegas, Nevada classified as held for sale with a carrying value of $29,038 was sold for a total of $16,900, which resulted
in a $12,138 loss on disposal being recognized. For the year ended December 31, 2020 there was no comparable activity.
Gain on Cancellation of Land Use Rights
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Gain on cancellation of land use rights
|
|
$
|
—
|
|
|
$
|
(11,467
|
)
|
|
$
|
11,467
|
|
|
|
(100.0
|
)%
|
In 2019, land use rights granted by the government
of Zhejiang (China) for use of a parcel of land were cancelled and reverted to the government of Zhejiang. Legacy FF derecognized the
land use rights and the land use grant liability of $58,485 and $51,103, respectively. As part of the cancellation, Legacy FF received
cash of $15,902 and incurred tax expense of $2,947, resulting in a gain of $11,467. For the year ended December 31, 2020 there was no
comparable activity.
Loss on Disposal of Property and Equipment
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Loss on disposal of property and equipment
|
|
$
|
10
|
|
|
$
|
4,843
|
|
|
$
|
(4,833
|
)
|
|
|
(99.8
|
)%
|
In 2019, Legacy FF disposed of property and equipment
held by its operations in China at a loss of $4,843. For the year ended December 31, 2020 there was immaterial activity.
Gain on Expiration of Put Option
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Gain on expiration of put option
|
|
$
|
—
|
|
|
$
|
43,239
|
|
|
$
|
(43,239
|
)
|
|
|
(100.0
|
)%
|
In 2019, the gain related to the expiration of
the related party put options that expired unexercised in 2019. For the year ended December 31, 2020 there was no comparable activity.
Change in Fair Value Measurement of Related Party Notes Payable
and Notes Payable
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Change in fair value measurement of related party notes payable and notes payable
|
|
$
|
(8,948
|
)
|
|
$
|
(15,183
|
)
|
|
$
|
(6,235
|
)
|
|
|
(41.1
|
)%
|
The decrease in the change in fair value for related
party notes payable and notes payable for the year ended December 31, 2020 relates to the remeasurements of certain term notes payable
agreements, which FF elected to measure using the fair value option. In 2019, one of the notes payable held at fair value settled for
$21,668 related to a note payable with a $15,000 principal, which accounted for a significant portion of the 2019 fair value adjustment.
Change in Fair Value Measurement of The9 Conditional Obligation
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
$
|
3,872
|
|
|
$
|
—
|
|
|
$
|
3,872
|
|
|
|
100.0
|
%
|
The increase in the change in fair value for The9
Conditional Obligation for the year ended December 31, 2020 relates to the remeasurement of the contractual obligation.
Gain on extinguishment of related party notes payable, notes payable
and vendor payables in trust, net
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net
|
|
$
|
2,107
|
|
|
$
|
—
|
|
|
$
|
2,107
|
|
|
|
100.0
|
%
|
The increase in gain on extinguishment for the
year ended December 31, 2020 relates to amendments to related party notes payable and notes payable agreements and the vendor trust which
were deemed substantive, resulting in the application of extinguishment accounting. For the year ended December 31, 2019 there was no
comparable activity.
Other Expense, Net
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Other expense, net
|
|
$
|
(5,455
|
)
|
|
$
|
—
|
|
|
$
|
(5,455
|
)
|
|
|
100.0
|
%
|
The increase in other expense, net for the year
ended December 31, 2020 was primarily due to an increase of loss on foreign exchange of $4,108 on a $57,000 note payable held in RMB that
is remeasured at the end of each year.
Related Party Interest Expense
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Related party interest expense
|
|
$
|
(38,995
|
)
|
|
$
|
(34,074
|
)
|
|
$
|
(4,921
|
)
|
|
|
14.4
|
%
|
The increase in related party interest expense
for the year ended December 31, 2020 is due to interest incurred on the increase in unpaid related party principal balance of $9,508 and
an amendment on a related party note payable agreement with a $24,603 principal balance which increased the interest rate from 0% to 12%.
Interest Expense
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
Interest expense
|
|
$
|
(34,724
|
)
|
|
$
|
(25,918
|
)
|
|
$
|
(8,806
|
)
|
|
|
34.0
|
%
|
The increase in interest expense for the year ended
December 31, 2020 is due to interest incurred throughout the year on the increase in unpaid principal balance of $55,839 and the full
year effect of interest on the vendor payables in trust.
Liquidity and Capital Resources (in thousands, except share and
per share data)
As described in the “Overview”
section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the COVID-19 pandemic
impacted FF’s ability to raise funds and may have a material impact on future periods as FF prepares to bring its vehicles to market,
including its cash flows from financing activities, which funds its operations. The extent of COVID-19’s impact on FF’s liquidity
will depend upon, among other things, the duration and severity of the outbreak or subsequent outbreaks and related government responses
such as required physical distancing, restrictions on business operations and travel, the pace of recovery of economic activity and the
impact to consumers, all of which are uncertain and difficult to predict. Refer to section titled “Risk Factors” included
elsewhere in this prospectus for a full discussion of the risks associated with the COVID-19 pandemic.
The Company has evaluated whether there are certain
conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going
concern within one year after the date that FF’s unaudited condensed consolidated financial statements for the three and six months
ended June 30, 2021 were available to be issued.
Legacy FF started experiencing financial hardship
in 2018 and was not able to fulfill all its accounts payable obligations to its suppliers absent a significant financing inflow. Certain
suppliers ceased supplying their products and services to Legacy FF and/or initiated legal claims against Legacy FF when Legacy FF failed
to make overdue payments. On April 29, 2019, Legacy FF established the Vendor Trust to stabilize Legacy FF’s supplier base by providing
suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. All interests in the Vendor Trust
are collateralized by a first lien, with third payment priority, pursuant to applicable intercreditor arrangements, on virtually all tangible
and intangible assets of Legacy FF. The applicable interest rate for the Vendor Trust principal balance is 6.00%. A total of $109,565
and $111,574 of FF’s trade payables were included in the Vendor Trust with accrued interest of $13,358 and $11,840 as of June 30,
2021 and December 31, 2020, respectively.
The maturity date of the Vendor Trust secured trust
interests was originally November 30, 2019, and was subsequently extended to March 5, 2021. On October 30, 2020, following a vote of the
holders of the secured trust interests and with the approval of a steering committee of holders of secured trust interests, FF and the
trustee of the Vendor Trust amended the trust agreement governing the Vendor Trust to permit the secured trust interests to be satisfied
with equity to be issued in connection with a qualified merger with a special purpose acquisition company (including the Business Combination)
in lieu of cash. On March 1, 2021, the maturity date was further extended to the earliest to occur of October 6, 2021, the closing of
a qualified merger with a special purpose acquisition company (such as the Business Combination), a change in control of Legacy FF or
an acceleration of the obligations under certain of Legacy FF’s other secured financing arrangements. Consideration to satisfy these
obligations was in the form of equity interests in connection with the Business Combination for an aggregate of 10,456,582 shares of Company
Class A Common Stock as well as $28,928 of cash, of which $28,355 was paid as of the date FF’s unaudited condensed consolidated
financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus were available to be issued.
With respect to accounts payable obligations outside
of the Vendor Trust, some suppliers have continued to work with FF on advance payment terms. Therefore, in the accounts payable obligations,
there are deposits (refundable and non-refundable), retainers that are kept at an agreed upon minimum balance and advance payments for
services and products. Resolution of open balances for suppliers who did not contribute their trade receivables to the Vendor Trust has
been managed on a case-by-case basis, with ongoing negotiation of new payment terms, including cash advances and retainers, as well as
repayment plans if needed. FF is also defending against a limited number of civil lawsuits brought by certain suppliers that did not contribute
trade receivables to the Vendor Trust.
Since inception, FF has incurred cumulative losses
from operations, negative cash flows from operating activities and an accumulated deficit of $2,519,439 as of June 30, 2021. FF has funded
its operations and capital needs primarily through the proceeds received from capital contributions and the issuance of related party
notes payable and notes payable. The vast majority of notes payable and equity have been funded by entities controlled or previously controlled
by FF’s founder and former CEO. Since its formation, FF has devoted substantial effort and capital resources to strategic planning,
engineering, design, and development of its planned electric vehicle platform, development of initial electric vehicle models, and capital
raising. The aforementioned efforts and capital resources have positioned FF for a commercial launch of its first passenger vehicle, the
FF 91, which is anticipated during July 2022.
There can be no assurance that FF will be successful
in achieving its strategic plans, that FF’s future capital raises will be sufficient to support its ongoing operations, or that
any additional financing will be available in a timely manner or on acceptable terms, if at all. If events or circumstances occur such
that FF does not meet its strategic plans, FF will be required to reduce discretionary spending, alter or scale back vehicle development
programs, be unable to develop new or enhanced production methods, or be unable to fund capital expenditures. Any such events would have
a material adverse effect on FF’s financial position, results of operations, cash flows, and ability to achieve its intended business
objectives.
FF’s audit report for the year ended December
31, 2020 from FF’s independent registered public accounting firm included an explanatory paragraph stating that FF’s recurring
losses from operations and cash outflows from operating activities raised substantial doubt about FF’s ability to continue as a
going concern. However, FF believes that existing cash along with recent financing activities including the Business Combination, will
be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. As of June 30, 2021, FF
was in default on related party notes payable and notes payable with principal amounts of $147,093 and $40,935, respectively. Following
the closing of the Business Combination and the PIPE Financing on July 21, 2021, FF received net proceeds aggregating $991,053 and
has either settled the related parties notes payable and notes payable in cash or converted them to Company equity. As such, no adverse
action was taken or is expected to be taken by the respective note holders. Overall, as part of the closing of the Business Combination,
FF settled the majority of its indebtedness by making payments to vendors, related party note payable and note payable holders and active
and former employees in an aggregated amount of $144,924 and converted an aggregated amount of $258,696 to Company equity.
FF management estimates that it will require
approximately $1,400,000 in additional funding prior to achieving expected profitability and positive cash flow in 2024. Such funding
will be utilized to execute FF’s business plan, which includes the initial launch of its FF 91 vehicle anticipated during July
2022, followed by FF’s expected introduction of the FF 81 and FF 71 vehicles in 2023 and 2025, respectively. In accordance with
its business plan, in order to launch the FF 91 vehicle and continue development of the FF 81 vehicle, by July 2022, FF expects to spend
a total of approximately $450,000 to bring its Hanford, California manufacturing facility to full commercial production, including completion
of production and manufacturing tooling, execute its supply chain efforts, further its engineering, testing, certification, and validation
efforts, and invest in sales, marketing, and the infrastructure necessary to be a public company.
Since 2018, FF has implemented cost reduction initiatives
including layoffs and temporary salary reductions. Following the closing of the Business Combination, FF plans on significant increases
in operating expenses as noted above including full restoration of salary reductions and significant hiring efforts to execute the business
plan. FF expects its headcount to approximately double by July 2022. FF expects to fund these capital requirements through a combination
of future equity issuances as well as future issuances of debt.
FF’s continuing short-term and long-term
liquidity requirements are expected to be impacted by the following:
|
●
|
The timing and costs involved in bringing FF’s products to market;
|
|
●
|
The expansion of production capacity;
|
|
●
|
The costs of maintaining, expanding, and protecting FF’s intellectual property portfolio, including potential litigation costs and liabilities;
|
|
●
|
The costs related to being public company;
|
|
●
|
FF’s applied for loan forgiveness related to the Paycheck Protection Program Promissory Note, obtained pursuant to the Paycheck Protection Program of the Coronavirus Aid Relief and Economic Security Act. Please refer to the section titled “Risk Factors”, included elsewhere in this prospectus, for a full discussion on risks related to inability to obtain loan forgiveness;
|
|
●
|
The results of the Business Combination;
|
|
●
|
The ability of FF to extend the maturity dates for FF’s existing notes payable and interests in the Vendor Trust to the extent not converted to equity in connection with the Business Combination; and
|
|
●
|
Issuance of additional notes payable and/or related party notes payable.
|
FF believes that existing cash along with recent
financing activities including the Business Combination, will be sufficient to support working capital and capital expenditure requirements
for at least the next 12 months. Financing activities during the six months ended June 30, 2021, include the issuance of the additional
notes payable generating $111,641 of funds and applying for loan forgiveness on the $9,168 Paycheck Protection Program Promissory Note
(“PPP Note”). As of June 30, 2021, FF had $52,527 of unrestricted cash. For additional discussion around financing transactions,
see Note 9. Notes Payable of the Notes to FF’s unaudited condensed consolidated financial statements for the three and six
months ended June 30, 2021 included elsewhere in this prospectus.
During the next 12 months as of June 30, 2021 FF
committed to settle certain liabilities maturing and/or contingent upon the close of the Business Combination, as well as ongoing operating
obligations, as follows:
|
●
|
Related party notes payable with a principal of $204,098 and accrued interest of $47,274;
|
|
●
|
Notes payable with a principal amount of $261,172 and accrued interest of $38,064;
|
|
●
|
Amounts owed to employee for wages of $36,624;
|
|
●
|
Amounts payable to vendors in the Vendor Trust as of June 30, 2021, of $109,565 and accrued interest of $13,358;
|
|
●
|
An amount of $93,280 for transaction costs incurred by PSAC and Legacy FF in relation to the Business Combination and Private Placement, including advisory, banking, printing, legal and accounting services. Of this amount, $24,610 was expensed as part of the Business Combination and the remaining $68,670 was recorded to additional paid in capital as equity issuance cost upon the close of the Business Combination; and
|
|
●
|
Capital lease obligations of $3,958.
|
Significant Related Party Notes Payable and Notes Payable Facilities
As discussed above, one of FF’s major sources
of funding prior to the Business Combination was the issuance of related party notes payable and notes payable. As detailed below, these
related parties include employees as well as affiliates and other companies controlled or previously controlled by FF’s founder
and former CEO.
As of June 30, 2021, FF’s outstanding unpaid
principal balance for related party notes payable and notes payable were $204,098 and $301,172, respectively, with related party and third
party accrued interest of $47,274 and $50,776, respectively. On April 9, 2021, Legacy FF signed agreements with its related party notes
payable holders to convert related party notes payable with aggregating principal amounts of $194,810 and accrued interest of $71,760
into 57,513,413 Shares of Class A-1 Convertible Preferred Stock, with a conversion price of $1.67 per share, and 87,003,530 Shares of
Class A-2 Convertible Preferred Stock with a conversion price of $1.96 per share. The Class A-1 and A-2 Convertible Preferred Stock were
converted into shares of the newly registered company after the consummation of the Business Combination using an exchange ratio of 0.14130
(the “Exchange Ratio”). Just prior to the close of the Business Combination, Legacy FF converted: (i) notes payable with principal
amount of $56,000 into 37,335,421 shares of Class A-2 Preferred Stock; (ii) notes payable with an aggregate principal balance of $17,600
into 15,792,771 shares of Class A-1 Preferred Stock; (iii) a note payable with a principal balance of $1,500 into 1,281,976 shares of
Class A-3 Preferred Stock; and (iv) related party notes payable with an aggregate principal amount of $130,479 into 81,855,608 shares
of Class A-2 Preferred Stock. Notes payable with aggregate principal amount of $116,518 and related party notes payable with principal
amounts of $60,104 were either converted into equity or repaid in cash as part of the close of the Business Combination. See Note 15.
Subsequent Events to FF’s unaudited condensed consolidated financial statements for the three and six months ended June 30,
2021 included elsewhere in this prospectus.
Below is a summary describing notes which were
outstanding as of June 30, 2021 and December 31, 2020. For additional discussion of FF’s outstanding related party and third-party
lenders, see Note 8. Related Party Notes Payable and Note 9. Notes Payable of the Notes to FF’s unaudited condensed
consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus. FF’s related
party notes payable and notes payable facilities were either converted into equity in connection with the Business Combination or will
be repaid in cash subsequent to the consummation of the Business Combination. All other notes were converted into equity in connection
with the Business Combination or will be paid on the agreed upon maturity date.
Related party notes payable consists of the following
as of June 30, 2021, December 31, 2020, and December 31, 2019:
|
|
June 30, 2021
|
Note Name
|
|
Contractual
Maturity
Date
|
|
Contractual Interest
Rates
|
|
Unpaid
Balance
|
|
|
Fair Value Measurement Adjustments
|
|
|
Net
Carrying
Value
|
|
Related party note(1)
|
|
June 30, 2021
|
|
12.00%
|
|
$
|
149,674
|
|
|
$
|
—
|
|
|
$
|
149,674
|
|
Related party note(3)
|
|
Due on Demand
|
|
15.00%*
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
Related party notes – NPA tranche(2)
|
|
October 9, 2021
|
|
10.00%
|
|
|
18,112
|
|
|
|
3,657
|
|
|
|
21,769
|
|
Related party notes – China
|
|
Due on Demand
|
|
18.00%*
|
|
|
9,288
|
|
|
|
—
|
|
|
|
9,288
|
|
Related party notes – China various other
|
|
Due on Demand
|
|
0% coupon, 10.00% imputed
|
|
|
5,002
|
|
|
|
—
|
|
|
|
5,002
|
|
Related party notes – China various other(3)
|
|
Due on Demand
|
|
8.99%
|
|
|
1,410
|
|
|
|
—
|
|
|
|
1,410
|
|
Related party notes – Other(3)
|
|
June 30, 2021
|
|
6.99%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
4,160
|
|
Related party notes – Other(3)
|
|
June 30, 2021
|
|
8.00%
|
|
|
6,452
|
|
|
|
—
|
|
|
|
6,452
|
|
|
|
|
|
|
|
$
|
204,098
|
|
|
$
|
3,657
|
|
|
$
|
207,755
|
|
|
|
December 31, 2020
|
Note Name
|
|
Contractual Maturity
Date
|
|
Contractual Interest
Rates
|
|
Unpaid
Balance
|
|
|
Fair Value Measurement Adjustments
|
|
|
0%
Coupon Discount
|
|
|
Loss (Gain)
on Extinguishments
|
|
|
Net Carrying Value
|
|
Related party note
|
|
June 30, 2021
|
|
12.00%
|
|
$
|
240,543
|
|
|
$
|
—
|
|
|
$
|
(861
|
)
|
|
$
|
204
|
|
|
$
|
239,886
|
|
Related party note
|
|
Due on Demand
|
|
15.00%*
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Related party notes – NPA tranche
|
|
October 9, 2021
|
|
10.00%
|
|
|
18,112
|
|
|
|
3,515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,627
|
|
Related party notes – China
|
|
Due on Demand
|
|
18.00%*
|
|
|
9,196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,196
|
|
Related party notes – China various other
|
|
Due on Demand
|
|
0% coupon, 10.00% imputed
|
|
|
6,548
|
|
|
|
—
|
|
|
|
(190
|
)
|
|
|
(22
|
)
|
|
|
6,336
|
|
Related party notes – China various other
|
|
Due on Demand
|
|
8.99%
|
|
|
1,410
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
1,407
|
|
Related party notes – Other
|
|
Due on Demand
|
|
0.00%
|
|
|
424
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
424
|
|
Related party notes – Other
|
|
June 30, 2021
|
|
6.99%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
|
|
4,110
|
|
Related party notes – Other
|
|
June 30, 2021
|
|
8.00%
|
|
|
6,452
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
6,417
|
|
|
|
|
|
|
|
$
|
296,845
|
|
|
$
|
3,515
|
|
|
$
|
(1,051
|
)
|
|
$
|
94
|
|
|
$
|
299,403
|
|
|
|
December 31, 2019
|
Note Name
|
|
Contractual Maturity
Date
|
|
Contractual Interest
Rates
|
|
Unpaid
Balance
|
|
|
Fair Value Measurement Adjustments
|
|
|
0%
Coupon Discount
|
|
|
Net
Carrying
Value
|
|
Related party note
|
|
December 31, 2020
|
|
12.00%
|
|
$
|
215,940
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215,940
|
|
Related party note
|
|
Due on Demand
|
|
0% coupon, 10.00% imputed
|
|
|
24,399
|
|
|
|
—
|
|
|
|
(3,557
|
)
|
|
|
20,842
|
|
Related party note
|
|
Due on Demand
|
|
15.00%*
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Related party notes – NPA tranche
|
|
May 31, 2020
|
|
10.00%
|
|
|
18,112
|
|
|
|
3,410
|
|
|
|
—
|
|
|
|
21,522
|
|
Related party notes – China
|
|
Due on Demand
|
|
18.00%*
|
|
|
8,601
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,601
|
|
Related party notes – China various other
|
|
Due on Demand
|
|
0% coupon, 10.00% imputed
|
|
|
6,125
|
|
|
|
—
|
|
|
|
(607
|
)
|
|
|
5,518
|
|
Related party notes – Other
|
|
December 31, 2020
|
|
6.99%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,160
|
|
|
|
|
|
|
|
$
|
287,337
|
|
|
$
|
3,410
|
|
|
$
|
(4,164
|
)
|
|
$
|
286,583
|
|
(1)
|
On April 9, 2021, Legacy FF signed agreements with certain of its related party notes holders to convert their notes with principal amounts of $194,810 and accrued interest of $71,764 into 57,513,413 shares of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and 87,003,560 shares of A-2 Convertible Preferred Stock with a conversion price of $1.96 per share. Under the agreements, the notes ceased to accrue interest on March 31, 2021.
|
On May 13, 2021, related party notes payable with aggregating
principal amounts of $90,869 and accrued interest of $43,490 was converted into 57,513,413 Shares of Class A-1 Convertible Preferred Stock
with a conversion price of $1.67 per share and 19,546,600 Shares of Class A-2 Convertible Preferred Stock with a conversion price of $1.96
per share. The outstanding principal balance subsequent to the conversion was $149,674 as of June 30, 2021. The Class A-1 and A-2 Convertible
Preferred Stock converted into Class A Common Stock after the consummation of the Business Combination based on the Exchange Ratio. As
of June 30, 2021, $125,071 of the related party notes payable were in default.
(2)
|
On April 29, 2019, Legacy FF executed the Note Purchase Agreement (“NPA”) with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA was $200,000. Upon both a FF Preferred Stock offering and prepayment notice by the holder, or on the maturity date of the notes payable, the holder may elect to convert all of the outstanding principal and accrued interest of the notes payable, plus a 20.00% premium, into shares of Class A Convertible Preferred Stock in the offering. FF elected the fair value option for these notes payable. See Note 7. Fair Value of Financial Instruments to FF’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus.
|
(3)
|
As of June 30, 2021, FF was in default on twelve of its related party notes with a principal value of $22,022. FF was in compliance with all covenants under its remaining related party notes payable agreements as of June 30, 2021.
|
During the six months ended June 30, 2021, FF’s
outstanding unpaid principal balance of related party notes payable decreased from $296,845 to $204,098, primarily due the conversion
of related party notes aggregating $90,869 of principal balance into equity on April 9, 2021, as mentioned above. Related party notes
payable of $18,112 were measured at fair value due to embedded conversion features. Just prior to the Business Combination, Legacy FF
converted related party notes payable with an aggregate principal amount of $130,479 into 81,855,608 shares of Class A-2 Preferred Stock.
Related party notes payable with principal amounts of $60,104 were either converted into equity or repaid in cash as part of the close
of the Business Combination. See Note 15. Subsequent Events to FF’s unaudited condensed consolidated financial statements
for the three and six months ended June 30, 2021 included elsewhere in this prospectus.
During the year-end December 31, 2020, $37,915
of related party notes payable was modified resulting in a gain on extinguishment being recognized with a resulting unaccreted discount
of $767. As of December 31, 2020, related party notes payable of $240,543 were modified resulting in a troubled debt restructuring with
no gain or loss recognized, and related party notes payable of $18,112 were measured at fair value due to embedded conversion features.
Notes payable consists of the following as of June
30, 2021, December 31, 2020, and December 31, 2019:
|
|
June 30, 2021
|
Note Name
|
|
Contractual
Maturity
Date
|
|
Contractual Interest Rates
|
|
|
Unpaid
Balance
|
|
|
Fair Value Measurement Adjustments
|
|
|
Proceeds Allocated to
Warrants
|
|
|
Net
Carrying
Value
|
|
Note payable
|
|
Repayment in 10% increments contingent on a specified fundraising event
|
|
|
12.00
|
%
|
|
$
|
56,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56,000
|
|
Notes payable – NPA tranche
|
|
October 6, 2021
|
|
|
10.00
|
%
|
|
|
27,117
|
|
|
|
5,473
|
|
|
|
—
|
|
|
|
32,590
|
|
Notes payable(1)
|
|
October 6, 2021
|
|
|
14.00
|
%
|
|
|
55,000
|
|
|
|
11,232
|
|
|
|
—
|
|
|
|
66,232
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
12.00
|
%
|
|
|
19,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,100
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,400
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,240
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300
|
|
Notes payable(2)
|
|
October 6, 2021
|
|
|
8.00
|
%
|
|
|
3,750
|
|
|
|
1,475
|
|
|
|
—
|
|
|
|
5,225
|
|
Notes payable(2)
|
|
October 6, 2021
|
|
|
15.75
|
%
|
|
|
5,600
|
|
|
|
2,202
|
|
|
|
—
|
|
|
|
7,802
|
|
Notes payable(3)
|
|
October 6, 2021
|
|
|
0.00
|
%
|
|
|
18,250
|
|
|
|
5,241
|
|
|
|
—
|
|
|
|
23,491
|
|
Notes payable(3)
|
|
December 9, 2022
|
|
|
0.00
|
%
|
|
|
20,000
|
|
|
|
649
|
|
|
|
(2,563
|
)
|
|
|
18,086
|
|
Notes payable(3)
|
|
December 9, 2022
|
|
|
0.00
|
%
|
|
|
20,000
|
|
|
|
648
|
|
|
|
(2,562
|
)
|
|
|
18,086
|
|
Note payable(4)
|
|
March 9, 2022
|
|
|
0.00
|
%
|
|
|
15,667
|
|
|
|
4,499
|
|
|
|
—
|
|
|
|
20,166
|
|
Note payable(5)
|
|
October 6, 2021
|
|
|
12.75
|
%
|
|
|
15,666
|
|
|
|
6,160
|
|
|
|
—
|
|
|
|
21,826
|
|
Notes payable – China various other
|
|
Various Dates 2021
|
|
|
6.00
|
%
|
|
|
4,917
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,917
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,715
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,715
|
|
Notes payable – China various other(6)
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
5,387
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,387
|
|
Notes payable – various other notes(7)
|
|
June 30, 2021
|
|
|
6.99
|
%
|
|
|
1,260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,260
|
|
Notes payable – various other notes(7)
|
|
Due on Demand
|
|
|
8.99
|
%
|
|
|
500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
Notes payable – various other notes(7)
|
|
June 30, 2021
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
11,635
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,635
|
|
Notes payable
|
|
April 17, 2022
|
|
|
1.00
|
%
|
|
|
9,168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,168
|
|
|
|
|
|
|
|
|
|
$
|
301,172
|
|
|
$
|
37,579
|
|
|
$
|
(5,125
|
)
|
|
$
|
333,626
|
|
|
|
December 31, 2020
|
Note Name
|
|
Contractual
Maturity
Date
|
|
Contractual
Interest
Rates
|
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
Gain on
Extinguishments
|
|
|
Net
Carrying
Value
|
|
Note payable
|
|
Repayment in 10% increments contingent on a specified fundraising event
|
|
|
12.00
|
%
|
|
$
|
57,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,293
|
|
Notes payable – NPA tranche
|
|
October 6, 2021
|
|
|
10.00
|
%
|
|
|
27,118
|
|
|
|
5,263
|
|
|
|
—
|
|
|
|
32,381
|
|
Notes payable
|
|
June 30, 2021
|
|
|
12.00
|
%
|
|
|
19,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,100
|
|
Notes payable
|
|
June 30, 2021
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
(102
|
)
|
|
|
4,298
|
|
Notes payable
|
|
June 30, 2021
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
2,235
|
|
Notes payable
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
300
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
299
|
|
Notes payable – China various other
|
|
Various Dates 2021
|
|
|
6.00
|
%
|
|
|
4,869
|
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
4,807
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,677
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
3,659
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
4,597
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,597
|
|
Notes payable – various other notes
|
|
June 30, 2021
|
|
|
6.99
|
%
|
|
|
1,380
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
1,370
|
|
Notes payable – various other notes
|
|
Due on Demand
|
|
|
8.99
|
%
|
|
|
380
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
379
|
|
Notes payable – various other notes
|
|
June 30, 2021
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
(29
|
)
|
|
|
1,471
|
|
Note payable
|
|
March 9, 2022
|
|
|
0.00
|
%
|
|
|
15,000
|
|
|
|
2,712
|
|
|
|
—
|
|
|
|
17,712
|
|
Note payable
|
|
October 6, 2021
|
|
|
12.75
|
%
|
|
|
15,000
|
|
|
|
5,972
|
|
|
|
—
|
|
|
|
20,972
|
|
Notes payable
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
11,635
|
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
11,578
|
|
Notes payable
|
|
April 17, 2022
|
|
|
1.00
|
%
|
|
|
9,168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,168
|
|
|
|
|
|
|
|
|
|
$
|
177,657
|
|
|
$
|
13,947
|
|
|
$
|
(285
|
)
|
|
$
|
191,319
|
|
|
|
December 31, 2019
|
Note Name
|
|
Contractual
Maturity
Date
|
|
|
Contractual Interest
Rates
|
|
|
|
Unpaid
Balance
|
|
|
|
Fair Value Measurement Adjustments
|
|
|
|
Net
Carrying
Value
|
|
Note payable
|
|
Repayment in 10%
increments contingent
on a specified
fundraising event
|
|
|
12.00
|
%
|
|
$
|
53,185
|
|
|
$
|
—
|
|
|
$
|
53,185
|
|
Notes payable – NPA tranche
|
|
May 31, 2020
|
|
|
10.00
|
%
|
|
|
26,218
|
|
|
|
4,935
|
|
|
|
31,153
|
|
Notes payable– NPA tranche
|
|
March 6, 2020
|
|
|
10.00
|
%
|
|
|
900
|
|
|
|
169
|
|
|
|
1,069
|
|
Notes payable
|
|
December 31, 2019
|
|
|
12.00
|
%
|
|
|
12,100
|
|
|
|
—
|
|
|
|
12,100
|
|
Notes payable
|
|
Due on Demand
|
|
|
12.00
|
%
|
|
|
7,000
|
|
|
|
—
|
|
|
|
7,000
|
|
Notes payable
|
|
December 31, 2019
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
4,400
|
|
Notes payable
|
|
July 1, 2020
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
2,240
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,440
|
|
|
|
—
|
|
|
|
3,440
|
|
Notes payable – China various other
|
|
Various Dates 2020
|
|
|
6.00
|
%
|
|
|
3,155
|
|
|
|
—
|
|
|
|
3,155
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
4,300
|
|
|
|
—
|
|
|
|
4,300
|
|
Notes payable – various other notes
|
|
Repayment upon new
equity or debt financing in
an aggregate amount
exceeding $50,000
|
|
|
8.99
|
%
|
|
|
500
|
|
|
|
—
|
|
|
|
500
|
|
Notes payable – various other notes
|
|
Due on Demand
|
|
|
6.99
|
%
|
|
|
180
|
|
|
|
—
|
|
|
|
180
|
|
Notes payable – various other notes
|
|
June 3, 2020
|
|
|
6.99
|
%
|
|
|
2,700
|
|
|
|
—
|
|
|
|
2,700
|
|
Notes payable – various other notes
|
|
December 31, 2019
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
$
|
121,818
|
|
|
$
|
5,104
|
|
|
$
|
126,922
|
|
(1)
|
On March 1, 2021, Legacy FF amended the NPA to permit the issuance of additional notes payable
with principal amounts up to $85,000. On the same day, Legacy FF entered into notes payable agreements with Ares for an aggregate
principal of $55,000, receiving net proceeds of $51,510, inclusive of a 4.00% original issue discount and $90 of debt issuance costs
paid directly by the lender. The notes payable are collateralized by a first lien on virtually all tangible and intangible assets
of Legacy FF and bear interest at 14% per annum. The notes payable mature on the earliest of (i) March 1, 2022, (ii) October
6, 2021, if the Qualified SPAC Merger contemplated in the Merger Agreement has not been consummated by July 27, 2021, (iii) the
occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. Legacy FF has elected
the fair value option because the notes include features, such as a contingently exercisable put option, which meet the definition
of an embedded derivative. Additionally, the notes payable agreements contain a minimum cash provision, which requires Legacy FF
to maintain at least $5,000 of cash on hand at all times. Legacy FF has classified the related $5,000 in Restricted Cash on its unaudited
condensed consolidated balance sheet as of June 30, 2021. On August 26, 2021, the Company drew an aggregated principal amount
of $30,000 from the lender, pursuant to the terms of the amended NPA, receiving net proceeds of $29,913, net of debt issuance costs
of $87. The note payable is collateralized by a first lien on virtually all tangible and intangible assets of the Company and bears
interest at 14% per annum. The note payable matures on the earliest of (i) March 1, 2022, (ii) the occurrence of a change in control,
or (iii) the occurrence of an acceleration event, such as a default. Additionally, upon closing of the Merger, the minimum cash provision,
which requires the Company to maintain minimum cash on hand at all times, increased from $5,000 to $25,000.
|
In addition, in conjunction with the issuance of the
notes payable, the Company committed to issue warrants to the lender to purchase the Company’s Class A Ordinary Stock no later
than August 11, 2021, or, if earlier, 15 days after consummation of the Merger. The warrants will have a term of 6 years, be equal to
0.20% of the fully diluted capitalization of FFIE’s Class A Common Stock and have an exercise price of $10 per share. The warrants
meet the definition of a derivative, were accounted for as a liability, and will be marked to fair value at the end of each reporting
period with the changes in fair market value recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
The Company determined the commitment to issue warrants was a liability as of March 1, 2021, and estimated the fair value of the warrants
to be $5,000 using the Black-Scholes option-pricing model under two scenarios (See Note 7. Fair Value of Financial Instruments). Fair
value of the warrants as of June 30, 2021, was $7,880. Pursuant to its commitment to issue warrants to Ares following the closing of
the Merger, on August 5, 2021, the Company issued warrants to the lender, which are exercisable at the election of the lender at any
time within 6 years of the issuance date into 670,092 shares of the Company’s Class A Common Stock.
|
|
June 30,
2021
|
|
Outstanding principal
|
|
$
|
55,000
|
|
Accrued interest
|
|
|
654
|
|
Interest expense
|
|
|
654
|
|
Original issue discount
|
|
|
3,490
|
|
Debt issuance costs recorded in interest expense
|
|
|
315
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
Net proceeds
|
|
$
|
51,510
|
|
(2)
|
On January 13, 2021,
Legacy FF amended the NPA to permit the issuance of additional notes payable and issued $3,750 of notes payable to Birch Lake,
receiving net proceeds of $3,510, inclusive of a 6.50% original issue discount and $225 of debt issuance costs paid directly by the
lender. The additional secured convertible notes payable issued to Birch Lake (“BL Notes”) accrue interest at 8% per
annum. The BL Notes mature on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger,
(iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations in the event of a default.
Additionally, the BL Notes contain a liquidation premium that ranges from 35% to 45% depending on the timing of settlement, with 50%
of this premium convertible into equity. Birch Lake can demand repayment of the BL Notes if an event of default, change in control,
or a Qualified SPAC Merger occurs. Legacy FF determined that the feature to settle the BL Notes at a premium upon the occurrence of
a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and
represents an embedded derivative. Legacy FF elected the fair value option for this note payable. See Note 7. Fair Value of
Financial Instruments to FF’s unaudited condensed consolidated financial statements for the three and six months ended
June 30, 2021 included elsewhere in this prospectus.
|
On March 8, 2021, Legacy FF entered into a notes
payable agreement under the NPA, as amended, with Birch Lake with a total principal of $5,600, receiving net proceeds of $5,240,
inclusive of a 6.50% original issue discount and $307 of debt issuance costs paid directly by the lender. The notes payable matures
on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, as defined in the note
agreement, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a
default. The notes payable bears interest at 15.75% per annum. Additionally, the notes payable contains a liquidation premium that
ranges from 42% to 52% depending on timing of settlement, with 50% of this premium convertible into equity. Birch Lake can demand
repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. Legacy FF determined that the feature to
settle the notes payable at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a
contingently exercisable put option with a liquidation premium and represents an embedded derivative. Legacy FF has elected to
measure the notes payable at fair value because the notes include features, such as a contingently exercisable put option, which
meet the definition of an embedded derivative.
(3)
|
On January 13, 2021,
Legacy FF entered into a note payable agreement under the NPA, as amended, (“January 13 Notes”) with a US-based
investment firm for total principal of $11,250, receiving net proceeds of $10,350, inclusive of an 8% original issue discount and
$480 of debt issuance costs paid directly by the lender. The note payable is collateralized by a first lien on virtually all
tangible and intangible assets of Legacy FF and bears interest at 0% per annum. The note payable matures on the earliest of
(i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control,
or (iv) the occurrence of an acceleration event, such as an event of default. In the event Legacy FF consummates a Qualified
SPAC Merger, an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued original issue discount
under the notes through (but not including) the date of consummation of the Qualified SPAC Merger will automatically convert into
Common Stock of PSAC received by Legacy FF’s Class A ordinary stockholders and the notes and interest shall be deemed
satisfied in full and terminated. Legacy FF elected the fair value option for this note payable because the inclusion of a
conversion feature that allows the lenders to convert the notes payable into Preferred Stock.
|
On March 12, 2021, Legacy FF and the US-based investment
firm entered into a notes payable agreement (“March 12 Notes”) for an aggregate principal amount of $7,000, receiving net
proceeds of $6,440, inclusive of an 8% original issue discount. The terms of this note payable are the same as the notes payable issued
on January 13, 2021.
In conjunction with the issuance of the notes on
various dates during January 2021 and March 2021, Legacy FF issued warrants to purchase 270,200 shares of Legacy FF’s Class A
Ordinary Stock with an exercise price of $2.72 and 2,167,254 shares of Legacy FF’s Class A Ordinary Stock with an exercise
price of $2.71. The warrants were issued with a term of seven years and are subject to certain down-round adjustments. The fair
value of the warrants was recorded in equity in accordance with the derivative accounting scope exception in ASC 815 for certain
contracts involving an entity’s own equity. Legacy FF estimated the fair value of the warrants to be $1,988 using the
Black-Scholes option-pricing model. (See Note 7. Fair Value of Financial Instruments to FF’s unaudited condensed
consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus.)
On June 9, 2021, Legacy FF amended the NPA to permit
the issuance of two notes payable, each with a principal value of $20,000 (“June 2021 Notes”), to a US-based investment firm.
The June 2021 Notes are subordinate to the notes payable issued to Birch Lake on January 13 and March 8, 2021 (See (2) above) and the
notes payable issued to Ares on March 1, 2021 (See (1) above) and senior in priority to the notes payable issued under the NPA prior to
September 9, 2020. The June 2021 Notes mature on December 9, 2022, and do not bear interest unless extended beyond its maturity date by
the US-based investment firm, in which case, the June 2021 Notes will bear interest at 10% per annum starting upon their original maturity.
Each of the June 2021 Notes are subject to an original issue discount of 8% and 13%, respectively. The June 2021 Notes contain a liquidation
premium that upon a Qualified SPAC Merger the then outstanding principal accrued interest of the notes payable plus a 30% premium convert
into Class A Ordinary Stock of Legacy FF. Legacy FF received net proceeds of $35,603 as part of the June 2021 Notes.
As part of the Amendment to the NPA, on or prior to the 12-month
anniversary of the Qualified SPAC Merger, the US-based investment firm has the option to purchase additional notes for up to $40,000 (“Optional
Notes”), subject to similar original issue discounts as the June 2021 Notes. The June 2021 Notes and the Optional Notes, along with
the notes previously issued to the same lender, are provided with an anti-dilution protection. Subsequent to June 30, 2021, the US-based
investment firm exercised its option to purchase $33,917 of Optional Notes. See Note 15. Subsequent Events to FF’s unaudited
condensed consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus for
additional information.
In connection with the issuance of the June 2021 Notes,
Legacy FF issued warrants to the US-based investment firm to purchase up to 5,831,357 of Legacy FF’s Class A Ordinary Stock
for $2.5723 per share exercise price on or before June 9, 2028. Upon the occurrence of a Fundamental Transaction, the warrants shall
be exercisable within 15 days and their exercise price shall be adjusted to equal the lower of (i) $2.5723 per share, (ii) the
pre-money valuation ascribed to Legacy FF in connection with the Fundamental Transaction divided by the pro-forma fully diluted
capitalization of Legacy FF and (iii) the lowest effective net price per share of Legacy FF Class A Ordinary stock paid for by any
third party at the time of or in connection with the Fundamental Transaction. The Optional Notes are entitled to warrants with the
same terms as the June 2021 Notes once the Optional Notes are issued.
(4)
|
On January 13, 2021, Legacy FF amended the NPA to increase the principal amount of its $15,000 note payable with a US-based investment firm by $667. Legacy FF received no cash proceeds as the increase in principal was used to pay a consent fee to the US-based investment firm. The Legacy FF recorded the consent fee in Interest Expense on FF’s unaudited condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2021. The consent fee permitted the issuance of additional notes payable to the US-based investment firm of $11,250 and $7,000, as described in (3) above.
|
(5)
|
On January 13, 2021,
Legacy FF amended the NPA to issue an additional note to Birch Lake, with the same terms as its $15,000 note payable to Birch Lake,
in the amount of $666. Legacy FF received no cash proceeds as the additional note was used to pay a consent fee to Birch Lake.
Legacy FF recorded the consent fee in Interest Expense on Legacy FF’s unaudited condensed consolidated statements of
operations and comprehensive loss for the six months ended June 30, 2021. The consent fee permitted the issuance of additional notes
payable to Birch Lake of $3,750 and $5,600, as described in (2) above.
|
(6)
|
On January 15, 2021, Legacy FF borrowed $102 from a Chinese lender. The unsecured note payable is payable on demand and does not have a stated interest rate.
|
(7)
|
As of June 30, 2021,
Legacy FF was in default on sixteen of its notes payable with an aggregate principal value of $40,935. Legacy FF is in compliance
with all its covenants under the remaining notes payable agreements as of June 30, 2021.
|
During the six months ended June 30, 2021,
Legacy FF’s outstanding unpaid principal balance of notes payable increased from $177,657 to $301,172 primarily due to
additional proceeds from new notes payable with aggregate principal value of $122,600, as detailed above. $213,504 of notes payable
was measured at fair value due to embedded features. Legacy FF has applied for forgiveness of the PPP Loan of $9,168. Just prior to
the close of the Business Combination, Legacy FF converted: (i) notes payable with principal amount of $56,000 into 37,335,421
shares of Class A-2 Preferred Stock; (ii) notes payable with an aggregate principal balance of $17,600 into 15,792,771 shares of
Class A-1 Preferred Stock; and (iii) a note payable with a principal balance of $1,500 into 1,281,976 shares of Class A-3 Preferred
Stock. Notes payable with aggregate principal amount of $116,518 were either converted into equity or repaid in cash as part of the
close of the Business Combination. See Note 15, Subsequent Events to FF’s unaudited condensed consolidated financial
statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus.
Subsequent
Events.
During the year ended December 31, 2020, $30,382
of notes payable was modified resulting in a gain on extinguishment being recognized with a resulting unaccreted discount of $285 as of
December 31, 2020, $76,393 of notes payable was modified resulting in a troubled debt restructuring with no gain or loss recognized, and
$57,117 of notes payable was measured at fair value due to embedded features.
Cash Flow Analysis
Presented below is a summary of Legacy FF’s cash flows for
the periods indicated:
|
|
For the Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Net cash provided by (used in)
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(52,311
|
)
|
|
$
|
(19,793
|
)
|
Investing activities
|
|
|
(1,386
|
)
|
|
|
3,500
|
|
Financing activities
|
|
|
111,525
|
|
|
|
16,691
|
|
Effect of exchange rate changes on cash and restricted cash
|
|
$
|
(1,407
|
)
|
|
$
|
143
|
|
Operating Activities
Legacy FF continues to experience negative
cash flows from operations as Legacy FF designs and develops its vehicles and builds its infrastructure both in the
United States and China. Legacy FF’s cash flows from operating activities are significantly affected by Legacy FF’s
cash investments to support the growth of Legacy FF’s business in areas such as research and development associated with
Legacy FF’s electric vehicles, corporate planning and general and administrative functions. Legacy FF’s operating cash
flows are also affected by its working capital needs to support growth and fluctuations in personnel related expenditures, accounts
payable, accrued interest, other current liabilities, deposits and, other current assets.
Net cash used by operating activities was
$52,311 and $19,793 for the six months ended June 30, 2021 and 2020, respectively. The largest components of Legacy FF’s cash
used during the six months ended June 30, 2021, were $25,570 for wages and compensation related expenses and $11,604 for
professional services. Other movements were related to changes in working capital.
The largest component of Legacy FF’s
cash used during the six months ended June 30, 2020, was $16,552 for wages and compensation.
Investing Activities
Net cash (used in) provided by investing activities
was $(1,386) and $3,500 for the six months ended June 30, 2021, and 2020, respectively. Cash used for investing activities for the six
months ended June 30, 2021, consists of payments for equipment purchases.
Net cash provided by investing activities for the
six months ended June 30, 2020, consists of $3,600 in note receivable payments offset by $100 of payments for equipment purchases.
Financing Activities
Legacy FF has financed its operations
primarily with proceeds from issuances of related party notes payable and notes payable.
Net cash provided from financing activities was
$111,525 and $16,691 for the six months ended June 30, 2021, and 2020, respectively. Cash provided from financing activities during the
six months ended June 30, 2021, primarily consists of proceeds of $111,940 from the issuance of notes payable and related party notes
payable net of original issuance discounts and $7,752 from the exercise of stock options. These were partially offset by payments for
related party notes payable obligations of $1,528, payments of notes payable issuance costs of $3,355, payments of stock issuance cost
of $1,071 and payments of capital lease obligations of $2,212.
Net cash provided from financing activities during
the six months ended June 30, 2020, primarily consists of proceeds of $18,203 from the issuance of notes payable and related party notes
payable. Cash outflows for the six months ended June 30, 2020, were $1,531 related to payments of capital lease obligations and $123 of
debt issuance costs.
Effect of Exchange Rate Changes on Cash and Restricted Cash
The exchange rates effect on Cash and Restricted
Cash was a negative impact of $1,407 for the six months ended June 30, 2021 and a positive impact of $143 for the same period in 2020.
The effects of exchange rate changes on cash and restricted cash result from fluctuations on the translation of assets and liabilities
denominated in foreign currencies, primarily RMB. Fluctuations in exchange rates against the U.S. dollar may positively or negatively
affect Legacy FF’s operating results.
Contractual Obligations and Commitments
During the six months ended June 30, 2021,
Legacy FF had the following major changes in its contractual obligations, Legacy FF: (i) issued new notes payables to third parties
with aggregated principal value of $122.6 million; and (ii) converted related party notes payable with an aggregate principal
balance of approximately $90.9 million and accrued interest of approximately $43.5 million into 57,513,413 shares of Class A-1
Convertible Preferred Stock, with a conversion price of $1.67 per share, and 19,546,600 Shares of Class A-2 Convertible Preferred
Stock with a conversion price of $1.96 per share. The Class A-1 and A-2 Convertible Preferred Stock converted into Company Class A
Common Stock after the consummation of the Business Combination based on the Exchange Ratio.
Subsequent to June 30, 2021, related party
notes payable and notes payable with aggregated principal balance of approximately $130.5 million and $75.1 million, respectively,
were converted into 15,792,771 shares of Class A-1 Preferred Stock, 119,191,029 shares of Class A-2 Preferred Stock, and 1,281,976
Class A-3 Preferred Stock. Additionally, as of the closing of the Business Combination and through the date that Legacy FF’s
unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 were available to be issued,
related party notes payable and notes payable with an aggregate principal balance of approximately $60.1 million and $116.5 million,
respectively, were either converted into equity or repaid in cash.
Other than the transactions described above, there
were no material changes in our contractual obligations and commitments from December 31, 2020. The following table sets forth, as of
December 31, 2020, significant cash obligations that affect FF’s future liquidity:
|
|
Payments Due by Period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 to 3
years
|
|
|
3 to 5
years
|
|
|
After
5 years
|
|
|
|
(in thousands)
|
|
Operating lease obligations
|
|
$
|
525
|
|
|
$
|
525
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital lease obligations(1)
|
|
|
16,843
|
|
|
|
4,395
|
|
|
|
5,207
|
|
|
|
3,549
|
|
|
|
3,692
|
|
Vendor payables in trust(2)
|
|
|
111,574
|
|
|
|
111,574
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Vendor payables in trust interest(5)
|
|
|
11,840
|
|
|
|
11,840
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Related party notes payable(3)
|
|
|
296,845
|
|
|
|
296,845
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Related party accrued interest(5)
|
|
|
78,583
|
|
|
|
78,583
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Notes payable(4)
|
|
|
177,658
|
|
|
|
168,490
|
|
|
|
9,168
|
|
|
|
—
|
|
|
|
—
|
|
Notes payable accrued interest(5)
|
|
|
28,368
|
|
|
|
28,368
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total contractual obligations
|
|
$
|
722,236
|
|
|
$
|
700,620
|
|
|
$
|
14,375
|
|
|
$
|
3,549
|
|
|
$
|
3,692
|
|
(1)
|
Capital lease obligations include property leases, such as FF main production facility in Hanford, California and its headquarters in Gardena, California.
|
(2)
|
The Vendor Trust provides FF’s suppliers with the opportunity to exchange unsecured trade receivables held by such suppliers for secured trust interests. All obligations due under the Vendor Trust are collateralized by a first lien, with third payment priority, pursuant to applicable intercreditor agreements, on substantially all of the tangible and intangible assets of the borrowers and guarantors.
|
(3)
|
Related party notes payable include multiple term notes to related party lenders. Interest rates range from 0% – 18%.
|
(4)
|
Notes payable includes multiple term notes to third-party lenders. Interest rates range from 0% – 12.75%.
|
(5)
|
Accrued interest related to the actual amount accrued as of December 31, 2020 related to the related party notes payable, notes payable and vendor payables in trust.
|
The commitment amounts in the table above are associated
with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to
be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not
include obligations under agreements that FF can cancel without a significant penalty.
Off-Balance Sheet Arrangements
We did not have 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 June 30, 2021 or December 31, 2020.
Critical Accounting Estimates
The preparation of Legacy FF’s
condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period.
Management has based its estimates on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values that are not readily
apparent from other sources.
Actual results may differ from these
estimates under different assumptions or conditions. Changes in the accounting estimates are reasonably likely to occur from period
to period. Accordingly, actual results could differ significantly from the estimates made by Legacy FF’s management. Critical
accounting estimates and assumptions are evaluated on an ongoing basis including those related to the: (i) realization of tax
assets and estimates of tax liabilities; (ii) valuation of equity securities; (iii) recognition and disclosure of
contingent liabilities, including litigation reserves; (iv) fair value of related party notes payable and notes payable;
(v) estimated useful lives of long-lived assets; and (vi) fair value of options granted to employees and non-employees and
warrants. To the extent that there are material differences between these estimates and actual results, future financial statement
presentation, financial condition, results of operations and cash flows will be affected. Given the global economic climate and
unpredictable nature and unknown duration of the COVID-19 pandemic, estimates are subject to additional volatility.
For a description of Legacy FF’s
significant accounting policies, see Note 3 Summary of Significant Accounting Policies, of the Notes to FF’s audited
consolidated financial statements for the year ended December 31, 2020 included elsewhere in this prospectus. An accounting policy
is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the
accounting estimates that are reasonably likely to occur periodically, could materially impact Legacy FF’s consolidated
financial statements. Management believes the following critical accounting policies reflect the more significant estimates and
assumptions used in the preparation of Legacy FF’s consolidated financial statements.
Fair Value Measurements
Stock-Based Compensation
Legacy FF accounts for all stock-based compensation
awards granted to employees and non-employees at fair value. Legacy FF’s stock-based payments consist of stock options subject to
various vesting conditions. Legacy FF estimates the fair value of stock options using the Black-Scholes option-pricing model. Determining
the fair value of stock-based compensation awards under this model requires highly subjective assumptions, including the fair value of
the underlying ordinary share, risk-free interest rate, the expected term of the award, the expected volatility of the price of Legacy
FF’s ordinary share, and the expected dividend yield of Legacy FF’s ordinary share. These estimates involve inherent uncertainties
and the application of management’s judgment. If Legacy FF had made different assumptions, Legacy FF’s stock-based compensation
expense and its net loss could have been materially different.
The assumptions and estimates are as follows:
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Expected Term. Given Legacy FF does not have sufficient
exercise history to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior,
Legacy FF determines the expected term using the simplified method, which estimates the term based on an averaging of the vesting
period and contractual term of the option grant for employee awards and the contractual term of the stock option award agreement
for non-employees.
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Expected Volatility. Legacy FF determines the expected volatility based on the historical average volatilities of publicly traded industry peers. Legacy FF intends to continue to consistently apply this methodology using the same or similar public companies until a sufficient amount of historical information regarding the volatility of Legacy FF’s own ordinary shares price becomes available, unless circumstances change such that the identified companies are no longer similar to Legacy FF, in which case more suitable companies whose stock prices are publicly available would be utilized in the calculation.
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Risk-Free Interest Rate. The risk-free interest rate assumption is based upon observed interest rates on United States government securities appropriate for the expected term of the stock option.
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Expected Dividend Yield. Legacy FF has not paid and does not anticipate applying any cash dividends in the foreseeable future and, therefore, Legacy FF uses an expected dividend yield of zero.
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Forfeiture rate. Legacy FF estimates a forfeiture rate to calculate its stock-based compensation expense for its stock-based awards. The forfeiture rate is based on an analysis of actual forfeitures. Legacy FF will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated forfeiture rate can have a significant impact on Legacy FF’s stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the estimated forfeiture rate is changed.
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Fair Value of Ordinary Stock. Because there is no public market for Legacy FF’s ordinary stock, Legacy FF’s Board of Directors has determined the fair value of Legacy FF’s ordinary stock at the time of the grant of stock options by considering a number of objective and subjective factors. The fair value of the underlying ordinary stock will be determined by Legacy FF’s Board of Directors until such time as Legacy FF’s ordinary stock commences trading on an established stock exchange or national market system. The fair value has been determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled “Valuation of Privately Held Company Equity Securities Issued as Compensation”. Legacy FF’s Board of Directors grants stock options with exercise prices equal to the fair value of Legacy FF’s ordinary stock on the date of grant. See section entitled “Fair Value of Ordinary Stock” for additional discussion of the valuation model and assumptions used to fair value Legacy FF’s ordinary stock.
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For the information relating to Legacy FF’s
stock options granted in the six months ended June 30, 2021, see Note 13. Stock-Based Compensation of Notes to FF’s unaudited
condensed consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere in this prospectus.
In addition to the assumptions used in the Black-Scholes
option-pricing model, Legacy FF also estimates a forfeiture rate to calculate its stock-based compensation expense for Legacy FF’s
stock-based awards. The forfeiture rate is based on an analysis of actual forfeitures. Legacy FF will continue to evaluate the appropriateness
of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated
forfeiture rate can have a significant impact on Legacy FF’s stock-based compensation expense as the cumulative effect of adjusting
the rate is recognized in the period the estimated forfeiture rate is changed. If a revised forfeiture rate is higher than the previously
estimated forfeiture rate, an adjustment is made that will result in a decrease to our stock-based compensation expense recognized in
Legacy FF’s consolidated financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate,
an adjustment will be made that will result in an increase to Legacy FF’s stock-based compensation expense recognized in Legacy
FF’s consolidated financial statements.
Fair Value of Ordinary Shares
Legacy FF is required to estimate the fair value
of the ordinary shares underlying Legacy FF’s stock-based awards. The fair value of the ordinary shares underlying Legacy FF’s
stock-based awards has been determined in each case by FF’s Board of Directors, with input from management and contemporaneous third-party
valuation expert. Legacy FF believes that its Board of Directors has the relevant experience and expertise to determine the fair value
of Legacy FF’s ordinary shares. Legacy FF’s Board of Directors intends all stock options granted to be exercisable at a price
per share not less than the fair value per share of the ordinary share underlying those stock options on the date of grant.
In the absence of a public market for Legacy FF’s
ordinary shares, the valuation of Legacy FF’s ordinary shares has been determined using a hybrid method, which incorporated a scenario-based
method and an option pricing method. The valuation was performed in accordance with the guidelines outlined in the American Institute
of Certified Public Accountants Practice Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation.
Legacy FF considered various objective and subjective
factors to determine the fair value of Legacy FF’s ordinary shares as of each grant date, including:
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Contemporaneous valuations performed by unrelated third-party experts;
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The progress of Legacy FF’s research and development;
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Legacy FF’s stage of development and commercialization and Legacy FF’s business strategy;
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Industry information, such as external market conditions affecting the electric car industry and trends within the electric car industry;
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Lack of marketability of Legacy FF’s ordinary stock;
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Likelihood of achieving a liquidity event, such as an initial public offering, SPAC merger, or strategic sale given prevailing market conditions and the nature and history of Legacy FF’s business;
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Prices, privileges, powers, preferences, and rights of our convertible preferred stock relative to those of Legacy FF’s ordinary stock;
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Forecasted cash flow projections for Legacy FF’s business;
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Liquidity of stock-based awards involving securities in a private company; and
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Macroeconomic conditions.
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The assumptions underlying these valuations
represented management’s best estimate, which involved inherent uncertainties and the application of management’s
judgment. The probability of a liquidity event and the derived discount rate are significant assumptions used to estimate the fair
value of Legacy FF’s ordinary stock. If Legacy FF had used different assumptions or estimates, the fair value of Legacy
FF’s ordinary stock and Legacy FF’s stock-based compensation expense could have been materially different.
Following the completion of the Business
Combination in July 2021, Legacy FF started estimating the fair value of options based on the market price of our Class A Common
Stock underlying the awards on the grant date.
During 2019 and 2020, Legacy FF’s
estimated fair value of its Class A Ordinary Stock remained relatively consistent, fluctuating between $0.36 per share as of April
30, 2019 (“April 2019 valuation”), $0.346 per share as of March 31, 2020 (“March 2020 valuation”), before
increasing, mostly as a result of the close of the Business Combination becoming more likely, to $0.391 per share as of January 20,
2021 (“January 2021 valuation”) and $1.123 per share as of April 20, 2021 (“April 2021 valuation”).
In order to estimate the fair value of Legacy
FF’s Class A Ordinary Stock, Legacy FF utilized more than one valuation approach. The April 2019 valuation and March 2020
valuation were completed prior to the contemplation of the Business Combination as such, income and market approaches were utilized
in estimating the fair value. The January 2021 valuation used a Hybrid Method, applying a probability-weighted expected return
method (“PWERM”) to weight the indicated equity value determined under the option pricing model, income and market
approaches for the scenario in which the Business Combination does not close, and the equity value implied by the planned Business
Combination.
During 2019 and 2020, Legacy FF experienced
financial hardship and was unable to satisfy its liabilities, including payables in vendor trust, notes payable, and related party notes
payable. Further, given these financial hardships, FF was unable to successfully achieve its strategic plans, including completing its
manufacturing facility in Hanford or generating revenues from the sale of FF 91, and therefore Legacy FF’s estimated fair value
of Legacy FF Class A Ordinary Stock decreased slightly between 2019 and early 2020. Please refer to Key Factors Affecting Operating Results
and Liquidity and Capital Resources within FF’s Management’s Discussion and Analysis of Financial Condition and Results of
Operations for further details on Legacy FF’s operations, capital resources, and going concern.
The increase in value between the March 2020,
the January 2021 valuation and the April 2021 valuation was due to Legacy FF’s progress towards the Business
Combination. During the latter half of 2020, Legacy FF started contemplating a SPAC merger and began taking the necessary steps to
prepare for the Business Combination with PSAC. The necessary steps undertaken to prepare for the Business Combination included
meeting with PSAC and investment bankers, discussing timing expectations, and negotiating the preliminary letter of intent between
PSAC and Legacy FF. As Legacy FF’s ongoing negotiations related to the Business Combination reflected an increased likelihood
of a near-term exit transaction and/or liquidity event, the valuation of Legacy FF’s equity as of the January 2021 valuation
took into consideration the indicated equity value implied by the negotiations as well as the uncertainty inherent in the future key
milestones including execution of the Merger Agreement and PSAC’s shareholder vote. The April 2021 valuation took into
consideration the signing of the Merger Agreement at January 27, 2021, the benefits expected as a result of amending the Merger
Agreement on February 25, 2021, to increase the permitted amount of any additional bridge loan to $100 million, filing the
Company’s Registration Statement on Form S-4 on April 5, 2021 and the appointment of the post-merger board of directors.
Fair Value Measurements and Fair Value of Related Party Notes Payable,
Notes Payable
Fair value measurement applies to financial assets
and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. Fair value is an
exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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Level 1
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Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds.
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Level 2
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Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. government and agency debt securities, and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds.
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Level 3
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Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
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The accounting guidance for financial instruments
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date.
Legacy FF has elected the fair value option
for certain related party notes payable and notes payable with embedded derivatives. The fair value of certain related party notes
payable and notes payable was determined using a yield method, probability weighted for the likelihood of a liquidity event prior to
maturity that would result in the conversion of the notes payable into ordinary stock. The probability of a liquidity event and the
derived discount rate are assumptions used to estimate the fair value of Legacy FF’s notes payable carried at fair value.
Income Taxes
Legacy FF recognizes deferred tax liabilities
and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of
assets and liabilities. Deferred income 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 of a change in tax
rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations and comprehensive loss in
the period that includes the enactment date. A valuation allowance is recorded when it is more likely than not that some of the
deferred tax assets will not be realized. In evaluating the need for a valuation allowance, management considers the weighting of
all available positive and negative evidence, which includes, among other things, the nature, frequency and severity of current and
cumulative taxable income or losses, future projections of profitability, and the duration of statutory carryforward periods.
Legacy FF recognizes the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in Legacy FF’s consolidated financial
statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being
realized. Legacy FF recognizes interest and penalties accrued with respect to uncertain tax positions, if any, in its provision for
income taxes in the consolidated statements of operations and comprehensive loss.
Recent Accounting Pronouncements
See Note 7. New Accounting Pronouncements of
Notes to FF’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 included elsewhere
in this prospectus for a discussion about accounting pronouncements recently adopted and recently issued, but not yet adopted.
Quantitative and Qualitative Disclosures about Market Risk
FF is exposed to market risks in the ordinary course
of its business. Market risk represents the risk of loss that may impact FF’s financial position due to adverse changes in financial
market prices and rates. FF’s market risk exposure is primarily the result of fluctuations in interest rates and foreign currency
exchange rates.
Interest Rate Risk
FF’s related party notes payable and notes
payable are fixed rate instruments and are not subject to fluctuations in interest rates. FF did not enter into investments for trading
for speculative purposes. FF has not been exposed, nor anticipate being exposed to material risk due to changes in interest rates.
Foreign Currency Exchange Risk
FF’s reporting currency is the U.S. dollar.
FF is exposed to foreign currency exchange risk through its Chinese subsidiaries that use the RMB as their functional currency. The assets
and liabilities of each of FF’s subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet
date and operations accounts are translated using the average exchange rate for the relevant period. Decreases in the relative value
of the U.S. dollar to other currencies may negatively affect operating results as expressed in U.S. dollars. Foreign currency translation
adjustments are accounted for as a component of Accumulated Other Comprehensive income (loss) within Stockholders’ Deficit. Gains
or losses due to transactions in foreign currencies are included in Other Expense, net in the Consolidated Statements of Operations and
Comprehensive Loss. FF has not hedged its foreign currency risk, although FF may choose to do so in the future. FF does not believe that
an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on its
operating results.
Credit Risk
FF is exposed to credit risk through its financial
instruments, which consist of cash, notes receivable, and deposits. FF maintains its cash with major financial institutions. At times,
cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance
limits ($250 thousand per depositor per institution) and China Deposit Insurance Regulations limits (RMB 500 thousand per depositor per
institution). FF believes the financial institutions that hold FF’s cash are financially sound and, accordingly, deem the credit
risk low. FF is exposed to third party credit risk through its notes receivable balance. The credit risk on the note is mitigated by the
borrower also being a lender to FF, and the amount due to the lender from FF is greater than the note receivable balance. FF is exposed
to credit risk through payments of vendor deposits for tooling and equipment. FF closely monitors credit risk related to deposits held
by vendor and has writes off any deposits determined to be unrecoverable.
As of June 30, 2021 and December 31, 2020, FF had
cash and restricted cash of approximately $58.2 million and $1.8 million, respectively.
CONTROLS AND PROCEDURES
Internal Control Over Financial Reporting
FF’s disclosure controls and procedures are
designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules
and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on an evaluation of FF’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), FF’s Chief
Executive Officer and Chief Financial Officer (its principal executive officer and principal financial and accounting officer, respectively)
have concluded that FF’s disclosure controls and procedures were not effective as of June 30, 2021, due to the material weaknesses
in our internal control over financial reporting. FF performed additional analysis as deemed necessary to ensure that FF’s financial
statements were prepare in accordance with GAAP. Accordingly, management believes that the financial statements included in this quarterly
report present fairly in all material respects FF’s financial position, results of operations, and cash flows for the periods presented.
Material Weaknesses in Internal Control over Financial Reporting
In connection with the preparation of FF’s
consolidated financial statements for the years ended December 31, 2020 and 2019, material weaknesses were identified in FF’s
internal control over financial reporting that continue to exist. A material weakness is a deficiency, or combination of deficiencies,
in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or
interim consolidated financial statements will not be prevented or detected on a timely basis. These material weaknesses are as follows:
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FF did not design and maintain an effective control environment commensurate
with its financial reporting requirements. Specifically, FF lacked a sufficient number of professionals with an appropriate level of accounting
knowledge, training, and experience to appropriately analyze, record, and disclose accounting matters timely and accurately. Additionally,
the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities
in pursuit of its financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in its finance
and accounting functions.
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FF did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls were not sufficient to respond to changes to the risks of material misstatement to financial reporting, due to growth in the business.
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FF did not design and maintain effective controls for communicating and sharing information between the legal and accounting and finance departments. Specifically, the accounting and finance departments are not consistently provided the complete and adequate support, documentation, and information to record transactions within the financial statements timely, completely, and accurately.
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These material weaknesses contributed to the following
additional material weaknesses:
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FF did not design and maintain effective controls to address the identification
of and accounting for certain non-routine, unusual or complex transactions, including the proper application of U.S. GAAP of such transactions.
Specifically, FF did not design and maintain controls to timely identify and account for embedded derivatives related to convertible notes,
impute interest on related party notes payable with interest rates below market rates, account for failed sale leaseback transactions,
and account for warrant instruments.
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FF 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 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.
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FF 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; (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; and (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored.
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Remediation of 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. During 2021, we made the following
enhancements to our internal control over financial reporting:
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We added finance and accounting personnel to the organization to strengthen our finance and accounting teams. The additional personnel are expected to provide oversight, structure, reporting lines, and additional review over our disclosures; and
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We implemented new policies, procedures, and an IT system relevant
to the preparation of our financial statements to improve communication of key areas across the different departments at FF and to provide
adequate structure, accountability, and segregation of duties;
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Our remediation activities are continuing during
2021. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:
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Continuing to hire key finance and accounting personnel as we scale and until we have sufficient technical accounting resources, combined with engaging external consultants to provide support and to assist us in our evaluation of more complex applications of U.S. GAAP and to assist us with documenting and assessing our accounting policies and procedures;
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Designing and implementing procedures to identify and evaluate changes in our business and the impact on our internal controls;
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Designing and implementing formal processes, accounting policies, procedures, and controls supporting our financial close process, including creating standard balance sheet reconciliation templates and journal entry controls;
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Continuing to implement additional IT systems relevant to the preparation
of our financial statements and controls over financial reporting to improve communication of key areas across the different departments
at FF and to provide adequate structure, accountability and segregation of duties; and
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Designing and implementing IT general controls, including controls over change management, the review and update of user access rights and privileges and controls over batch jobs and data backups.
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We continue to enhance corporate oversight over
process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability
to enable remediation of our material weaknesses.
While we have made progress, our material weaknesses
will not be considered remediated until we complete the design and implementation of the enhanced controls, the controls operate for a
sufficient period of time, and we have concluded, through testing, that these controls are effective. We believe that our remediation
plan will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting.
As management continues to evaluate and work to
improve our internal control over financial reporting, we may determine that additional measures or modifications to the remediation plan
are necessary.
BUSINESS
Unless
the context indicates otherwise, references in this prospectus to “FFIE”
refer to Faraday Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp.), a holding company incorporated in the
State of Delaware, and not to its subsidiaries, and references herein to the “Company,” “FF,” “we,”
“us,” “our” and similar terms refer to FFIE and its consolidated subsidiaries. We refer to our primary operating
subsidiary in the U.S., Faraday&Future Inc., as “FF U.S.” We refer to our subsidiaries in China, including FF Automotive
(China) Co. Ltd., Ruiyu Automotive (Beijing) Co., Ltd. and Shanghai Faran Automotive Technology Co., Ltd. as the “PRC Subsidiaries.”
See Exhibit 21.1 to the registration statement of which this prospectus forms a part for a complete list of all our subsidiaries organized
in China. The discussion of FF’s business and the electric vehicle industry below is qualified by, and should be read in conjunction
with, the discussion of the risks related to FF’s business and industry detailed elsewhere in this prospectus.
Company Overview
FF is a California-based global shared intelligent
mobility ecosystem company founded in 2014 with a vision to disrupt the automotive industry.
With headquarters in Los Angeles, California,
the Company designs and engineers next-generation smart electric connected vehicles. FF intends to manufacture vehicles at its production
facility in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing partner
in South Korea. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer in South
Korea. The Company has additional engineering, sales, and operational capabilities in China and plans to develop its manufacturing capability
in China through a joint venture or other arrangements. Since its founding, the Company has created major innovations in technology and
products, and a user centered business model. These innovations are enabling FF to set new standards in luxury and performance that will
enhance quality of life and redefine the future of intelligent mobility.
Technology
FF’s technology innovations include its proprietary
Variable Platform Architecture (“VPA”), propulsion system, and Internet, Autonomous Driving, and Intelligence (“I.A.I.”)
system.
The VPA is a modular skateboard-like platform which
can be sized to accommodate various motor and powertrain configurations, enabling fast and capital efficient product development for both
the passenger and commercial vehicle segments. FF’s propulsion system includes industry-leading inverter design, battery pack gravimetric
energy density and propulsion system gravimetric power density. The propulsion system provides a leading competitive edge in electric
drivetrain performance and battery pack performance. FF’s advanced I.A.I. technology offers high-performance computing, high speed
internet connectivity, Over-the-air (“OTA”) updates, an open ecosystem for third party application integration, and a Level
3 autonomous driving-ready system, in addition to several other proprietary innovations that enable the Company to build an advanced highly
personalized user experience.
Since inception, FF has developed a differentiated
portfolio of valuable intellectual property. As of December 31, 2020, the Company has filed approximately 880 patents globally and has
been granted approximately 550 patents (with approximately 150 issued patents in the U.S., approximately 380 issued patents in China,
and the remaining issued in other jurisdictions). Key patents include FF’s inverter assembly, fully submerged battery cells in liquid
coolant, battery strings design, integrated drive and motor assemblies, methods and apparatus for generating current commands for an interior
permanent magnet (“IPM”) motor and keyless vehicle entry system. These key patents will expire in 2035 and 2036.
Products
FF’s B2C (business-to-consumer) passenger
vehicle launch pipeline over the next five years includes FF 91 series, FF 81 series, and FF 71 series. FF’s passenger vehicle portfolio
is designed to address different passenger vehicle segments. In addition to passenger vehicles, leveraging its VPA, FF plans to launch
a Smart Last Mile Delivery (“SLMD”) vehicle to address the high growth last mile delivery opportunity. FF’s presence
in the last mile delivery segment will enable the Company to leverage its technology and expand its total addressable market and avenues
for growth.
Each of the three passenger vehicle series is planned
in two different configurations. At the top end, the “Futurist” configurations will drive FF’s core brand values (design,
superior driving experience, and personalized user experience) to the fullest. Offering multiple configurations allows FF to participate
in a wide price range within each vehicle series.
FF intends to commercially launch FF 91 series
within twelve months after the Closing. Please refer to “Risk Factors — FF’s vehicles are in development and its
first vehicle may not be available for sale within twelve months after closing of the Business Combination, if at all” for a
discussion on risks and uncertainties related to the expected launch. Toward that goal, FF has completed most of the vehicle development
milestones, including 29 prototype and 13 pre-production assets. FF 91 series is designed to compete with Maybach, Bentley Bentayga, Lamborghini
Urus, Ferrari Purosangue, Mercedes S-Class, Porsche Taycan, BMW 7-Series etc. In addition to the FF 91 series, FF has planned the following
passenger vehicle offerings:
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FF 81 series, FF’s second passenger vehicle, will be
a premium mass market electric connected vehicle positioned to compete against Tesla Model S and Model X, Nio ES8, BMW 5-series, and
similar vehicles.
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FF
71 series, FF’s mass market passenger vehicle, will integrate connectivity and advanced
technology into a smaller vehicle size and positioned to compete against Tesla Model 3 and
Model Y, BMW 3-series, and similar vehicles.
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Product
Positioning
All
FF passenger vehicles will share common brand DNA of:
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modern
design: styling and interior materials;
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superior
driving experience: leading power, performance and driving range; and
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personalized
user experience: space, comfort and internet experience.
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The
flagship FF 91 series will define the FF brand DNA. This DNA will carry over to FF 81 and FF 71 series. With such brand DNA, FF products
are expected to be ahead of competition in their respective segments in terms of design, driving experience, interior comfort, connectivity,
and user experience.
Robust
Hybrid Manufacturing Strategy
To implement a capital light business model,
FF has adopted a hybrid global manufacturing strategy consisting of its refurbished manufacturing facility in Hanford, California and
collaboration with Myoung Shin, a leading contract manufacturing partner in South Korea. FF is also exploring other potential contract
manufacturing options in addition to the contract manufacturer in South Korea. The Company is exploring the possibility of additional
manufacturing capacity in China through a joint venture or other arrangements.
As
of the date hereof:
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FFIE
leased a 1.1 million square foot manufacturing facility in Hanford, California with an expected
production capacity of approximately 10,000 vehicles per year;
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FFIE
entered into a memorandum of understanding with a contract manufacturing
partner in South Korea for additional manufacturing capacity of up to 270,000 vehicles per year by 2025. FF is also exploring other potential
contract manufacturing options in addition to the contract manufacturer in South Korea; and
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FF U.S., FF’s primary U.S. operating subsidiary, entered into a non-binding memorandum
of understanding with a tier-1 municipal city and Legacy FF, FF Automotive (Zhuhai) Co.,
Ltd. and FF Hong Kong Holding Limited entered into a cooperation framework agreement with
Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”) regarding, among other
things, a potential joint venture in China and manufacturing vehicles through the joint venture.
The joint venture remains subject to agreement by the parties on a joint venture agreement
and the closing of the Private Placement.
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Distribution
Model
FF
management anticipates making its first passenger vehicles available in the U.S., followed shortly by a rollout in China. Expansion to
Europe is expected to begin in 2023. FF plans to utilize a direct sales model integrating online and offline sales channels to drive
sales and user (including customers, drivers, passengers of FF vehicles) operations to continuously create value. FF’s offline
sales are planned through FF’s self-owned stores as well as FF Partner-owned stores and showrooms. The self-owned stores are expected
to help establish the FF brand, while the partner-owned stores and showrooms will enable expansion of the sales and distribution network
without substantial capital investment by FF.
FF’s
Competitive Strengths
FF’s
products, technology, team and business model provide strong competitive differentiation:
FF’s
proprietary VPA
FF’s
proprietary VPA is a skateboard-like platform that incorporates the critical components of an electric vehicle, and can be sized to accommodate
various motor and powertrain configurations. This flexible modular design supports a range of consumer and commercial vehicles and facilitates
rapid development of multiple vehicle programs to reduce cost and time to market.
Superior
product performance with industry-leading propulsion technology
FF’s
propulsion system includes industry-leading inverter design, battery pack gravimetric energy density and propulsion system gravimetric
power density. FF’s proprietary FF Echelon Inverter used in FF’s electric powertrain has the technological advantage driving
a large amount of current in a small space using proprietary parallel Insulated Gate Bipolar Transistors (“IGBTs”). This
achieves low inverter losses and high efficiency. The propulsion system has high torque accuracy with fast transient response. FF’s
patented flooded cell technology enables the battery pack to possess leading gravimetric energy density. The electric motor drive units
are fully integrated with the inverter, transmission and control unit to create industry-leading compact and efficient design. Propelled
by an integrated FF designed powertrain system ideally suited for FF’s modular VPA, FF’s vehicles can achieve leading horsepower,
efficiency, and acceleration performance.
Internet,
Autonomous Driving, and Intelligence (“I.A.I”) Technology
FF’s advanced I.A.I. technology offers high-performance
computing, high speed internet connectivity, OTA updates, an open ecosystem for third party application integration, and a Level 3 autonomous
driving-ready system, in addition to several other proprietary innovations that enable the Company to build an advanced highly personalized
user experience. The FF 91 series will feature a high-performance dual systems-on-a-chip (“SoC”) computing platform for in-vehicle
infotainment, an NVIDIA based autonomous driving system, and a high-speed connectivity system capable of up to three simultaneous 4G/LTE
carrier connections. Together, these systems deliver a highly intelligent voice-first user experience, and seamless cloud connectivity
and a vehicle that is Level 3 highway autonomous driving ready.
FF’s
I.A.I system is built on an enhanced Android Automotive code base and is upgraded with each release of Google’s platform.
All
FF vehicles use FF’s proprietary FFID unique identifier to deliver personalized content, apps and experiences. FFID provides a
unique Faraday Future user profile that ensures a consistent experience across the FF Ecosystem, as the user goes from one seat
to another or even from one vehicle to another.
Strong
intellectual property portfolio
FF has significant capabilities in the areas of
vehicle engineering, vehicle design and development, as well as software, internet, and AI. The Company has additionally developed a number
of proprietary processes, systems and technologies across these areas. FF’s research and development efforts have resulted in a
strong intellectual property portfolio across battery, powertrain, software, user interface design and user experience design (“UI/UX”),
and advanced driver-assistance systems, among other areas. As an example, FF’s patented battery design submerges battery components
in liquid coolant to improve battery safety, extend life and increase energy density. This modular battery design with independent battery
strings facilitates production of a variety of vehicles and configurations. As of the date of the Merger Agreement, FF’s proprietary
inverter design provides 42% more current than inverters in competitor electric vehicles, and creates one of the highest power-to-weight
ratios in the industry. The patented keyless entry technology recognizes the user from a distance, opens (not only unlocks) doors and
customizes the user’s seating area using facial-recognition-prompted download of FFID. Patented autonomous driving technology can
be used to find empty space in a parking lot and autonomously park using cameras, radars, LIDARs (Light Detection and Ranging), ultrasound
and an inertial measurement unit (“IMU”). FF believes its strong intellectual property portfolio will allow continued differentiation
from its competitors and shorten time to market for future products.
Visionary
management with a strong record of success
FF
is led by a visionary management team with a unique combination of extensive automotive and internet experience. FF’s Global CEO,
Dr. Carsten Breitfeld, is a seasoned automotive industry veteran with over 20 years of leadership experience at BMW. Dr. Breitfeld
was previously in charge of several innovative vehicle projects at BMW, including the i8 Vehicle Program which gave birth to the i8 luxury
plug-in hybrid model. Dr. Breitfeld also served as Founder, Chairman and Chief Executive Officer of BYTON, a Chinese electric vehicle
startup with operations in multiple countries. FF’s Founder and Chief Product and User Ecosystem Officer, YT Jia, oversees activities
in product innovation, strategy and definition; internet, AI and autonomous driving; user experience, user acquisition and user operation.
YT Jia founded Leshi Information Technology Co., ltd., a video streaming website in 2004. He also founded Le Holdings Co. Ltd. (“LeEco”),
an internet ecosystem and technology company with businesses including smart phones, smart TV, smart cars, internet sports, video content,
internet finance and cloud computing. FF’s other management team members have significant product, industry and leadership experience
in areas such as vehicle engineering, battery, powertrain, software, internet, AI, and consumer electronics.
Speed
to market with the ability to launch commercial production within 12 months after the Business Combination
FF
has achieved major commercial milestones to bring its FF 91 model to the market. Unlike many competitors, FF has the advantage of speed
to market as it is positioned to launch a production try-out in 9 months and commercial production of FF 91 series within 12 months after
the Business Combination. Please refer to “Risk Factors — FF’s vehicles are in development and its first vehicle
may not be available for sale within twelve months after closing of the Business Combination, if at all” for a discussion on
risks and uncertainties related to the expected launch. FF has completed 29 prototypes and 13 pre-production assets and has completed
most of the vehicle development hurdles including feasibility, concept and development phases. As of the date hereof, 96% of the key
components for FF 91 have been sourced, 91% production tooling is complete and 75% of production equipment is complete.
Electric Vehicle
Industry Overview and Market Opportunity
The
electric vehicle industry is poised for explosive growth. Based on the Electric Vehicle Outlook 2020 report, a long-term forecast published
in May 2020 by Bloomberg New Energy Finance (“BNEF Report”), passenger electric vehicle sales in the U.S., Europe and
China would grow to a total of approximately 7.7 million vehicles in 2025, from 1.6 million vehicles in 2020, and then grow to approximately
22.5 million vehicles by 2030, representing approximately 37% of all vehicle sales within these regions in 2030.
Driven
by China’s new energy vehicle (“NEV”) credit and European CO2 regulations as well as city policies restricting
new internal combustion engine (“ICE”) vehicle sales, electric vehicle sales in China and Europe combined will represent
72% of all passenger electric vehicle sales in 2030, according to the BNEF Report. In addition, since many U.S. households have the infrastructure
to install home charging, they are ideal adopters of electric vehicles. According to the BNEF Report, by 2040, over half of all new passenger
vehicles sold will be electric, with markets in China and parts of Europe achieving a much higher penetration. For commercial electric
vehicles, demand for electric small vans, and trucks are expected to rise more than 50% by 2040, with the U. S., Europe, and China markets
expanding even faster, according to BNEF Report. In addition, the report notes that light-duty commercial vehicles will see the greatest
surge in demand for electric drivetrains among all commercial vehicles. FF believes its U.S. and China dual-home market strategy, as
well as its innovative DNA, strong technology portfolio and emphasis on design, driving experience and personalized user experience will
position it well in the passenger electric vehicle segments in these markets. By leveraging the scalable design and modularity of FF’s
variable platform architecture, FF is well-positioned to capitalize on growing demands for light, commercial electric vehicles. Additionally,
FF’s robust vehicle engineering capabilities and extensive portfolio of technologies offer significant future licensing and strategic
partnership opportunities.
Key
Drivers for Electric Vehicle Market Growth
Several
important factors are contributing to the popularity of electric vehicles, in both the passenger electric vehicle and light-duty commercial
vehicle segments. FF believes the following factors will continue to drive growth in these markets:
Increasing
Environmental Awareness and Tightening Emission Regulations
Environmental
concerns have resulted in tightening emission regulations globally, and there is a broad consensus that further emission reductions will
require increased electrification in the automotive industry. The cost of regulatory compliance for ICE powertrains is rising sharply
due to the natural limitations of traditional ICE technologies. In response, global original equipment manufacturers (“OEMs”)
are aggressively shifting their strategies toward electric vehicles. At the same time, consumers are more concerned about the impact
of goods they purchase, both on their personal health and the environment. As consumer awareness increases, zero emission transportation
has become a popular and widely advocated urban lifestyle which has accelerated further development in the electric vehicle market. Consumer
pressure can also be seen in the commercial electric vehicle market. Being encouraged by their customers to reduce their carbon footprints,
retailers, logistics companies and other corporations are highly incentivized to transition their existing fleets or new vehicle purchases
toward electric vehicles.
Decreasing
Battery and Electric Vehicle Ownership Costs
Battery
and battery-related costs represent the most expensive components of an electric vehicle, according to the BNEF Report. The falling price
of lithium-ion batteries is the most important factor affecting electric vehicle penetration in the future. Additionally, the average
battery energy density is expected to increase with continuous improvements in battery chemistries, improved materials, advanced engineering
and manufacturing efficiencies. With improvements in battery technology and economies of scale, battery production costs (translated
to electric vehicle ownership costs) should continue to decrease. The BNEF Report states that the average lithium-ion battery price has
fallen by 87% from 2010 to 2019 to $156/kWh. They project the cost of lithium-ion batteries will fall as low as $61/kWh by 2030. According
to the BNEF Report, price parity between electric vehicles and ICE is expected to be reached by the mid-2020s in most vehicle segments,
subject to variation between geographies.
Strong
Regulatory Push
An
increasing number of countries are encouraging the adoption of electric vehicles or a shift away from fossil-fuel-powered vehicles. For
example, in the U.S., both states and municipalities have begun to roll out legislation banning combustion engines, with California mandating
that every new passenger car and truck sold to be zero-emission by 2035, and every new medium and heavy-duty truck sold be zero-emission
by 2045. Fifteen additional U.S. states and Washington, D.C. have announced they intend to follow California’s lead in transitioning
all sales of heavy-duty trucks, vans and buses to zero-emission, with potentially more to follow in coming years. In China, the focused
regulatory push has been one of the strongest drivers of NEV penetration. In recent years, the Chinese government implemented a series
of favorable policies encouraging the purchase of electric vehicles and construction of electric vehicle charging infrastructure. Since
2015, the Chinese regulatory authorities have provided subsidies to purchasers of electric vehicles. Although previous purchase subsidies
were reduced in China by approximately half in 2019, the Chinese government has continued to provide subsidies for charging infrastructure
construction. Since 2016, the Chinese central finance department has been incentivizing certain local governments with funds and subsidies
for the construction and operation of charging facilities and other relevant charging infrastructure, such as charging stations and battery
swap stations. Europe, UK, Denmark, Iceland, Ireland, the Netherlands, Slovenia and Sweden have all announced plans to phase out combustion
engines in some form or fashion by 2030. These legislative tailwinds have already begun to force some legacy OEMs toward electrification,
creating a strong need for a modular, flexible and cost-efficient electric vehicle solution, which will increase competition in the alternative
energy vehicle industry.
Growth
of Electric “Shared Mobility”
According
to the BNEF Report, despite the drop in 2020 due to COVID-19, the global shared mobility fleet (i.e., ride-hailing and car-sharing) is
expected to represent 16% of the total kilometers traveled by passenger vehicles by 2040, up from less than 5% in 2019. Bloomberg data
also predicted that due to electric vehicles’ lower operating costs, they are anticipated to account for over 80% of shared mobility
vehicles by 2040, representing a dramatic increase from its current penetration of 1.8%. At the same time, as vehicle consumers move
to rely upon shared mobility fleets, and view ride-hailing and car-sharing as a service, such trends may partially offset passenger vehicle
demand growth.
Corporate
History and Milestones
FF
U.S., the Company’s primary U.S. operating subsidiary, was incorporated and founded in the State of California in May 2014.
In July 2014, LeSee Automotive (Beijing) Co., Ltd. (“LeSee Beijing”), the Company’s primary Chinese operating
entity, was formed in China.
To
facilitate global investment of FF’s business and operations in different jurisdictions, FF established a Cayman Islands holding
company structure for the entities within the group. As part of these efforts, Smart Technology Holdings Ltd. (formerly known as FF Global
Holdings Ltd.) was incorporated on May 23, 2014 in the Cayman Islands, which directly or indirectly owned and/or controlled 100% of the
shareholding of all operating subsidiaries in the group. In March 2017, FF established FF Automotive (China) Co., Ltd., as a Chinese
wholly-foreign-owned entity (“WFOE”). As part of a broader corporate reorganization, and to facilitate third-party investment,
FF incorporated its top-level holding company, FF Intelligent Mobility Global Holdings Ltd. (formerly known as Smart King Ltd.), in the
Cayman Islands in November 2017, as the parent company of Smart Technology Holdings Ltd. To enable effective control over FF’s
Chinese operating entity and its subsidiaries without direct equity ownership, in November 2017, the WFOE entered into a series
of contractual arrangements (“VIE contractual arrangements”) with LeSee Beijing and LeSee Zhile Technology Co., Ltd., which
previously held 100% of LeSee Beijing. The VIE contractual arrangement enabled FF to exercise effective control over LeSee Beijing and
its subsidiaries, to receive substantially all of the economic benefits of such entities, and to have an exclusive option to purchase
all or part of the equity interests in LeSee Beijing. The VIE contractual arrangements were adjusted in the past three years, and were
terminated on August 5, 2020. LeSee Beijing is currently owned 99% by the WFOE.
The organizational chart below shows FFIE’s
operating subsidiaries2 as of the date hereof:
2
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Excludes
subsidiaries with immaterial operations.
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Milestones
Significant
milestones in FF’s historical development and commercialization of FF’s electric vehicles include the following:
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In
2015, FF completed its first test mule car, and a fully developed electric vehicle Beta prototype
was completed in August 2016.
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In
January 2016, FF debuted the FF Zero 1 at the 2016 Consumer Electronics Show (CES) and
obtained a U.S. patent for FF’s proprietary power inverter, the “FF Echelon Inverter.”
In November 2016, FF obtained an autonomous vehicle testing permit issued by the State
of California, which allowed FF to test self-driving vehicles on public roads with the presence
of a safety driver.
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In
January 2017, FF revealed FF 91, its luxury electric crossover vehicle, at CES 2017.
FF 91’s beta prototype set the fastest production-electric vehicle record at the Pikes
Peak International Hill Climb in 2017, with a time of 11 minutes and 25.083 seconds.
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In
November 2017, FF entered into agreements with its Series A investor in connection with
its Series A financing and received gross proceeds of $800.0 million through June 2018.
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In
August 2018, FF completed its first pre-production build of FF 91 in its Hanford, California
manufacturing facility. FF also began designing the FF 81 project in January 2018.
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In
September 2020, FF U.S., FF’s primary U.S. operating subsidiary,
entered into a non-binding memorandum of understanding with a large city in China where FF
plans to build its China headquarters and research and development center in China. Pursuant
to the non-binding proposal, FF intends to form a joint venture in the city and expects that
the city will provide certain support to the joint venture.
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In
January 2021, Legacy FF, FF Automotive (Zhuhai) Co., Ltd. and FF Hong Kong Holding Limited.
entered into a cooperation framework agreement with Zhejiang Geely Holding Group Co., Ltd.
pursuant to which Geely Holding agreed to explore the possibility of joint investment in
the technology licensing, contract manufacturing and joint venture with FF and the city,
as well as to pursue the possibility of further business cooperation with the joint venture.
The joint venture remains subject to agreement by the parties on a joint venture agreement
and the closing of the Private Placement. FF believes the strategic partnership among the
city, Geely Holding and FF, if successfully entered into, will benefit the implementation
of FF’s dual-home market strategy in China.
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Partnership
Program
In
order to ensure the sustainability of the Company’s mission, vision and values, FF established a partnership program (the “Partnership
Program”) through FF Global Partners LLC (“FF Global”) in July 2019. FF Global controls Pacific Technology Holding
LLC, which indirectly holds 19.1% of FF’s share capital on a fully-diluted basis as of the date hereof. The members and managers
of FF Global are treated as “partners” or “preparatory partners” from FF’s internal governance perspective.
FF Global is managed by its board of managers which also functions as its executive committee, which currently consists of eight managers
— YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip Bethell and Dr. Carsten Breitfeld. A majority
of the board of managers of FF Global (excluding Dr. Carsten Breitfeld, who does not yet have voting rights because he has not met the
tenure eligibility requirement, and once he satisfies the tenure requirement in September 2022, subject to election by the partners of
FF Global, he will become a voting manager) is required to approve any actions of FF Global, including actions relating to the voting
and disposition of shares of FF held by FF Top and indirectly owned by FF Global. The committee has adopted policies to address the nomination
and election of partners and managers of FF Global. These policies specify certain minimum requirements to be eligible for such positions,
including minimum tenure as an employee of FF, business-related performance and behavior-related performance in connection with corporate
cultural values during the tenure as an employee of FF, minimum tenure as a partner or preparatory partner, and payment of a portion
of the capital contributions to FF Global. FF Global elects those members of FF management and FF employees who share the same mission
and vision, demonstrate partnership spirits, and have made significant contributions to become partners or preparatory partners of FF
Global, and issues corresponding equity incentives to them. The managers, except for the managing partner, are nominated by the partners
of FF Global from the existing partners that satisfy certain qualifications and elected by all partners by plurality voting according
to the policy and procedures adopted by the committee. Each partner has one vote in the process and the preparatory partners have no
voting rights but each can attend the meetings of the partners.
The
Partnership Program is a very important measure to attract and retain talent of FF. FF believes that the Partnership Program will set
a solid foundation for an advanced corporate governance structure and will facilitate attracting, retaining and nurturing global talent
across industries. The program aims to embody the vision of a large group of management team and employees and foster the spirit of partnership.
The peer nature of the partnership enables the Company’s executives and some key employees to work together without bureaucracy.
FF Global has 22 partners and 6 preparatory partners as of the date hereof. The Partnership Program is dynamic and enables admission
of new partners and preparatory partners each year. The number of partners and preparatory partners may also change due to the retirement
of partners or the departure of partners for other reasons.
The
Partnership Program continues to exist post-Business Combination. FF Global intends to amend its governance documents to, among other
things, clarify the parties’ intention in terms of the allocation of income and loss and any distributions to the members of FF
Global. Such amendment will include reclassifying each existing unit of FF Global into a capital unit and a profits unit and forming
a new limited liability company to be wholly-owned by FF Global that will in turn hold approximately 58.5% of the equity interest in
Pacific Technology Holding LLC.
FF Technology
Variable
Platform Architecture
FF
believes one of its core technology competencies is its proprietary Variable Platform Architecture (VPA). FF’s VPA is a flexible
and adaptable skateboard-like platform featuring a monocoque vehicle structure with integrated chassis and body. The platform directly
houses the critical components of an electric vehicle, including all-wheel steering, suspension system, brakes, wheels, electric propulsion
system, electronic control units and high voltage battery, among others. Each of these component systems has been engineered in-house
or integrated into the FF vehicles with a view to strive for optimizing performance, efficient packaging, and functional integration.
As
an integrated structure, the skateboard-like platform can be shortened or lengthened to allow various wheelbases and battery pack sizes
along with other options to fit into the platform. It is designed to accommodate up to three motors and support single or dual rear motors
and a single front motor. VPA can be configured in front-wheel-drive (“FWD”), rear-wheel-drive (“RWD”) or all-wheel-drive
(“AWD”) configurations. The platform enables scalable vehicle design and improves manufacturing flexibility as well as capital
efficiency and allows continuous improvement across product generations. It is also designed to reduce development time for future models
leveraging the platform, as most of research and development and a significant portion of the crash structure is integrated into the
platform and enables 5 star and equivalent safety ratings. The modular design of the VPA is adaptable to support a wide range of FF vehicles
for both consumer and commercial vehicle markets.
Propulsion
Technology
FF
has designed an integrated set of powertrain systems ideally suited for FF’s modular VPA. FF’s proprietary and patented designed
electric powertrain provides a leading competitive edge in horsepower, efficiency, and acceleration performance. It features an integrated
drive system with the industry’s highest gravimetric power density.
Battery
Pack and Battery Management System
FF
designed its battery packs to achieve high gravimetric energy density and fast charging capability while maintaining safety, reliability,
and long life. FF’s proprietary technology includes systems for high-density energy storage, battery pack cooling, safety, modularity,
efficiency and electronics management. FF’s patented “string” battery design and integration results in the industry’s
largest battery pack gravimetric energy density of 187 Wh/kg dry (without coolant). Each string includes 6 battery modules and each module
can be adapted to create 900 volt strings. Together with the VPA, the string battery design enables various wheelbases variable range.
The advanced cooling system in the battery pack that consists of FF’s patented cell submersion technology can improve battery safety,
extend battery life and increase energy density. Leveraging this advanced cooling system, FF’s battery pack is designed to support
charge rates of 200kW for all vehicles. FF 91 will be able to reach an 80% charge from 20% in approximately 25 minutes. FF’s proprietary
laser welding process allows welding of multiple cells simultaneously, which is designed to reduce cycle time and manufacturing costs.
FF laser weld design and technology has 50% less pack welds compared to a wire bonded approach. All components, architecture, and battery
management systems are designed and will be assembled either in-house in FF’s Hanford, California manufacturing facility or other
contract manufacturing facilities through contract manufacturing partner or joint venture.
FF Echelon
Inverter
The
inverter in FF’s electric vehicle powertrain governs the flow of high-voltage electrical current throughout the vehicle and serves
to power the electric motor, generating torque while driving and delivering energy into the battery pack while braking. The inverter
converts direct current from the battery pack into alternating current to drive the permanent magnet motors and provides “regenerative
braking” functionality, which captures energy from braking to charge the battery pack. The primary technological advantages of
FF’s designs include the ability to drive large amounts of current in a small, physical package with high efficiency and low cost
(low inverter losses to provide 98% of inverter efficiency) utilizing patented parallel IGBT technology and can achieve high torque accuracy
with fast transient response. The inverter can achieve high reliability due to tab bonds in the high current path. The monitoring system
is integrated into the inverter to provide enhanced safety. The patented FF Echelon Inverter is designed to have high power in a compact
light weight package with high reliability and durability and can support multiple motor configurations.
Integrated
Electric Motor Drive Units
FF
has internally designed, and will assemble, its electric motor drive units (including gearbox) either in-house in its Hanford, California
manufacturing facility or other manufacturing facilities through contract manufacturing partner or joint venture. The electric drive
units are fully integrated with the inverter, transmission, and control unit to create a compact and efficient design. The FF designed
drive units have low noise and vibration that can greatly improve driving experience. Depending on the power requirements of each model,
the motors can be utilized individually or in two or three motor configurations. The combination of high-power and high-torque is expected
to provide users with powerful driving force. The FF 91 Futurist, equipped with three integrated electric drive units (each is designed
to deliver up to 350 horsepower), is expected to deliver 1,050 horsepower and 12,510 Newton meters (“Nm”) of torque. FF believes
its electric drive unit design is ahead of most of its competitors in terms of performance because of its proprietary, advanced packaging,
stator-rotor design, unique inverter layout and superior power density.
Internet,
Autonomous Driving, and Intelligence (“I.A.I”)
FF
utilizes an industry-leading automotive grade dual-chip computing system running the Android Automotive operating system. FF’s
I.A.I system is built on an enhanced Android Automotive code base and is upgraded with each release of Google’s platform. FF’s
vehicles are designed with software OTA capabilities, which allow software and applications in the vehicle to be updated and upgraded
wirelessly to deliver continuous enhancements. The vehicle will be connected to FF’s information cloud at all times. When there
is a firmware or software update available, FF’s cloud will push an update message to the vehicle to notify the driver to schedule
an update. Upgrades will be wirelessly downloaded to the vehicle, installed, and launched, including updates for firmware, operating
systems, middleware, and applications. FF’s patented Future OS operating system allows multiple users to login through FF 91, preparing
user’s preferences per their cloud based FFID profiles.
For
autonomous driving, FF’s Level 3 autonomous driving-ready system will deliver multiple ADAS features through a combination of FF’s
own as well as industry partners’ applications. FF plans to devote resources to autonomous driving research and development and
plans to work with partners to deliver full autonomous-driving capabilities in highway and urban driving, as well as parking, across
its vehicle lines in the future.
FF’s
Artificial Intelligence system can actively learn preferences, habits, entertainment, and navigation routines of a user, and associates
them with the user’s unique FFID (Faraday Future proprietary user ID). FFID provides a unique Faraday Future user profile that
ensures a consistent experience across the FF Ecosystem, as the user goes from one seat to another or even from one vehicle to another.
The seamless design and interface of the in-vehicle infotainment system planned in the FF vehicles will offer multiple HMI options and
facilitate a personalized user experience for each seat in the vehicle. The enhanced user experience platform powered by
Android
enables seamless access to third party applications. FF’s patented Intelligent Aggregation Engine can pull content from multiple
video applications and displays content in a single area, removing the need to access multiple applications. The Intelligent Recommendation
Engine that may be integrated in certain FF series learns each passenger or driver’s digital media preferences across multiple
video applications and provide personalized recommendations. The User Recognition function is embedded in each seat through facial or
voice recognition, to deliver a suite of personalized content and preferences.
Electrical/
Electronic (“E/E”) Architecture
FF
plans to design the first generation of FF vehicle series (FF 91 and FF 81) to adopt a domain-centralized E/E architecture, which enables
architecture flexibility and maximizes performance efficiency while meaningfully reducing the overall system complexity and weight. The
domain-centralized E/E architecture will consolidate the domain functions across five core high-performance domain control units (“DCU”)
that manage, compute, and process controls for propulsion, chassis, self-driving, body and IoV (Internet over Vehicle – connected
infotainment system). The E/E architecture of FF’s variable platform architecture is designed with the capacity to support the
power and communication requirements necessary for seamless integration with advanced autonomous systems as they evolve. All of FF’s
DCUs will support OTA updates and data collection.
FF Products
FF
has developed an extensive portfolio of proprietary technologies that will be embedded and integrated in FF vehicles. FF’s B2C
passenger vehicle launch pipeline over the next five years includes FF 91 series, FF 81 series and FF 71 series. In addition to passenger
vehicles, leveraging its VPA, FF plans to launch a Smart Last Mile Delivery (“SLMD”) vehicle to address the high growth last
mile delivery opportunity.
Passenger
Vehicles
Each
of the three passenger vehicle series is planned in two different configurations. All passenger vehicles will share common brand DNA
of:
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modern
design: styling and interior materials;
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superior
driving experience: leading power, performance, and driving range; and
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personalized
user experience: space, comfort, and internet experience.
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The
flagship FF 91 series will define the FF brand DNA. This DNA will carry over to FF 81 and FF 71 series. At the top end, the Futurist
configurations of each of these series will be designed to push the core brand values to the maximum. With this brand DNA, FF products
are expected to be ahead of competition in their respective segments in terms of design, driving experience, interior comfort, connectivity,
and user experience.
FF 91
With
a wheelbase of 3,200 mm, FF 91, FF’s flagship vehicle, is designed to be a high-performance luxury electric vehicle in the E-segment/Executive/Full-Size
or F-segment/Full-size luxury vehicle segment. FF has completed 29 prototypes and 13 pre-production assets for validation and testing.
FF aims to launch FF 91 within twelve months after the closing of the Business Combination. Please refer to “Risk Factors —
FF’s vehicles are in development and its first vehicle may not be available for sale within twelve months after closing of the
Business Combination, if at all” for a discussion on risks and uncertainties related to the expected launch.
FF
believes that FF 91 represents a bold new breed of electric mobility that combines high performance, precise handling, the comfort of
a luxury passenger vehicle, and a unique collection of intelligent internet features. It leverages FF’s proprietary VPA, which
is a skateboard-like platform structure designed and engineered in-house. This integrated platform provides measurable improvements in
overall vehicle structural performance, safety, and handling. FF 91 features a multi-motor configuration and an all-wheel drive system.
With three electric motors (one in the front and two in the rear), the top configuration (FF 91 Futurist) is designed to produce 850
to 1,050 horsepower and 12,510 Nm of torque to all four wheels. This enables FF 91 Futurist to have torque vectoring in the rear for
enhanced vehicle dynamics and stability in addition to rear wheel steering and acceleration from zero to 60 mph in less than 2.40 seconds
(with variances depending on selected motor configuration). Its all-wheel drive system offers greater traction control as well as precise
power distribution. This technology delivers superior acceleration and safety. It leverages rear-wheel steering for agile cornering,
allowing drivers to confidently execute maneuvers, which significantly improves vehicle handling in emergency situations.
The
variable platform architecture for FF 91 series houses strings of lithium ion and floor-mounted batteries, as well as FF’s proprietary
inverter, the FF Echelon Inverter, and integrated electric motor drive units. With the 130-kWh battery system (including 6 strings per
battery pack), FF 91 can achieve an estimated driving range of up to 378 miles on the EPA cycle and over 700 kilometers on the NEDC cycle.
FF 91 can charge at up to a 200kW rate. FF plans to provide charging solutions in FF’s self-owned stores and FF Partner-owned stores
and showrooms.
FF
91 aims to deliver a first-class user experience that emphasizes personalization and comfort for all users of the vehicle, including
the driver and passengers. In terms of driver comfort, there are six driver-specific screens including an ultra-large heads-up display
and slim instrument cluster. The center information display supports on-screen gesturing with swipe of fingers. The reconfigurable 3D
touch steering wheel can allow further user configurability. FF 91 is a connected device that has a voice-first user interface as well
as an open ecosystem for third-party applications, and offers an immersive audio, video, and media experience. There are over 100 inches
of high-resolution viewing area across 11 displays embedded in the vehicle. These include industry’s first 17-inch front passenger
screen and industry-leading 27-inch rear passenger display, allowing passengers to stream their favorite movies, TV shows and live sports
while FF 91 is in motion without driver distraction. The voice-first foundation enables multiple natural commands at once, facilitating
the areas of comfort (including air conditioning, seat positions and doors), productivity (including text, email and phone calls), entertainment
(including media playlists and content search) and destination reaching (including refined search and navigation). The connectivity is
powered by “Super Mobile AP”, which consists of up to three modems to realize aggregated high internet speed and great coverage
by multi-carriers for high-throughput and continuous coverage. The Artificial Intelligence system and use of FFID (automatically loaded
through facial recognition in each seat) carry the personalized user experience from seat-to-seat and vehicle-to-vehicle. The front and
rear passengers will have individual sound zones, which allow passengers in the front and passengers in the rear to listen to their separate
audio content with minimal sound interference. The luxury interior design of FF 91 Futurist also features “zero gravity”
seats in the rear row (with industry leading 48.9 inches rear leg room and 60-degree recline). The vehicle also offers a spa mode with
personalized seat position, ventilation, massage settings, light animations, and ambient sound.
For
autonomous driving, FF 91 will have up to 12 cameras, up to 5 radar sensors, LIDAR, and 12 ultrasound sensors with full 360-degree sensor
coverage to allow the FF 91 to steer autonomously once the autonomous driving software solution is validated and released. FF’s
autonomous driving system will deliver several highway autonomy & parking features, and through continuous learning over time,
will enable Autonomous Valet Parking (“AVP”) — where the vehicle can autonomously navigate a parking lot, find
a parking space and park itself. Eventually, the adaptive learning could allow the driver to use an application to park and summon the
vehicle after the driver has exited the vehicle.
FF
91 will feature an SAE Level 3 capable autonomous driving system that will deliver multiple ADAS features through a combination of FF’s
own as well as partners’ applications. FF plans to devote resources to autonomous driving research and development and plans to
work with partners to deliver full autonomous-driving capabilities in highway and urban driving, as well as parking, across its vehicle
lines in the future.
FF
91 Futurist has a target starting price of $180,000.
FF 81
FF
81 series is FF’s planned second vehicle model and is aimed at the premium mass market in the D-segment or E-segment (with a wheelbase
of 3,000 mm). FF has completed the design of FF 81 and has conducted the second virtual assessment loop for the FF 81 design and engineering.
FF 81 is now in the engineering stage and is expected to start pre-series production around 18 months after the launch of the FF 91.
FF 81 is designed on FF’s proprietary VPA enabling up to 60% carry-over of common parts from FF 91. In addition, parts developed
for the FF 81 can be carried back to FF 91 series. The large number of common parts shared across vehicle models creates economics of
scale and reduces costs.
FF
81 aims to deliver a premium user experience that emphasizes personalization. FF 81 is planned with high-performance computing and next
generation connectivity with a voice-first user interface and open ecosystem for third-party applications. It also has integrated, autonomous
driving features and the pertinent hardware capability, including cameras, radars, ultrasound sensors and optional LIDAR(s).
FF
81 Futurist has a target starting price of $95,000.
FF 71
FF’s third planned passenger vehicle,
FF 71 series, is expected to be a connected electric vehicle with a more compact size aiming at the mass market in the C-segment or D-segment
(with a wheelbase of 2,850 mm). FF 71 will be designed to integrate full connectivity and advanced technology into a smaller vehicle
size. As FF is currently focusing on the development of FF 91 and FF 81, the Company does not expect to start design and development
of FF 71 until 2022 and plans to launch FF 71 Futurist configuration in the first quarter of 2025, assuming that sufficient funding
is secured in a timely manner.
FF
71 Futurist has a target starting price of $65,000.
Commercial
Vehicles
Smart
Last Mile Delivery (“SLMD”)
FF
plans to provide purpose-built Smart Last Mile Delivery vehicles by leveraging its proprietary VPA and technical solutions developed
for FF’s passenger vehicles. Using the modularity and commonality of the VPA enables specifically tailored SLMD configurations
to meet the exact customer needs, whether for fleet provider or last mile delivery divisions, while reducing development time and costs.
There will be three sizes of configurations, all of which are built on the VPA platform.
FF’s
last-mile delivery vehicles are expected to be designed to have the following features:
|
●
|
Customizable
cargo van capacity of up to 500 cubic feet;
|
|
●
|
Flexible
range options from 110 miles to 330 miles;
|
|
●
|
High
cargo efficiency: 25.6 cubic feet/ft length;
|
|
●
|
6.5
feet standing clearance with roll-up rear door for convenience; and
|
|
●
|
Estimated
charging from 20% to 80% within 25 minutes.
|
Several
other advantages to utilizing FF’s VPA include a floor mounted battery pack for low center of gravity, low floor enabled by VPA
that allows easy ingress, an all-wheel-drive option and rear steering for enhanced maneuverability.
Additionally,
FF’s technical solutions for advanced connectivity and user experience enable an easy integration of the SLMD as another device
in the logistics system. Such features will include:
|
●
|
Advanced
connectivity and telematics for next-gen fleet management;
|
|
●
|
OTA
upgrade capability;
|
|
●
|
Third
party application integration on touch screen display;
|
|
●
|
Surround
view cameras for improved visibility;
|
|
●
|
Equipped
with Level 3 ready autonomy and ready-for-future capabilities; and
|
|
●
|
SLMD’s
adaptive modular build enables additional use cases (utilities, tradesmen, and others) with
minimal additional time or investment.
|
Manufacturing
Strategy
FF
plans to manufacture FF 91 series vehicles in its manufacturing facility in Hanford, California with an annual capacity of 10,000 vehicles.
In particular, once the Hanford, California manufacturing facility is fully refurbished and built out, FF intends to manufacture core
electrification components that are critical to the production of FF 91, including the inverter, electric motor, battery modules, and
complete battery packs at this facility. In addition to these components, FF will conduct operations similar to traditional vehicle manufacturing
facilities such as body assembly, paint operations, final vehicle assembly, and end-of-line testing for FF 91 in the Hanford manufacturing
facility. FF intends for its vehicle engineering and manufacturing teams to work alongside one another to streamline the feedback loop
for rapid product enhancements and quality improvement and will extensively utilize virtual manufacturing simulation methods to validate
operations and improve the manufacturing processes.
For
additional capacity for production of FF 91 (i.e., exceeding 10,000 vehicles annually), FF can expand production operations in Hanford
or leverage its contract manufacturing partner in South Korea as needed. FF is also exploring other potential contract manufacturing
options in addition to the contract manufacturer in South Korea. For FF 81, FF plans to outsource direct vehicle production to its contract
manufacturing partner in South Korea, as FF believes outsourcing could reduce capital investment and accelerate its go-to-market strategy
for launching FF 81, while benefiting from the flexibility to scale volume to match demand level. FF may outsource the production of
FF 71 to its contract manufacture partner in South Korea or a manufacturing joint venture in China. These plans align with FF’s
asset-light, flexible manufacturing strategy. For more information about FF’s manufacturing facility, see the discussion below
under the heading “Facilities.” For more information about FF’s memorandum of understanding for contract manufacturing
in South Korea, see the discussion below under the heading “Key Agreements and Partnerships.”
Sales,
Delivery, and Servicing of Vehicle
As
of the date hereof, FF has not yet sold any electric vehicles. FF plans to adopt a direct sales model that utilizes a mix of online and
offline presence to drive sales. FF’s offline sales network will consist of FF’s self-owned stores and FF Partner-owned stores
and showrooms. The self-owned stores are expected to establish FF brand awareness, while the FF Partner-owned stores and showrooms are
expected to expand the sales and distribution network without substantial capital investment by FF.
FF
plans to establish stores and showrooms in certain key markets, which may include Los Angeles, San Francisco, New York, Miami, Beijing,
Shanghai, Guangzhou, Shenzhen, London, Paris, and Oslo, among other cities. These locations will operate as experiential showrooms for
FF’s electric vehicle models and will provide sales, aftersales, and charging services. The FF Partner-owned stores and showrooms
will support FF’s online-to-offline sales model, vehicle delivery, charging service and other user operations. To support its expansion
plan via FF Partner-owned stores and showrooms, FF has already signed memoranda of understanding with automotive retail groups such as
Jolta in the U.S., and Harmony Auto, Topyoung, Huachi Fuwei, and Haipai in China.
All
purchase transactions will be processed online through FF’s website or mobile apps, while FF Partners will support the process
(including demonstration drives and providing vehicle information) and receive compensation for sales based on sales territory and/or
services performed. Users accessing FF.com can directly purchase the vehicle online and can choose their closest FF store or FF Partner-owned
store and showroom for support. Customers going to a FF Partner-owned store will be supported by staff and directed to FF.com for purchasing.
FF believes that once the reputation of FF’s vehicles has been established and users are familiar with FF vehicles, an increasing
share of the vehicle sales process is likely to be completed fully online. This will further free up offline capacity and potentially
increase productivity for FF’s Partner-owned stores. As FF will oversee delivery of the vehicles, both FF stores and FF Partner-owned
stores and showrooms will be able to run their operations with lower on-site inventory, keeping them asset light.
The FF Partner-owned stores and showrooms will
be the prioritized network for servicing FF’s vehicles, which may include repair, maintenance, and bodywork services. FF will also
contract with select third-party service centers to ensure coverage and will deploy mobile service vans based on user demand. To quickly
ramp up its service capabilities, FF U.S., FF’s primary U.S. operating subsidiary, has signed a memorandum of understanding
with Formel D, a global provider of “After Sales as a Service”. Additionally, FF users can benefit from FF’s connected
remote service platform that can address a majority of service issues, perform remote diagnosis and OTA updates, perform artificial intelligence
and predictive maintenance, and will be able to offer real-time service and repair status update to vehicle users.
FF Suppliers
FF U.S. has partnered with tier-1 reputable,
international suppliers in North America, Europe, and Asia. These include: Bosch, which provides FF’s passive safety systems, and
key components for brakes and ADAS systems; ThyssenKrupp Presta for steering system; MS Autotech for body parts, Novelis for flat-rolled
aluminum, Velodyne for LIDAR, Truly for camera modules, Mayco and Tesca for interior and seat system, JJE for E-motor and gearbox, and
Joyson for airbags and seatbelts systems. FF U.S. has selected and on-boarded suppliers for all critical parts for FF 91 (approximately
96% of the key components as of the date hereof). Although FF U.S. has not approved secondary sources for key components of FF 91, it
has identified possible secondary suppliers for all key components. FF aims to obtain systems, components, raw materials, parts, manufacturing
equipment, and other supplies and services from suppliers which FF believes to be reputable and reliable.
To expand the capacity for production of FF 91 beyond FF’s Hanford
plant, FF U.S. entered into a memorandum of understanding to secure additional capacity for painted bodies through its contract manufacturing
partner in South Korea. FF U.S. also signed an agreement with the contract manufacturer in South Korea to reserve manufacturing capacity
for the FF 81 in the same plant. FF is also exploring other potential contract manufacturing options in addition to the contract manufacturer
in South Korea. FF aims to obtain systems, components, raw materials, parts, manufacturing equipment, and other supplies and services
from suppliers which FF believes to be reputable and reliable.
Intellectual
Property
FF has significant capabilities in the areas
of vehicle engineering, development and design, and has developed a number of proprietary systems and technologies. As of December 31,
2020, FF has filed approximately 880 patent applications with approximately 550 patents issued worldwide, including approximately 150
issued in the U.S. and approximately 380 issued in China, and has approximately 700 trademark registrations worldwide, including approximately
490 registrations in China and approximately 20 registrations in the United States. FF intends to continue to file additional patent
applications with respect to its technology. FF’s patented technology covers battery, UI/UX, powertrain, ADAS, body, hardware/software
platform and chassis. Key patents include FF’s inverter assembly, fully-submerged battery cells for vehicle energy-storage systems,
patented battery strings design, integrated drive and motor assemblies, methods and apparatus for generating current commands for an
interior permanent magnet (“IPM”) motor and seamless vehicle access system. These key patents will expire in 2035 or 2036.
Key Agreements
and Partnerships
Strategic
Partnership with Myoung Shin, South Korea
On September 1, 2020, FF U.S.
entered into a non-binding memorandum of understanding with Myoung Shin in South Korea for the manufacturing of FF’s vehicles beyond
FF’s own manufacturing capacity. Contract manufacturing in South Korea can benefit from its very low or no tariffs on imports and
exports to key target markets. Production by Myoung Shin will be launched in the former General Motors plant with key retained personnel
in vehicle production and ramp-up. Myoung Shin has a production capacity of 270,000 vehicles per year at its production plant. Pursuant
to an amendment to the memorandum of understanding entered into on April 30, 2021, Myoung Shin has reserved production capacity to manufacture
and supply up to two hundred and fifty thousand (250,000) FF 81 products per year for the years 2023 to 2030, consistent with the final
targeted production volumes.
Strategic
Partnership with a Tier-1 City in China
FF U.S. entered into a non-binding memorandum of understanding with a tier-1 city in China (affiliated entities of
which are subscribers in the Private Placement) in September 2020, pursuant to which FF intends to establish a joint venture company
(the “JV”) in that city. This joint venture is expected to be managed and controlled by FF. The proposed strategic partnership
is subject to the condition that FF will receive capital of no less than $500 million through Private Placement and/or the Business Combination
and agreement by the parties on binding definitive documentation. In December 2020, the JV was established initially as an entity
wholly-owned by FF, which is intended to primarily engage in the manufacturing of FF’s high-end Internet smart electric vehicles,
with targeted total annual maximum production capacity to be 250,000 units, to be achieved in two phases in the second quarter of 2025
and the fourth quarter of 2026.
Potential
Partnership with Geely Holding
In December 2020, FF U.S.
entered into a non-binding memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), who
is also a subscriber in the Private Placement, pursuant to which the parties contemplate a strategic cooperation in various areas including
engineering, technology, supply chain and contract manufacturing.
In January 2021, Legacy FF, FF Automotive
(Zhuhai) Co., Ltd. and FF Hong Kong Holding Limited and Geely Holding entered into a cooperation framework agreement and a license agreement
that set forth the major commercial understanding of the proposed cooperation among the parties in the areas of potential investment
into the JV, engineering, technology and contract manufacturing support. The foregoing framework agreement and the license agreement
may be terminated if the parties fail to enter into the joint venture definitive agreement.
Strategic
Partnerships on FF Partner Stores and Other Sales and Service
FF Partner
Stores in the U.S.
FF U.S. has entered into a
non-binding memorandum of understanding with Jolta for setting up FF Partner-owned stores in the U.S. for vehicle sales. The memorandum
of understanding contemplates a coverage by Jolta of approximately 15 major U.S. cities by 2025 and 30 major U.S. cities going forward.
FF Partner Stores in China
FF U.S. has entered into a
non-binding memorandum of understanding with each of Harmony Auto, Topyoung, Huachi Fuwei, and Haipai to establish Partner-owned stores
in more than 30 major cities in China for vehicle sales and service.
After-Sales and Service Offering
FF U.S. has entered into a
non-binding memorandum of understanding with Formel D for setting up FF’s after-sales and service offering in addition to FF’s
Partner-owned stores and FF’s stores for the U.S., China and European markets. The memorandum of understanding contemplates that
Formel D will provide services for FF in more than 15 major U.S. cities, more than 10 major cities in China and more than 10 major European
countries.
Facilities
FF
leases all of its facilities. The following table sets forth the location, approximate size, primary use and lease term of FF’s
major facilities.
Location
|
|
Approximate
Size (Building)
in Square
Feet
|
|
Primary
Use
|
|
Lease
Expiration
Date
|
Gardena, California
|
|
146,765
|
|
Global
headquarters, research and development, office
|
|
April
30, 2022
|
Hanford, California
|
|
1,100,000
|
|
Manufacturing
|
|
December 31, 2027
|
Beijing, China
|
|
13,993
|
|
Administrative
services, research and development, strategic planning
|
|
December
14, 2021
|
Guangdong, China
|
|
1,309
|
|
Administrative
services, research and development, strategic planning
|
|
September 30, 2021
|
Shanghai, China
|
|
6,518
|
|
Administrative
services, research and development, strategic planning
|
|
June
10 2022;
August 10, 2022
|
Shanghai, China
|
|
2,799
|
|
Administrative
services, research and development, strategic planning
|
|
July 19, 2023
|
FF
expects construction and refurbishment of the Hanford manufacturing facility to be completed by nine months after the closing of the
Business Combination. The facility is planned to have a body shop, a paint shop, component manufacturing and an assembly line. The Hanford
manufacturing facility is approximately 1.1 million square feet and, once it is built out, is expected to have the capacity to support
a production of 10,000 vehicles per year.
Employees
As of September 20, 2021, FF has 452 active
employees globally. A majority of FF’s employees are engaged in research and development and related engineering, manufacturing,
and supply chain functions. FF plans to ramp up additional hiring efforts for its targeted vehicle production and delivery. FF’s
targeted hires typically have significant experience working for reputable OEMs, software, internet, consumer electronics and artificial
intelligence companies, as well as tier-one automotive suppliers and engineering firms. FF has not experienced any work
stoppages and considers its relationship with its employees to be good. None of FF’s employees are subject to a collective bargaining
agreement or represented by a labor union.
The
FF team is composed of experienced talent from a variety of industry backgrounds and nationalities with a common goal of creating highly
innovative and unique products. FF’s human capital resources objectives include, as applicable, identifying, recruiting, retaining,
incentivizing and integrating existing and additional employees. FF has a competitive equity incentive plan to promote its core values
through ownership and to attract, retain and motivate its exceptional employees.
Governmental
Regulations, Programs and Incentives
FF
operates in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and
regulations to which FF is subject govern, among others, vehicle emissions and the storage, handling, treatment, transportation and disposal
of hazardous materials and the remediation of environmental contamination. Compliance with such laws and regulations at an international,
regional, national, provincial and local level is critical to FF’s ability to continue its operations.
Environmental
standards applicable to FF are established by the laws and regulations of the countries in which FF operates, standards adopted by regulatory
agencies and the permits and licenses issued to FF. Each of these sources is subject to periodic modifications and comprise what FF anticipates
will be increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial
administrative, civil or even criminal fines, penalties and orders to cease any violating operations or to conduct or pay for corrective
work. In some instances, violations may also result in the suspension or revocation of permits or licenses.
Vehicle
Safety and Testing Regulation
FF
vehicles will be subject to, and must comply with, numerous regulatory requirements established by the National Highway Traffic Safety
Administration (“NHTSA”), including all applicable U.S. Federal Motor Vehicle Safety Standards (“FMVSS”). As
a manufacturer, FF must self-certify that its vehicles meet all applicable FMVSSs before the vehicles are sold in the U.S. There are
many FMVSSs that will apply to FF vehicles, such as crash-worthiness requirements, crash avoidance requirements and electric vehicle
requirements (i.e., limitations on electrolyte spillage, battery retention and avoidance of electric shock after certain crash tests).
FF’s future vehicles must fully comply with all applicable FMVSSs. Additionally, there are regulatory changes being considered
for several FMVSSs, and FF must comply with all such FMVSS regulations.
In
addition to FMVSS, FF will also be required to comply with other federal laws administered by NHTSA, including the Corporate Average
Fuel Economy (“CAFE”) standards, Theft Prevention Act requirements, consumer information labeling requirements, early warning
reporting requirements regarding warranty claims, field reports, death and injury reports and foreign recalls and owners’ manual
requirements. FF must also comply with the Automobile Information and Disclosure Act, which requires manufacturers of motor vehicles
to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. Further, this
law allows inclusion of city and highway fuel economy ratings, as determined by EPA, as well as crash test ratings as determined by NHTSA.
FF
vehicles sold outside of the U.S. are subject to similar foreign safety, environmental, and other regulations. If those regulations and
standards are different from those applicable in the U.S., FF will redesign and/or retest its vehicles. For example, the European Union
(“E.U.”) has established new approval and oversight rules requiring that a national authority certify compliance with heightened
safety rules, emissions limits and production requirements before vehicles can be sold in each E.U. member state, the initial of which
rules were rolled out on September 1, 2020, and there is also regulatory uncertainty regarding how these rules will impact sales in the
United Kingdom given its recent withdrawal from the E.U. These changes could impact the rollout of new vehicle features in Europe.
FF vehicles sold in China will be subject to compulsory product certification by certification authorities designated by the State Certification
and Accreditation Administration Committee. Additionally, for FF vehicles to be approved for manufacture and sale in China, FF vehicles
will need to be added to the Announcement of Vehicle Manufacturers and Products issued by the Ministry of Industry and Information Technology
(“MIIT”) of China, by showing compliance with the relevant safety and technical requirements and other conditions, including
among others, the Administrative Rules on the Admission of New Energy Vehicle Manufacturers and Products and the Administrative Rules
on the Admission of Passenger Vehicles Manufacturer and Products, and passing the review by the MIIT.
Battery
Safety and Testing Regulations
FF’s
battery packs must conform to mandatory regulations governing the transport of “dangerous goods” that may present a risk
in transportation, which includes lithium-ion batteries, and are subject to regulations issued by the Pipeline and Hazardous Materials
Safety Administration. (“PHMSA”). These regulations are based on the UN Recommendations on the Safe Transport of Dangerous
Goods Model Regulations and related UN Manual Tests and Criteria. The regulations vary by mode of transportation when these items are
shipped, such as by ocean vessel, rail, truck or air. FF will complete the applicable transportation tests for its battery packs, demonstrating
its compliance with applicable regulations. FF uses lithium-ion cells in its high-voltage battery packs. The use, storage and disposal
of FF’s battery packs is regulated under federal law. FF will enter into agreements with third-party battery recycling companies
to recycle FF’s battery packs.
Environmental
Credits
In
connection with the production, delivery, and placement into service of FF’s zero-emission vehicles, FF will earn tradable credits.
FF may sell FF future credits to automotive companies and other regulated entities who can use the credits to comply with emission standards
and other regulatory requirements. For example, under California’s Zero Emission Vehicle Regulation and those of states that have
adopted California’s standards, vehicle manufacturers are required to earn or purchase credits, referred to as ZEV credits, for
compliance with their annual regulatory requirements. These laws provide that automakers may bank or sell to other regulated parties
their excess credits if they earn more credits than the minimum quantity required by those laws. FF may also earn other types of salable
regulatory credits in the U.S. and abroad, including greenhouse gas, fuel economy, and clean fuels credits.
EPA
Emissions and Certification
The
U.S. Clean Air Act requires that FF obtain a Certificate of Conformity issued by the U.S. Environmental Protection Agency (“EPA”)
or a California Executive Order issued by the California Air Resources Board (“CARB”) certifying that FF vehicles comply
with all applicable emissions requirements. A Certificate of Conformity is required for vehicles sold in states covered by the Clean
Air Act’s standards. A CARB Executive Order is required for vehicles sold in states that have adopted California’s stricter
standards for emissions controls related to new vehicles and engines sold in such states. States that have adopted the California standards
as approved by EPA also recognize the CARB Executive Order for sales of vehicles. In addition to California, there are 13 other states
that have either adopted or are in the process of adopting the stricter California standards, including New York, Massachusetts,
Vermont, Maine, Pennsylvania, Connecticut, Rhode Island, Washington, Oregon, New Jersey, Maryland, Delaware and Colorado. FF is
required to seek an EPA Certificate of Conformity for vehicles sold in states covered by the Clean Air Act’s standards or a CARB
Executive Order for vehicles sold in California or any of the other 13 states identified above that have adopted the stricter California
standards.
Regulation —
Self Driving
There
are no federal U.S. regulations pertaining to the safety of self-driving vehicles; however, the NHTSA has established recommended guidelines.
Certain U.S. states have legal restrictions on self-driving vehicles, and many other states are considering them. This patchwork increases
the legal complexity for FF’s vehicles. In Europe, certain vehicle safety regulations apply to self-driving braking and steering
systems, and certain treaties also restrict the legality of certain higher levels of self-driving vehicles. Self-driving laws and regulations
are expected to continue to evolve in numerous jurisdictions in the U.S. and foreign countries, and may create restrictions on self-driving
features that FF develops.
Automobile
Manufacturer and Dealer Regulation
U.S.
state laws regulate the manufacture, distribution and sale of automobiles, and generally require motor vehicle manufacturers and dealers
to be licensed in order to sell vehicles directly to consumers in the state. FF will need to secure dealer licenses (or their equivalent)
and engage in sales activities for its self-owned stores and service centers, while partners in certain states will support by providing
services via partner-owned stores and showrooms.
In
China, automobile suppliers and dealers are required to receive a business license and file and update the relevant information through
the information management system for the national automobile circulation operated by the competent commerce department in China. Additionally,
according to the Administrative Measures on Automobile Sales, automobile suppliers and dealers shall sell automobiles, spare parts and
other related products that are in compliance with relevant provisions and standards of the state, and the dealers shall, in an appropriate
manner, expressly indicate the prices of automobiles, spare parts and other related products as well as the rates of charges for various
services on their business premises, and shall not sell products at higher prices or charge other fees without express indication.
Competition
FF
has experienced, and expects to continue to experience, intense competition from several companies, particularly as the transportation
sector increasingly shifts towards low-emission, zero-emission or carbon neutral solutions. Many established and new automobile manufacturers
have entered or have announced plans to enter the alternative fuel and electric vehicle market. Many major automobile manufacturers,
such as Tesla, Porsche, Mercedes and Audi, have electric vehicles available today. Other current and prospective automobile manufacturers
are also developing electric vehicles, for example Nio, xPeng, Li Auto, Canoo and Fisker, among others. In addition, several manufacturers
offer hybrid vehicles, including plug-in versions. FF directly competes with other pure-play electric vehicle companies targeting the
high-end segment, while also competing to a lesser extent with new energy vehicles (“NEVs”) and internal combustion engine
(“ICE”) vehicles in the mid- to high-end segment offered by traditional OEMs. FF believes the primary competitive factors
in the electric vehicle market include, but are not limited to:
|
●
|
technological
innovation;
|
|
●
|
vehicle
performance, quality and safety;
|
|
●
|
space,
comfort and user experience;
|
|
●
|
service
and charging options;
|
|
●
|
design,
styling and interior materials; and
|
|
●
|
manufacturing
efficiency.
|
FF
believes that it will compete favorably with its competitors on the basis of these factors. However, most of FF’s current and potential
competitors have greater financial, technical, supply chain, manufacturing, marketing, and other resources than FF. They may be able
to deploy greater resources to the design, development, manufacturing, supply chain, distribution, promotion, sales, marketing, and support
of their electric vehicles. Additionally, FF’s competitors may also have greater name recognition, longer operating histories,
lower cost of materials, larger sales forces, broader customer and industry relationships, and other resources than FF does.
Legal
Proceedings and Vendor Trust
From time to time, FF may become involved in
legal proceedings arising in the ordinary course of business. In the past, FF has been involved in litigation with contractors and
suppliers when FF failed to make overdue payments due to cash constraints FF faced, certain of which were settled through the Vendor
Trust FF established on April 29, 2019. In exchange for contributing accounts receivable to the Vendor Trust, the participating
vendors are required to refrain from bringing legal claims regarding any overdue payment and forbear from exercising remedies on any
payables tendered to and accepted by the Vendor Trust. FF’s suppliers and contractors holding aggregate past due payables of
approximately $116.1 million contributed payables to the Vendor Trust in exchange for interests in the Vendor Trust. Certain FF
suppliers and contractors also received interests in the Vendor Trust related to approximately $25.0 million of purchase orders for
goods and services to be provided in the future. During September and October 2020, FF paid an aggregate of $4.5 million
to the Vendor Trust, thus reducing the aggregate past due principal payables and purchase orders held by the Vendor Trust to
approximately $136.6 million. In the fourth quarter of 2020, the Vendor Trust agreed to amend the agreement governing the
satisfaction of interests in the Vendor Trust to permit the conversion of the interests in the Vendor Trust to equity interests in
PSAC in connection with the Business Combination. In June 2021, FF and the Vendor Trust further agreed to allow the holders of
interests in the Vendor Trust to elect to receive up to $10 million in cash in the aggregate upon closing of the Business
Combination, which would reduce on a dollar-for-dollar basis the number of equity interests to be issued to such holders in
satisfaction of their interests in the Vendor Trust. Fifty-three (53) of the holders of interests in the Vendor Trust elected to
participate in the $10.0 million cash distribution at the Closing, and the remaining interests in the Vendor Trust were settled
through the conversion of interests into Company Class A Common Stock and payment of cash at the Closing..
Additionally, FF’s PRC Subsidiaries are
involved in 86 proceedings or disputes in China. Substantially all of the claims arose out of those subsidiaries’ ordinary course
of business, involving lease contract, third-party suppliers or vendors, or labor disputes. The amounts claimed by the parties in the
disputes involving FF’s PRC Subsidiaries range from $1,000 to $4.6 million.
Other
than disclosed herein, FF is currently not a party to any legal proceedings the outcome of which, if determined adversely to FF, would
individually or in the aggregate be reasonably expected to have a material adverse effect on FF’s business, financial condition,
or results of operations.
MANAGEMENT
The following table sets forth, as of September
20, 2021, certain information regarding our directors and executive officers who are responsible for overseeing the management of our
business.
Name
|
|
Age
|
|
Position
|
Dr. Carsten Breitfeld
|
|
58
|
|
Global Chief Executive Officer
and Director(4)
|
Zvi Glasman
|
|
58
|
|
Chief Financial Officer
|
Yueting Jia (YT Jia)
|
|
47
|
|
Founder and Chief Product & User Ecosystem
Officer
|
Benedikt Hartmann
|
|
61
|
|
Senior Vice President of Supply Chain
|
Chui Tin Mok
|
|
46
|
|
Executive Vice President, Head of User Ecosystem
|
Matthias Aydt
|
|
64
|
|
Senior Vice President,
Business Development and Product Definition and Director
|
Robert A. Kruse Jr.
|
|
62
|
|
Senior Vice President, Product Execution
|
Hong Rao
|
|
50
|
|
Vice President, I.A.I.
|
Jiawei Wang
|
|
30
|
|
Vice President, Global Capital Markets
|
Jordan Vogel
|
|
41
|
|
Director(2)(3)
|
Brian Krolicki
|
|
60
|
|
Director(2)
|
Edwin Goh
|
|
42
|
|
Director(1)(4)
|
Lee Liu
|
|
56
|
|
Director(2)(3)
|
Qing Ye
|
|
38
|
|
Director(4)
|
Susan G. Swenson
|
|
73
|
|
Director(1)(3)
|
Scott D. Vogel
|
|
46
|
|
Director(1)
|
|
(1)
|
Member
of the audit committee
|
|
(2)
|
Member
of the nominating committee
|
|
(3)
|
Member
of the compensation committee
|
|
(4)
|
Member
of the finance and investment committee
|
Executive
Officers and Directors
Dr. Carsten
Breitfeld has served as FF’s Global Chief Executive Officer since September 2019 and has served as a member of FF’s
board of directors since July 2021. Dr. Breitfeld is a veteran in the automotive industry and had held various positions with BMW
Group for approximately 20 years, including serving as its Group Vice President and Head of the i8 Vehicle Program, which gave birth
to the i8 luxury plug-in hybrid model. From July 2016 to January 2019, Dr. Breitfeld was the Chief Executive Officer and
Chairman of the Board of BYTON, a Chinese electric vehicle startup with operations in multiple countries and cofounded by Dr. Breitfeld.
Dr. Breitfeld received his PhD degree in Mechanical Engineering from the University of Hannover.
Dr.
Breitfeld is well-qualified to serve on the Company’s board of directors based on his extensive executive experience in the automotive
industry and his experience with FF and service as FF’s Global Chief Executive Officer.
Mr. Zvi Glasman has served as
FF’s Chief Financial Officer since December 2020. From August 2013 to October 2019, Mr. Glasman served as the Chief
Financial Officer of Fox Factory Holding Corp. (NASDAQ: FOXF) (“Fox Factory”), a publicly traded company that designs, engineers,
manufactures and markets performance-defining products and systems for customers worldwide, primarily used on bikes, side-by-side vehicles,
ATVs, snowmobiles, motorcycles, automotive, and other off-road and on-road recreational vehicles. Mr. Glasman first joined Fox Factory
as the Chief Financial Officer of its subsidiary which he served from January 2008 until August 2013, and led Fox Factory’s
initial public offering in 2013. Prior to joining Fox Factory, Mr. Glasman held CFO roles with several companies from 2001 to 2008. Mr.
Glasman is an inactive certified public accountant. He earned a Bachelor of Science degree in Finance from Pennsylvania State University
in 1985.
Mr.
Yueting Jia (YT Jia) is the Founder of FF and has served as FF’s Chief Product and User Ecosystem Officer since September 2019.
In 2003, YT Jia founded Xbell Union Communication Technology (Beijing) Co., a Singapore publicly-listed company that developed and launched
China’s first mobile video streaming software system. In 2004, YT Jia founded LeTV, a video streaming website. In 2011, YT Jia
founded Le Holdings Co. Ltd (“LeEco”), which is an internet ecosystem technology company with business segments including
smart phones, smart TV, smart cars, internet sports, video content, internet finance and cloud computing. In 2014, YT Jia founded FF
and was its Chief Executive Officer until September 2019. YT Jia defined and led the team in creating the FF 91. As Chief Product
and User Ecosystem Officer, YT Jia oversees activities in product innovation, strategy and definition; internet, AI and autonomous driving;
user experience, user acquisition and user operation and will report directly to the FF board of directors. YT Jia completed master’s
degree courses in enterprise management from Shan Xi University and attended the China CEO Program jointly offered by Cheung Kong Graduate
School of Business, Columbia Business School, IMD and London Business School.
Mr.
Benedikt Hartmann has served as FF’s Senior Vice President of Supply Chain since January 2020. Prior to joining FF,
from September 2017 to December 2019, Mr. Hartmann served as the Vice President of Purchasing and Supplier Quality at BMW-Brilliance
Automotive, a BMW joint venture in China with a yearly production of 540,000 vehicles, in which Mr. Hartmann was responsible for the
purchasing of production and non-production material as well as managing and overseeing supplier quality. From January 2013 to August 2017,
Mr. Hartmann served as the Vice President of Purchasing Production and Development Partners at BMW AG, where he was responsible for contract
manufacturing sourcing and research and development services for complete vehicles. Between 2006 and 2013 he held various positions at
BMW AG including Vice President of Project Purchasing 1-, 3-, 4- and 5-Series and Vice President of Purchasing Powertrain and Chassis
globally. Mr. Hartmann received his Master degree in Industrial Engineering at University Karlsruhe.
Mr.
Chui Tin Mok has served as FF’s Executive Vice President and the Global Head of User Ecosystem since August 2018.
Mr. Mok is very experienced in managing marketing & sales functions in global internet tech companies. Prior to joining FF,
Mr. Mok worked in Trend Lab Limited, which Mr. Mok founded in January 2017. Trend Lab has been rated as Top 10 Innovation Startups.
From September 2017 to January 2018, Mr. Mok was the President of EFT Solutions Limited (HKEx: 8062), a Hong Kong public
company that provides online and offline payment solutions. From 2013 to 2017, Mr. Mok served as the Group Chief Marketing Officer of
LeEco Group and also the CEO of LeEco APAC. During this time, he successfully managed a team of more than 1500 people across all business
functions of smartphone, smart TV, video streaming service, cloud computing, online content distribution, e-commerce, retail, etc. in
both domestic and overseas markets. He contributed to helping LeEco successfully enter the Hong Kong, India and US markets. Mr.
Mok served as the Global Vice President of Sales and Marketing of Meizu Technology Co., Ltd. from 2010 to 2013. He managed marketing
and communication departments that included more than 500 employees and was in charge of the sales channel upgrade as well as the overseas
expansion. Mr. Mok received his Higher Diploma in Building Service Engineering from Hong Kong Institute of Vocational Education,
and his Executive Master Degree in Business Administration from International Business Academy of Switzerland.
Mr.
Matthias Aydt has served as FF’s Senior Vice President of Business Development and Product Definition since November 2019,
overseeing business development of FF’s business to business sales, technology licensing and strategic cooperation as well as leading
its product strategy for future products, and has served as a member of FF’s board of directors since July 2021. Mr. Aydt has served
in various leadership roles at FF, including Senior Vice President of Product Execution, Vice President of Vehicle Engineering and Vehicle
Chief Engineer and Head of Hardware Architecture. Mr. Aydt has extensive experience in the automotive industry. Prior to joining FF in
July 2016, Mr. Aydt served as the Vice President of Vehicle Engineering of Qoros Auto from January 2015 to May 2016, held
various positions at Magna Steyr from 2006 to 2014, including Branch Manager and Head of Project Management at Magna Steyr China. Mr.
Aydt received his Bachelor of Science degree from Fachhochschule Ulm - Hochschule für Technik.
Mr.
Aydt is well qualified to serve on the Company’s board of directors based on his extensive executive experience in the automotive
industry and with FF and his strategic and technical background.
Mr.
Robert A. Kruse Jr has served as FF’s Senior Vice President of Product Execution since November 2019, and is responsible
for product development, advanced technology, vehicle program management and manufacturing, and leads the product execution strategy.
Mr. Kruse also sits on the advisory board of American Battery Solutions and Neah Power Strategic. Prior to joining FF, Mr. Kruse was
the Chief Technology Officer of Karma Automotive from January 2017 to October 2019, and Chief Technology Officer of Qoros Automotive
from June 2015 to December 2016. Prior to that, from May 2013 to October 2014 he served as the Vice President of
Townsend Capital and before that, from November 2010 to May 2013, Mr. Kruse was the Chief Operating Officer and a member of
the board of Saktis3 Inc., a startup solid-state battery company. From 1978 to 2009, Mr. Kruse worked in General Motors Corporation Michigan
in various leadership capacities, including the Global Executive Director in charge of hybrid, electric vehicles and advanced technology
batteries, among others. Mr. Kruse holds a Bachelor of Science degree in Electrical Engineering from Missouri University of Science &
Technology and a Master of Science degree in Management from Massachusetts Institute of Technology.
Mr.
Hong Rao has served as FF’s Vice President of I.A.I. (Internet, Autonomous Driving, Intelligence) since April 2015,
overseeing technology innovation, product and technology roadmap, system architecture, software and AI, among others. Prior to joining
FF, Mr. Rao served as Co-Founder and Chief Technology Officer at Borqs Technologies from October 2007 to March 2015 and held
several engineering leadership positions in Motorola from 2003 to 2007. Mr. Rao received his Master of Business Administration degree
from Arizona State University, his Master of Science degree in Electrical Engineering from Beijing Institute of Technology, and his Bachelor
of Science degree in Electrical Engineering from Shanghai University of Science & Technology.
Mr.
Jiawei Wang has served as FF’s Vice President of Global Capital Markets since May 2018. Prior to that, Mr. Wang was
the General Manager of China Capital Markets at FF from March 2017 to January 2018 and Global Head of Capital Markets from
January 2018 to May 2018. Before joining FF, Mr. Wang worked at LeEco as Director of Corporate Development from 2015 to 2017.
He co-founded Global Galaxy Inc. in September 2013 and worked as a private equity analyst at Knights Investment Group from December 2013
to February 2014. Mr. Wang received his Bachelor Degree in Finance from Central University of Finance and Economics.
Mr.
Qing Ye. Mr. Ye has served as a member of FF’s board of directors since July 2021. Mr. Ye joined FF in February 2018
and currently serves as FF’s Vice President of Business Development and FF PAR. Mr. Ye also served as a director of Faraday Future
from September 2018 to February 2020. Prior to joining FF, Mr. Ye served as the Vice President of Smart Device Overseas at
LeEco from November 2016 to May 2017, and President of LeEco U.S. from May 2017 to February 2018, as a member of
the board of directors of Lucid Motors from September 2017 to August 2018, and as a Country GM/MD of Huawei Consumer BG at
Huawei France from January 2014 to October 2016. Mr. Ye received his Master degree in Electronics Engineering from Zhongshan
University and his Bachelor degree in Engineering and Administration from Huazhong Science and Technology University.
Mr.
Ye is well-qualified to serve on the Company’s board of directors due to his extensive leadership experience in electric vehicle
and technology companies.
Mr.
Jordan Vogel has served as a member of FF’s board of directors since July 2021. Prior to that, Mr. Vogel was PSAC’s
Chairman, Co-Chief Executive Officer and Secretary from its inception until the consummation of the Business Combination in July 2021.
Mr. Vogel has been actively investing in and managing residential real estate in New York City since 2001. Since April 2009,
Mr. Vogel has served as Co-Founder and Managing Member of Benchmark Real Estate Group, LLC, a real estate investment company. Mr. Vogel
oversees all of the firm’s acquisitions and is a member of its Investment Committee. Prior to founding Benchmark, Mr. Vogel worked
at SG2 Properties, LLC, heading their acquisitions group from 2004 to 2009. Prior to SG2, Mr. Vogel worked at William Moses Co., Inc.,
an owner-operator of luxury apartments in Manhattan, from 2002 to 2004. He was responsible for asset management and the day-to-day operation
of the entire portfolio. Mr. Vogel began his career in private equity in 2000 at Cramer Rosenthal McGlynn, LLC, a $5 billion money management
firm located in New York City. Mr. Vogel graduated with a B.S. in Economics from the University of Pennsylvania and received an
M.S. in Real Estate Development from New York University.
Mr.
Vogel is well-qualified to serve on the Company’s board of directors due to his investment experience and special purpose acquisition
company experience.
Mr.
Brian K. Krolicki. Mr. Krolicki has served as a member and Chairman of FF’s board of directors since July 2021. Mr. Krolicki
sat on the advisory board of FF from June 2019 to April 2020 and has been a director of FF since May 2020. Mr. Krolicki
has extensive experiences in both the public and private sectors, and has served as a director or member of the advisory board in various
companies. Mr. Krolicki was the Lieutenant Governor of the State of Nevada from 2007 to 2014 and the State Treasurer of the State of
Nevada from 1999 to 2006. Mr. Krolicki also served in a wide variety of critical positions, including Chairman of the Nevada Commission
on Economic Development and President of the Nevada State Senate. During his tenure as State Treasurer, Nevada became the first state
treasury to receive the Certificate of Excellence in Investment Policy. In 2004, Brian was honored with the prestigious Award for Excellence
in Public Finance and, in the same year, earned the distinction the nation’s “Most Outstanding State Treasurer.” Mr.
Krolicki sits on the boards of Vislink Technologies Inc. (NASDAQ: VISL), and Nevada Nanotech Systems (and is currently its chairman of
the audit committee). He is also the director of government relations of Customer Engagement Technologies, a payment solutions company
in partnership with JPMorgan Chase. Mr. Krolicki holds a B.A. degree in Political Science from Stanford University.
Mr.
Krolicki is well-qualified to serve on the Company’s board of directors based on his directorship experience with various companies,
governance experience from his public service careers and extensive experience in the financial and technology industries.
Mr.
Edwin Goh. Mr. Goh has served as a member of FF’s board of directors since July 2021. Mr. Goh has extensive experience
in finance and strategy in the Technology, Media and Telecommunications (TMT) sector. Currently, he is a Senior Advisor to Cebile Capital,
a private advisory firm. Prior to that, Mr. Goh worked for Barclays Investment Bank in Europe and Asia for over 10 years and most recently
served as the Head of Asia Pacific TMT. Before joining Barclays, he worked at Goldman Sachs in London and Bain & Company in Singapore
and Los Angeles. Mr. Goh received his MBA degree from The Wharton School, University of Pennsylvania. He also holds a Masters of Engineering
in Civil Engineering from Imperial College, University of London.
Mr.
Goh is well-qualified to serve on the Company’s board of directors based on his skills and experiences in finance and consulting
and knowledge of the technology and internet industry.
Mr.
Lee Liu. Mr. Liu has served as a member of FF’s board of directors since July 2021. Mr. Liu has extensive experiences in
human resource, social capital and organizational capital management. Currently, Mr. Liu serves as founder and Chief Executive officer
of King Maker Company (KMC) and Chairman of China Intelligent Management Association, a national society focusing on human resource development.
Prior to founding KMC as well as CIMA in May 2020, Mr. Liu served as Senior Vice President of Human Resources at Baidu Inc., and
the Chairman of Baidu Cloud Business. Prior to joining Baidu in April 2011, Mr. Liu served a variety of management roles in Motorola
Inc. across regions and countries, including the Vice President of Global Human Resources. Mr. Liu received his PhD degree in Economics
from Southwestern University of Finance and Economics. He also holds an Executive MBA degree from Peking University and a Bachelor degree
in Microelectronis from Tianjin University.
Mr.
Liu is well-qualified to serve on the Company’s board of directors based on his extensive background in technology and internet
services and human resources management.
Ms.
Susan G. Swenson. Ms. Swenson has served as a member of FF’s board of directors since July 2021. Ms. Swenson has several
decades of operating experience in wireless telecom, video technologies and digital media, as well as telematics and small business software.
Since March 2019, Ms. Swenson has served on the board of Sonim Technologies Inc. (NASDAQ: SONM), and currently chairs the compensation
committee. Since July 2018, Ms. Swenson has served on the board of Vislink Technologies, Inc. (NASDAQ: VISL), a provider of wireless
video communications products, where she is board chair and chair of the audit committee. Since February 2012, Ms. Swenson has served
on the board of Harmonic, Inc. (NASDAQ: HLIT), a video delivery and media company, where she is chair of the governance & nominating
committee. From August 2012 to August 2018, Ms. Swenson served on the board of FirstNet, an independent authority within the NTIA/Department
of Commerce responsible for establishing a single nationwide public safety broadband network, and was chair of the board from 2014 to
2018. From December 2015 to June 2017, Ms. Swenson served as Chairperson and Chief Executive Officer of Inseego Corporation (formerly
Novatel Wireless; NASDAQ: INSG), a wireless internet solutions and telematics provider, and served as the board chairperson from April
2014 to June 2017. From February 2004 to October 2005, Ms. Swenson served as the President and Chief Operating Officer of T-Mobile US,
Inc. From 1999 to 2004, Ms. Swenson served as President of Leap Wireless International, Inc., and Chief Executive Officer of Cricket
Communications, Inc., a prepaid wireless service provider and subsidiary of Leap. Ms. Swenson also served as Chief Executive Officer
of Sage North America from 2008 to 2011. Ms. Swenson previously served on the board of directors of Wells Fargo from November 1994 to
December 2017. Ms. Swenson received a B.A. in French from San Diego State University.
Ms.
Swenson is well-qualified to serve on the Company’s board of directors based on her extensive leadership and directorship experience
with technology, media and communications companies.
Mr.
Scott D. Vogel. Mr. Vogel has served as a member of FF’s board of directors since July 2021. Mr. Vogel has served as the
Managing Member at Vogel Partners LLC, a private investment and advisory firm, since July 2016. From 2002 to July 2016, Mr. Vogel served
as Managing Director at Davidson Kempner Capital Management. From 1999 to 2001, he worked at MPF Investors, L.L.C. Prior to MPF Investors,
he was an investment banker at Chase Securities, Inc. Mr. Vogel has served on numerous boards during his career, including the board
of Seadrill Ltd. from July 2018 to February 2020, Arch Coal, Inc. from October 2016 to May 2019 and Key Energy Services, Inc. from December
2016 to April 2019. Currently, Mr. Vogel serves on the board of directors of the following public companies: Alpha Metallurgical Resources,
Inc. since December 2019, CBL & Associates Properties, Inc. since October 2020, Avaya Holdings Corp. since December 2017, and Bonanza
Creek Energy since April 2017. Mr. Vogel received his Master of Business Administration Degree from The Wharton School at the University
of Pennsylvania and his Bachelor’s degree in Business Administration from Washington University.
Mr.
Vogel is well-qualified to serve on the Company’s board of directors due to his mix experience with executive management oversight,
finance and capital markets, human resources and compensation, and strategic planning.
Board
Composition
FF’s
board of directors directs the management of FF’s business and affairs, as provided by Delaware law, and conducts its business
through meetings of the board of directors and its standing committees.
FF’s
board of directors consists of nine members, each of whom will serve for an initial term of one year. Under the Shareholder Agreement,
FF has agreed to nominate and seek re-election of the initial FF board of directors at the first annual meeting following the closing
of the Business Combination. Brian Krolicki will serve as Chairman of FF’s board of directors. The primary responsibilities
of FF’s board of directors are to provide oversight, strategic guidance, counseling and direction to FF’s management. FF’s
board of directors will meet on a regular basis and additionally as required.
Involvement
in Certain Legal Proceedings.
YT
Jia filed for bankruptcy protection under Chapter 11 of Title 11 of the United States (the “Bankruptcy Code”) on October
14, 2019 in the U.S. Bankruptcy Court for the District of Delaware which was later transferred to Bankruptcy Court for the Central District
of California (the “Bankruptcy Court”). YT Jia filed for bankruptcy as a result of guarantees or borrowing made by YT Jia
in order to fund LeECO and other businesses founded by YT Jia in China. The Chapter 11 plan was approved by the Bankruptcy Court and
became effective on June 26, 2020.
In
December 2019, YT Jia was determined by the Shenzhen Stock Exchange of China to be unsuitable for a position as director, supervisor
or executive officer of public listed companies in China as a result of violation by LeTV, a public company founded and controlled by
YT Jia in China, of several listing rules of Shenzhen Stock Exchange, including procedural non-compliance for the provision of funding
and guarantees by LeTV to other affiliated companies founded by YT Jia, discrepancies in LeTV’s forecast and financials, and procedurally
improper use of proceeds from LeTV’s public offering. Additionally, as the controlling shareholder and the former chairman of LeTV,
YT Jia received a notice from China Securities Regulatory Commission (“CSRC”) in April 2021 notifying the CSRC’s
decision to impose an administrative fine of RMB241.2 million and a permanent ban from entry into the securities market on YT Jia as
a result of LeTV’s misrepresentation in the registration document of its IPO and its financial statements, fraud in connection
with a private placement, and other violations of securities law and listing requirements.
In
January 2021, YT Jia, as the former executive director and chairman of Coolpad Group Limited (SEHK: 2369) received a decision from
the Listing Committee of The Stock Exchange of Hong Kong Limited (the “HKSE Listing Committee”) that YT Jia and another
executive director of Coolpad had breached their undertakings to the HKSE Listing Committee in connection with Coolpad Group Limited’s
failure to comply with the Hong Kong listing rules requirement to timely announce certain disclosable transactions (such as advancement
of money, provision of financial assistance, or certain related party transactions) and timely publish its financial results. HKSE Listing
Committee determined that YT Jia’s retention of office on the board of Coolpad would have been prejudicial to the interests of
investors. YT Jia appealed the decision on January 15, 2021.
Independence
of Directors
FF
will adhere to the rules of NASDAQ in determining whether a director is independent. The board of directors of FF has consulted, and
will consult, with its counsel to ensure that the board’s determinations are consistent with those rules and all relevant securities
and other laws and regulations regarding the independence of directors. NASDAQ listing standards generally define an “independent
director” as a person, other than an executive officer of a company or any other individual having a relationship which, in the
opinion of FF’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. FF has determined that Jordan Vogel, Brian Krolicki, Edwin Goh, Lee Liu, Susan G. Swenson and Scott D. Vogel are
independent directors. FF’s independent directors will have regularly scheduled meetings at which only independent directors are
present. A majority of the FF board of directors will be remain independent, meaning FF cannot elect to be a controlled company under
NASDAQ listing rules, until the market capitalization of FF exceeds $20 billion and the FF board of directors elects to become a controlled
company as a result of FF Top having requisite voting power for FF to become a controlled company.
Risk Oversight
FF’s board of directors will oversee the
risk management activities designed and implemented by management. FF’s board of directors will execute its oversight responsibility
both directly and through its committees. FF’s board of directors will also consider specific risk topics, including risks associated
with its strategic initiatives, business plans and capital structure. FF’s management, including its executive officers, is primarily
responsible for managing the risks associated with the operation and business of FF and will provide appropriate updates to the board
of directors and the audit committee. FF’s board of directors has delegated to the audit committee oversight of its risk management
process, and its other committees also consider risk as they perform their respective committee responsibilities. All committees report
to the board of directors as appropriate, including when a matter rises to the level of material or enterprise risk.
Meetings
and Committees of the Board of Directors
FF
has established a separately standing audit committee, nominating committee, compensation committee and finance and investment committee.
Audit
Committee Information
FF
has an audit committee comprised of independent directors. The audit committee consists of Susan Swenson, Edwin Goh and Scott Vogel with
Susan Swenson serving as chair. Each of the members of the audit committee are independent under the applicable listing standards. The
audit committee has a written charter. The purpose of the audit committee is, among other things, to appoint, retain, set compensation
of, and supervise FF’s independent registered public accounting firm, review the results and scope of the audit and other accounting
related services and review FF’s accounting practices and systems of internal accounting and disclosure controls.
The
audit committee will at all times be composed exclusively of “independent directors,” as defined for audit committee members
under NASDAQ listing standards and the rules and regulations of the SEC, who are “financially literate.” “Financially
literate” generally means being able to read and understand fundamental financial statements, including a company’s balance
sheet, income statement and cash flow statement. In addition, FF will be required to certify to the exchange that the committee has,
and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification
in accounting, or other comparable experience or background that results in the individual’s financial sophistication. Our board
has deemed Susan Swenson to be a financial expert on the audit committee.
Nominating
Committee Information
FF
has a nominating committee of the board of directors comprised of Brian Krolicki, Lee Liu and Jordan Vogel with Brian Krolicki serving
as chair. Each member of the nominating committee is independent under the applicable listing standards. The nominating committee has
a written charter. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on FF’s
board of directors.
Guidelines
for Selecting Director Nominees
The
nominating committee will consider persons identified by its members, management, stockholders, investment bankers and others. The guidelines
for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:
|
●
|
should
have demonstrated notable or significant achievements in business, education or public service;
|
|
●
|
should
possess the requisite intelligence, education and experience to make a significant contribution
to the board of directors and bring a range of skills, diverse perspectives and backgrounds
to its deliberations; and
|
|
●
|
should
have the highest ethical standards, a strong sense of professionalism and intense dedication
to serving the interests of the stockholders.
|
The nominating committee will consider a number
of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s
candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial
or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and
makeup of its members to obtain a broad and diverse mix of board members. The nominating committee will not distinguish among nominees
recommended by stockholders and other persons. Under the Shareholder Agreement entered into between FF and FF Top, based on FF Top having
voting power over 37.4% of our issued and outstanding Common Stock as of September 20, 2021, FF Top currently has the right to nominate
four out of nine directors on FF’s board of directors.
Compensation
Committee Information
FF
has a compensation committee consisting of independent directors. The compensation committee consist of Lee Liu, Susan Swenson and Jordan
Vogel with Lee Liu serving as chair. The compensation committee has a written charter. The purpose of the compensation committee is to
review and approve compensation paid to FF’s officers and directors and to administer FF’s incentive compensation plans,
including authority to make and modify awards under such plans.
Any
award made pursuant to an individual subject to the requirements of Section 16 of the Exchange Act must be approved by a committee
of two or more members of the board who are “nonemployee directors” as defined in Rule 16b-3(d)(1) under the Exchange
Act.
Finance
and Investment Committee Information
FF
has a finance and investment committee, of which Edwin Goh, Carsten Breitfeld and Bob Ye serve as members. Edwin Goh serves as chairperson
of the finance and investment committee. The principal functions of the finance and investment committee include:
|
●
|
reviewing
analyses and provide guidance and advice regarding acquisitions and divestments and discuss
and review FF’s tax strategies, planning, and related structures;
|
|
●
|
reviewing
the FF’s capital structure and capital allocation, including any organic and inorganic
investments;
|
|
●
|
reviewing
and discussing any dividend policy;
|
|
●
|
reviewing
and discussing any share repurchase activities and plans; and
|
|
●
|
reviewing
and discussing any debt portfolio, credit facilities, compliance with financial covenants,
commodity, interest rate, and currency derivative strategies, and proposed securities offerings.
|
The
finance and investment committee operates under a written charter. Under the Shareholder Agreement, Jiawei Wang will serve as a non-voting
member of the finance and investment committee as long as he serves as an officer of FF.
Code of
Ethics
FF
has a Code of Ethics that applies to all of its employees, officers, and directors. This includes FF’s principal executive officer,
principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The full text of
the Code of Ethics is posted on FF’s website at www.ff.com. FF intends to disclose on its website any future amendments
of the Code of Ethics or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer
or controller, persons performing similar functions, or FF’s directors from provisions in the Code of Ethics.
Compensation
Committee Interlocks and Insider Participation
None
of the members of the compensation committee is currently, or has been at any time, one of FF’s officers or employees. None of
FF’s executive officers currently serves, or has served since July 2021, as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a member of FF’s board of directors or compensation
committee.
Shareholder
and Interested Party Communications
Prior to the Closing, PSAC’s board of
directors did not provide a process for stockholders or other interested parties to send communications to the board of directors because
management believed that it was premature to develop such processes given the limited liquidity of PSAC’s common stock at that
time. However, management of FF may establish a process for shareholder and interested party communications in the future.
EXECUTIVE
AND DIRECTOR COMPENSATION
This
section discusses the material components of the executive compensation program for certain of FF’s executive officers (the “NEOs”)
and directors.
Overview
FF
intends to develop an executive compensation program that is designed to align executive compensation with FF’s business objectives
and the creation of stockholder value, while enabling FF to attract, motivate and retain individuals who contribute to the long-term
success of FF. We anticipate that compensation for our executive officers will have three primary components: base salary; an annual
cash incentive bonus; and long-term equity-based incentive compensation. We expect to grant the long-term equity-based incentive compensation
to our executive officers under the 2021 Plan.
Decisions
on the executive compensation program will be made by the compensation committee. The executive compensation program actually adopted
will depend on the judgment of the members of the compensation committee. FF has retained Mercer (US) Inc. (“Mercer”), an
independent compensation consultant, to assist FF in evaluating the compensation programs for the executive officers. Mercer will also
assist our board of directors in developing a compensation program for our non-employee directors.
Prior
to the Closing, employees of Legacy FF received restricted stock awards that were converted into shares of FF at the closing of the Business
Combination. These restricted stock awards were being granted in recognition of reduced prior compensation received by employees of Legacy
FF. These restricted stock awards will vest 90 days following the closing of the Business Combination, subject to the recipient’s
continued employment through such date. The grant values for the NEOs on an individual basis and the remaining executive officers in
the aggregate are as follows: Dr. Breitfeld, $1,598,354; Mr. Mok, $214,773; Mr. Wang, $122,510; and the remaining executive officers
of FF, in the aggregate, $1,141,339.
Summary
Compensation Table — Fiscal 2020
The
following table sets forth certain information concerning compensation paid to the NEOs for the fiscal year ended December 31, 2020:
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)(2)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All
Other
Compensation
($)(3)
|
|
|
Total
($)
|
|
Dr. Carsten Breitfeld
|
|
|
2020
|
|
|
|
468,313
|
|
|
|
400,000
|
(4)
|
|
|
—
|
|
|
|
1,765,581
|
|
|
|
—
|
|
|
|
98,419
|
|
|
|
2,732,313
|
|
Global
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chui
Tin Mok
|
|
|
2020
|
|
|
|
163,417
|
|
|
|
200,000
|
(5)
|
|
|
—
|
|
|
|
285,760
|
|
|
|
—
|
|
|
|
—
|
|
|
|
649,177
|
|
Executive
Vice President and Head of User Ecosystem
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiawei
Wang
|
|
|
2020
|
|
|
|
161,512
|
|
|
|
—
|
|
|
|
—
|
|
|
|
480,240
|
|
|
|
—
|
|
|
|
—
|
|
|
|
641,752
|
|
Vice
President of Global Capital Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
annualized base salaries for the NEOs at the beginning of fiscal 2020 were as follows: Dr. Breitfeld,
$1,800,000; Mr. Mok, $500,000 and Mr. Wang, $304,000. In response to the COVID-19 pandemic,
Legacy FF reduced the base salaries of each NEO in March 2020. The amounts reported
in this column represent base salaries earned by the NEOs during fiscal 2020, which included
the application of the COVID-19 reduction.
|
|
(2)
|
The
amounts reported in this column reflect the grant date fair value of time-based stock option
awards granted to the NEOs during 2020 by Legacy FF under the Smart King Ltd. Equity Incentive
Plan (the “Legacy FF EIP”) and are accounted for in accordance with FASB ASC
Topic 718. Please see Note 13 titled “Stock-Based Compensation” to
FF’s audited consolidated financial statements for the year ended December 31, 2020
included elsewhere in this prospectus for a discussion of the relevant assumptions used in
calculating these amounts. The grant date fair values of these option awards were as follows:
Dr. Breitfeld — $1,685,440; Mr. Mok — $285,760 and Mr. Wang — $480,240.
|
In
addition, the amount reported in this column for Dr. Breitfeld includes the grant date fair value of an equity award granted to
him during 2020 by FF Global (an indirect shareholder of FF as described below in this prospectus under “Partnership Program”).
This value is accounted for in accordance with FASB ASC Topic 718 based on the following assumptions: 10 year term; volatility of
34.96%; discount rate of 0.75%; and an estimated per unit value as of the grant date of $0.09. The grant date fair value of this FF Global
award for Dr. Breitfeld is $80,141.
|
(3)
|
For
Dr. Breitfeld, this amount includes $79,200 which is the value of the corporate housing
provided to Dr. Breitfeld in 2020 and $19,219 which is the value of a rental car provided
to Dr. Breitfeld in 2020.
|
|
(4)
|
This
amount represents the portion of the signing and retention bonus granted to Dr. Breitfeld
that vested during 2020. The remaining portion of the bonus vests based on Dr. Breitfeld’s
continued employment through August 2022, as described in more detail below under “Employment
Agreements, Offer Letters and Other Compensatory Agreements.”
|
|
(5)
|
This
amount represents the portion of the signing and retention bonus granted to Mr. Mok that
vested during 2020. The remaining portion of the bonus vests based on Mr. Mok’s continued
employment through October 2023, as described in more detail below under “Employment
Agreements, Offer Letters and Other Compensatory Agreements.”
|
Employment
Agreements, Offer Letters and Other Compensatory Agreements
Dr. Carsten
Breitfeld
Dr. Breitfeld entered into an employment
agreement with Faraday&Future, Inc., a California corporation and a wholly owned subsidiary of FF (“FF U.S.”), dated
August 6, 2019, that provides for his employment as FF’s Global Chief Executive Officer. The agreement has a term of three years
and provides for Dr. Breitfeld to receive an annual base salary of $2,250,000 (which was temporarily reduced to $1,800,000). In
connection with the Business Combination, Dr. Breitfeld’s base salary was increased to $2,250,000 and he received a lump sum
bonus equal to the amount by which his base salary was reduced from September 2019 to the closing of the Business Combination. The
agreement also provides that Dr. Breitfeld will be paid a signing and retention bonus of $1,200,000, which vests in three annual
installments in August 2020, August 2021 and August 2022, and that he is entitled to receive a discretionary annual performance
bonus. The agreement also provides that Dr. Breitfeld will be granted an initial option to purchase 13 million Class A ordinary
shares of Legacy FF (which was granted in April 2020) and will receive a future option grant to purchase 4 million Class A
ordinary shares of Legacy FF if FF achieves certain milestones on certain dates as specified by FF’s founder. Dr. Breitfeld
is also entitled to participate in all benefit programs provided to employees of FF U.S. generally and to reimbursement for business
expenses, paid time off, a car allowance, payment for visa application and legal fees, $5,000 for accounting advisors retained to advise
Dr. Breitfeld on the computation of his personal taxes, and reimbursement of relocation expenses within 90 days of the effective
date of the agreement. Dr. Breitfeld is also provided corporate housing by FF U.S. (or a monthly housing allowance not to exceed
$8,000). FF U.S. has also agreed to reimburse Dr. Breitfeld for monthly contributions to the German Public Retirement Insurance System.
If Dr. Breitfeld’s employment is
terminated by FF U.S. without cause (as such term is defined in the employment agreement), he will receive, subject to him executing
and not revoking a general release of claims in favor of FF U.S., a lump sum payment equal to his base salary for the remainder of the
term of the employment agreement. If Dr. Breitfeld’s employment is terminated due to his death or disability (as such term
is defined in the employment agreement), FF U.S. will pay Dr. Breitfeld (or his estate) a lump sum payment equal to three months
base salary.
The
employment agreement contains an indefinite confidentiality clause, one-year post-termination non-solicitation of employees and independent
contractors clause, one-year post-termination non-interference with customers clause, and one-year post termination non-disparagement
clause.
Dr.
Breitfeld’s employment agreement was amended, effective as of the effective time of the Business Combination, to provide that he
will serve as the Chief Executive Officer of FF and report to the FF board of directors, to remove provisions that are no longer operative
and to add customary provisions for public company employment agreements, such as a 280G cutback provision.
Chui Tin
Mok
Mr. Mok entered into an offer letter with FF
U.S., dated October 10, 2018, that provides for his employment as FF’s Global UP2U EVP. The offer letter provides for Mr. Mok to
receive an annual base salary of $500,000. The agreement also provides that Mr. Mok will be paid a signing and retention bonus of $1,000,000,
which vests over 60 months through October 2023, and that he is entitled to receive a discretionary annual performance bonus (with
a target amount of $300,000). Mr. Mok is also entitled to participate in FF U.S.’s health insurance, 401(k) plan, paid time off
and paid holidays.
Jiawei
Wang
Mr. Wang entered into an offer letter with
FF U.S., dated January 23, 2018 and amended July 1, 2019, that provides for his employment as FF’s Head of Capital. The offer letter
provides for Mr. Wang to receive an annual base salary of $100,000 (which was adjusted in July 2019 to $304,000 and was scheduled
to increase to $380,000 on March 1, 2020). Upon FF raising equity of $200 million, Mr. Wang will receive a bonus equal to the amount
by which his base salary was reduced from July 1, 2019 to February 29, 2020. The agreement also provides that Mr. Wang is entitled to
receive a discretionary annual performance bonus (with a target amount of $120,000 effective July 1, 2019). Mr. Wang is also entitled
to participate in FF U.S.’s health insurance, 401(k) plan, paid time off and paid holidays.
Zvi Glasman
Mr. Glasman entered into an offer letter with
FF U.S., dated December 20, 2020 and amended and restated March 29, 2021, that provides for his employment as FF U.S.’s Chief Financial
Officer and, upon the effective time of the Business Combination, the Chief Financial Officer of FF. The restated offer letter provides
for Mr. Glasman to receive an annual base salary of $320,000, that increased to $600,000 effective April 1, 2021 (with a $70,000 true-up
payment) and will increase to $1,000,000 if FF reaches a market capitalization of $7.5 billion. Mr. Glasman is entitled to receive a
discretionary annual bonus (with a target amount of $400,000 effective March 29, 2021), became entitled to a special efforts bonus of
$300,000 effective March 29, 2021, and was entitled to a transaction bonus of $400,000 upon the effective time of the Business Combination.
In January 2021, Mr. Glasman was granted (i) an initial option to purchase 2 million Class A ordinary shares of Legacy FF that will become
vested over seven years commencing in December 2020, (ii) an additional option to purchase 2 million Class A ordinary shares of Legacy
FF that will become vested over seven years commencing upon the start of production of the FF 91, and (iii) an option based upon his
assistance with the Private Placement that became vested upon the effective time of the Business Combination. If Mr. Glasman’s
employment is terminated by FF without cause (as defined in the offer letter) or by Mr. Glasman for good reason (as defined in the letter
agreement), Mr. Glasman will be entitled to receive a lump sum severance payment equal to one year’s base salary and a pro rata
target bonus. Mr. Glasman is also entitled to participate in FF U.S.’s health insurance, 401(k) plan, paid time off and paid holidays.
Outstanding
Equity Awards at 2020 Fiscal Year-End
FF Equity
Awards:
The
table below sets forth certain information concerning outstanding stock options to acquire Class A Ordinary Shares of Legacy FF
held by the NEOs as of December 31, 2020. In connection with the Business Combination, all outstanding stock options of Legacy FF were
converted into options to purchase Class A Common Stock of FF.
Option
Awards
|
Name
|
|
Date
of Grant
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
Dr. Carsten
Breitfeld
|
|
4/8/2020
|
|
|
1,841,667
|
|
|
|
11,158,333
|
(1)
|
|
|
0.34
|
|
|
4/8/2030
|
|
|
7/26/2020
|
|
|
75,359
|
|
|
|
678,230
|
(2)
|
|
|
0.34
|
|
|
7/26/2030
|
Chui Tin
Mok
|
|
5/30/2019
|
|
|
1,450,000
|
|
|
|
4,550,000
|
(3)
|
|
|
0.36
|
|
|
5/30/2029
|
|
|
7/26/2020
|
|
|
40,670
|
|
|
|
2,292,823
|
(4)
|
|
|
0.34
|
|
|
7/26/2030
|
Jiawei
Wang
|
|
2/1/2018
|
|
|
7,793,750
|
|
|
|
206,250
|
(5)
|
|
|
0.36
|
|
|
2/1/2028
|
|
|
5/30/2019
|
|
|
53,550
|
|
|
|
68,850
|
(6)
|
|
|
0.36
|
|
|
5/30/2029
|
|
|
7/26/2020
|
|
|
29,187
|
|
|
|
3,830,144
|
(7)
|
|
|
0.34
|
|
|
7/26/2030
|
|
(1)
|
The
unvested portion of this option is scheduled to vest as follows (subject in each case to
the NEO’s continued employment through the applicable vesting date):
|
|
●
|
With
respect to 3,575,000 shares, in thirty-three equal monthly installments on the third day
of each month through September 3, 2024.
|
|
●
|
With
respect to 2,383,333 shares, in forty-four equal monthly installments on the third day of
each month through September 3, 2024.
|
|
●
|
With
respect to 2,600,000 shares, in forty-eight equal monthly installments beginning on September
3, 2021.
|
|
●
|
With
respect to 2,600,000 shares, in forty-eight equal monthly installments beginning on September
3, 2022.
|
|
(2)
|
The
unvested portion of this option is scheduled to vest as to 25% of the shares subject to the
option on March 16, 2021 and the remaining portion of the option shall vest in thirty-six
equal monthly installments thereafter, subject to the NEO’s continued employment through
the applicable vesting date.
|
|
(3)
|
The
unvested portion of this option is scheduled to vest as follows (subject in each case to
the NEO’s continued employment through the applicable vesting date):
|
|
●
|
With
respect to 1,250,000 shares, in twenty-five equal monthly installments on the eighth day
of each month through December 8, 2022.
|
|
●
|
With
respect to 900,000 shares, in thirty-six equal monthly installments on the eighth day of
each month through December 8, 2022.
|
|
●
|
With
respect to 1,200,000 shares, in forty-eight equal monthly installments beginning on January
8, 2021.
|
|
●
|
With
respect to 1,200,000 shares, in forty-eight equal monthly installments beginning on January
8, 2022.
|
|
(4)
|
The
unvested portion of this option is scheduled to vest as follows (subject in each case to
the NEO’s continued employment through the applicable vesting date):
|
|
●
|
With
respect to 1,992,823 shares, as to 498,206 of such shares on March 16, 2021 and as to the
remaining 1,494,617 of such shares in thirty-six equal monthly installments thereafter.
|
|
●
|
With
respect to 180,000 shares, as to 45,000 of such shares on June 26, 2021 and as to the remaining
135,000 of such shares in thirty-six equal monthly installments thereafter.
|
|
●
|
With
respect to 60,000 shares, in forty-eight equal monthly installments beginning on June 26,
2021.
|
|
●
|
With
respect to 30,000 shares, in forty-eight equal monthly installments beginning on June 26,
2022.
|
|
●
|
With
respect to 30,000 shares, in forty-eight equal monthly installments beginning on June 26,
2023.
|
|
(5)
|
The
unvested portion of this option is scheduled to vest in eleven equal monthly installments
on the twenty-first day of each month through November 21, 2021, subject to the NEO’s
continued employment through the applicable vesting date
|
|
(6)
|
The
unvested portion of this option is scheduled to vest in twenty-seven equal monthly installments
on the fifteenth day of each month through February 15, 2023, subject to the NEO’s
continued employment through the applicable vesting date.
|
|
(7)
|
The
unvested portion of this option is scheduled to vest as follows (subject in each case to
the NEO’s continued employment through the applicable vesting date):
|
|
●
|
With
respect to 1,430,144 shares, as to 357,536 of such shares on March 16, 2021 and as to the
remaining 1,072,608 of such shares in thirty-six equal monthly installments thereafter.
|
|
●
|
With
respect to 960,000 shares, as to 240,000 of such shares on June 26, 2021 and as to the remaining
720,000 of such shares in thirty-six equal monthly installments thereafter.
|
|
●
|
With
respect to 480,000 shares, in forty-eight equal monthly installments beginning on June 26,
2021.
|
|
●
|
With
respect to 480,000 shares, in forty-eight equal monthly installments beginning on June 26,
2022.
|
|
●
|
With
respect to 480,000 shares, in forty-eight equal monthly installments beginning on June 26,
2023.
|
FF Global Equity Awards:
As described below in this prospectus under “Partnership
Program,” certain members of FF management (including each of the NEOs) and other FF employees participate as partners in FF Global,
an indirect shareholder of FF through FF Global’s controlling equity interest in an indirect parent company of FF Top. Under the
terms of their participation, the executive pays the purchase price for their equity interests in FF Global in 10 annual installments.
The table below sets forth the FF Global equity interests for each of the NEOs as of December 31, 2020. The estimated per unit value of
these interests as of December 31, 2020 was approximately $0.09. FF Global intends to amend its governance documents to, among other things,
clarify the parties’ intention in terms of the allocation and distribution of economic interests of the FF Global units received
by the partners and preparatory partners.
|
|
FF Global Awards
|
Name
|
|
Date of Grant
|
|
|
Number of
Securities
Underlying
Unexercised
Awards (1)
Exercisable(1)
|
|
|
Number of
Securities
Underlying
Unexercised
Awards (1)
Unexercisable(1)
|
|
|
Per-Unit
Purchase
Price
($)
|
|
|
Award
Expiration
Date
|
Dr. Carsten Breitfeld
|
|
6/10/2020
|
|
|
13,000,000
|
|
|
—
|
|
|
0.50
|
|
|
6/10/2030
|
Chui Tin Mok
|
|
6/25/2019
|
|
|
3,900,000
|
|
|
—
|
|
|
0.50
|
|
|
6/25/2029
|
Jiawei Wang
|
|
6/25/2019
|
|
|
9,100,000
|
|
|
—
|
|
|
0.50
|
|
|
6/25/2029
|
|
(1)
|
The FF Global equity interests are fully vested and exercisable.
However, if the executive does not pay an installment of the purchase price when due, the equity interests related to that installment
will be forfeited to FF Global without consideration.
|
Description of Equity Incentive Plan
Prior to the Closing, Legacy FF maintained the
Legacy FF EIP. In connection with the Business Combination, all outstanding stock options of Legacy FF were converted into options to
purchase Class A Common Stock of FF.
In connection with the Business Combination, stockholders
of PSAC approved the 2021 Plan, which replaced the Legacy FF EIP with respect to future equity awards.
Description of Retirement Plans
Each of the NEOs (other than Dr. Breitfeld)
participate in a defined contribution 401(k) plan maintained by FF for the benefit of its full-time employees based in the United States.
This 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code so that employee contributions and income
earned on such contributions are not taxable to employees until withdrawn. Employees may elect to defer a portion of their eligible compensation,
not to exceed the statutorily prescribed annual limit, in the form of elective deferral contributions to this 401(k) plan. This 401(k)
plan also has a “catch-up contribution” feature for employees aged 50 or older (including those who qualify as “highly
compensated” employees) who can defer amounts over the statutory limit that applies to all other employees. Currently, FF does not
make any discretionary or matching employer contributions to the 401(k) plan. Participants are always vested in their contributions to
the 401(k) plan.
Dr. Breitfeld participates in the German Public
Retirement Insurance System as required under German law. FF does not make any contributions to this retirement plan, but as noted above
in the description of his employment agreement, FF will reimburse Dr. Breitfeld for his contributions to this retirement system.
Director Compensation Table — Fiscal 2020
The following table sets forth certain information
concerning compensation paid to Brian Krolicki, who is not an employee of either Legacy FF or FF U.S., for his service on the boards
of directors of Legacy FF and FF U.S. (the “boards”) for the last fiscal year. Messrs. Breitfeld, Aydt, Mok and Wang also
served as directors of Legacy FF and FF U.S. during the last fiscal year; however, their compensation is reflected in the Summary Compensation
Table — Fiscal 2020 as they did not receive any additional compensation for their service on the boards of Legacy FF or FF
U.S.
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock Awards
($)
|
|
|
Option Awards
($)(1)(2)
|
|
|
Total
($)
|
|
Brian Krolicki
|
|
|
4,167
|
|
|
|
—
|
|
|
|
40,013
|
|
|
|
44,180
|
|
(1)
|
As of December 31, 2020, Mr. Krolicki held options to acquire
679,167 Class A ordinary shares of Legacy FF with 108,333 of such options unvested as of December 31, 2020.
|
(2)
|
The
amounts reported in this column reflect the grant date fair value of a time-based stock option award granted to Mr. Krolicki during 2020
by Legacy FF under the Legacy FF EIP and are accounted for in accordance with FASB ASC Topic 718. Please see Note 13 titled “Stock-Based
Compensation” to FF’s audited consolidated financial statements for the year ended December 31, 2020 included
elsewhere in this prospectus for a discussion of the relevant assumptions used in calculating these amounts.
|
Pursuant to the terms of the Director Agreement
by and among Legacy FF, FF U.S. and Brian Krolicki, dated May 1, 2020 (the “Director Agreement”), Mr. Krolicki is entitled
to receive (i) an annual cash stipend of $10,000, paid in four equal quarterly payments, (ii) meeting fees of $1,000 for each
board meeting above 12 meetings per year, and (iii) $5,000 per year for serving on any committee of the boards (which shall be increased
to $10,000 if Mr. Krolicki serves as the chair of any such committee). During fiscal 2020, Mr. Krolicki served on three committees of
the boards, and was chair of the Audit Committee, however he did not receive any compensation for service on these committees in 2020
as they were formed in December 2020 and did not have any meetings in 2020. Mr. Krolicki is also entitled to reimbursement of any
expenses incurred in connection with his service on the boards.
Pursuant to the terms of the Director Agreement,
Mr. Krolicki received an option to purchase 325,000 Class A ordinary shares of Legacy FF on May 1, 2020 at an exercise price equal
to the fair market value of the ordinary shares on the date of grant. The option vests ratably on a monthly basis over 12 months from
May 1, 2020, subject to Mr. Krolicki’s continued service on the boards through each vesting date.
As noted above under “Management,”
Dr. Breitfeld and Mr. Aydt are executive officers of FF and serve on the board of directors of FF. Qing Ye is an employee of FF,
serving as its Vice President of Business Development and FF PAR, and serves on the FF board of directors. These individuals will not
receive any additional compensation for their services as directors of FF. The employee compensation arrangements for Mr. Aydt and Mr.
Ye as of the date hereof are briefly summarized below.
Mr. Aydt commenced employment with FF U.S.
in July 2016 and currently serves as FF’s Senior Vice President, Business Development and Product Definition and Director.
Pursuant to his retention letter with FF U.S. dated February 25, 2020, his base salary is $400,000, and he is eligible to receive a discretionary
annual performance bonus (with a target amount of $100,000). Mr. Aydt is also entitled to participate in FF U.S.’s health insurance,
401(k) plan, paid time off and paid holidays. For his services as an employee during 2020, Mr. Aydt received $139,417 in base salary.
He was also granted an option in July 2020 to purchase up to 1,315,790 shares of Class A Ordinary Shares of Legacy FF at an
exercise price of $0.34 per share. Mr. Aydt also holds 7,332,000 membership units in FF Global on the terms generally described above
under “FF Global Equity Awards.”
Mr. Ye commenced employment with FF U.S. in
August 2018 and currently serves as its Vice President of Business Development and FF PAR. Pursuant to his offer letter with FF
U.S. dated August 27, 2018, his base salary is $300,000, and he is eligible to receive a discretionary annual performance bonus (with
a target amount of $100,000). Mr. Ye is also entitled to participate in FF U.S.’s health insurance, 401(k) plan, paid time off
and paid holidays. For his services as an employee during 2020, Mr. Ye received $153,750 in base salary. He was also granted an option
in July 2020 to purchase up to 250,479 shares of Class A Ordinary Shares of Legacy FF at an exercise price of $0.34 per share.
Mr. Ye also holds 3,632,700 membership units in FF Global on the terms generally described above under “FF Global Equity Awards.”
Director Compensation
The following director compensation program relates
to FF’s non-employee directors and accordingly, Dr. Breitfeld, Mr. Aydt and Mr. Ye will not receive compensation for their services
as directors.
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Annual Board Cash Retainer: $50,000
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Annual Board Chair Cash Premium: $45,000
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Annual Committee Member Cash Retainers:
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Audit Committee: $10,000
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Compensation Committee: $6,250
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Nominating and Corporate Governance Committee: $5,000
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Finance & Investments Committee: $5,000
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Annual Committee Chair Cash Premiums:
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Audit Committee: $15,000
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Compensation Committee: $10,000
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Nominating and Corporate Governance Committee: $7,500
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Finance & Investments Committee: $7,500
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Annual Restricted Stock Unit Award: $150,000
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Board Member Initial Year Restricted Stock Unit Premiums:
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All Independent Directors: $30,000
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First Year as Board Chair: $45,000
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First Year as Committee Chair: $15,000
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Restricted stock unit awards will vest on the earlier
to occur of the one-year anniversary of the grant date and the next annual meeting of stockholders following the grant date.
The non-employee members of the FF board of directors
will receive a restricted stock unit award in accordance with the program above, with the number of shares determined based on the price
per share received in the Private Placement.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the executive officer and director
compensation arrangements discussed in the section titled “Executive and Director Compensation,” we describe below
the transactions since January 1, 2020 to which we have been a participant, in which the amount involved in the transaction exceeds
or will exceed $120,000 and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any
immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material
interest.
Certain Relationships and Related Person Transactions — the
Company
Amended and Restated Registration Rights Agreement
In connection with the consummation of the Business
Combination, Property Solutions Acquisition Sponsor, LLC (the “PSAC Sponsor”), EarlyBirdCapital, Inc., FF Top Holding Ltd.
and Season Smart Ltd. (collectively, the “A&R RRA Parties”) entered into the Amended and Restated Registration Rights
Agreement (the “A&R RRA”) with the Company, which became effective upon the consummation of the Business Combination.
In accordance with the A&R RRA, the A&R RRA Parties are entitled to have registered, in certain circumstances, the resale of shares
of Company Common Stock (and the shares of Class A Common Stock underlying Company Warrants) held by or issued to them at the closing
of the Business Combination, subject to the terms and conditions set forth therein. Within 45 days of the Closing, the Company is obligated
to file a shelf registration statement to register the resale of certain securities and the Company is required to use its reasonable
best efforts to have such shelf registration statement declared effective as soon as practicable after the filing thereof and no later
than the earlier of (x) the 90th calendar day following the filing date if the SEC notifies the Company that it will “review”
the shelf registration statement and (y) the tenth (10th) business day after the date the Company is notified in writing by the SEC that
such shelf registration statement will not be “reviewed” or will not be subject to further review. Additionally, at any time
and from time to time after one year (or 180 days with respect to Season Smart Ltd.) after the Closing, the A&R RRA Parties representing
a majority-in-interest of the total number of shares of Class A Common Stock issued and outstanding on a fully diluted basis held by the
A&R RRA Parties (or Season Smart) may make a written demand for registration for resale under the Securities Act of all or part of
the shares of Company Common Stock (and the shares of Class A Common Stock underlying Company Warrants) held by or issued to them at the
closing of the Business Combination in an underwritten offering involving gross proceeds of no less than $50,000,000. The Company will
not be obligated to effect more than an aggregate of two underwritten offerings per year (or three underwritten offerings per year demanded
by Season Smart) and, with respect to Season Smart, such shares of Class A Common Stock do not exceed more than 10% of the outstanding
shares of the Company. The A&R RRA Parties will also be entitled to participate in certain registered offerings by the Company, subject
to certain limitations and restrictions. The Company will be required to pay certain expenses incurred in connection with the exercise
of the registration rights under the A&R RRA.
Indemnification Agreements
In connection with the consummation of the Business
Combination, the Company entered into indemnification agreements with its directors and executive officers. Those indemnification agreements
and the Amended and Restated Bylaws require the Company to indemnify all directors and officers to the fullest extent permitted by Delaware
law against any and all expenses, judgments, liabilities, fines, penalties, and amounts paid in settlement of any claims. The indemnification
agreements also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to the Company if it is
found that such indemnitee is not entitled to such indemnification under applicable law.
Shareholder Agreement
In connection with the Business Combination, FF
and FF Top entered into the Shareholder Agreement pursuant to which (a) FF and FF Top agreed on the initial composition of FF’s
board of directors and (b) so long as FF Top beneficially owns shares of issued and outstanding shares of Class A Common Stock representing
in excess of 5% voting power, FF Top will have the right to nominate a specified number of directors on FF’s board of directors
based on FF Top’s voting power of the issued and outstanding Class A Common Stock, a sufficient number of which will be independent
such that FF’s board of directors would be comprised of a majority of independent directors assuming the election of the FF Top
designees and the other members of FF’s board of directors until FF is a “controlled company” as defined in the rules
of the national securities exchange on which the Class A Common Stock is listed. FF Top will have the right to nominate a replacement
for any of its designees who is not elected or whose board service has terminated prior to the end of such director’s term. So long
as the Shareholder Agreement is in effect, any action by FF’s board of directors to increase or decrease the total number of directors
comprising FF’s board of directors will require the prior written consent of FF Top and in connection with any increase or decrease
in the total number of directors comprising FF’s board of directors, the number of FF Top designees required to be independent will
be increased or decreased as may be necessary. FF Top will also have the right for its nominees to serve on each committee of FF’s
board of directors proportionate to the number of nominees it has on FF’s board of directors, subject to compliance with applicable
law and stock exchange listing rules.
FF Shareholder Lockup Agreements
Under the Merger Agreement, as a condition
to receiving Class A Common Stock after the closing of the Business Combination in respect of their Legacy FF ordinary shares, Legacy
FF’s stockholders were required to execute lockup agreements pursuant to which such stockholders must agree not to sell, transfer
or take certain other actions with respect to such shares of Class A Common Stock for a period of 180 days after the closing of
the Business Combination, subject to certain customary exceptions. Under the lock-up agreement entered into by the Vendor Trust and certain
Legacy FF bridge lenders and warrant holders, subject to certain limited exceptions, such parties agree that with respect to (a) 33⅓%
of the shares of Class A Common Stock received by such Legacy FF stakeholders in connection with the Business Combination, not to sell,
transfer or take certain other actions with respect to such shares of Class A Common Stock for a period of 30 days after the closing
of the Business Combination (which expired on August 20, 2021), (b) 33⅓% of the shares of Class A Common Stock received by such
Legacy FF stakeholders in connection with the Business Combination (which expired on September 19, 2021), not to sell, transfer or take
certain other actions with respect to such shares of Class A Common Stock for a period of 60 days after the closing of the Business
Combination, and (c) the remaining 33⅓% of the shares of Class A Common Stock received by such Legacy FF stakeholders in
connection with the Business Combination, not to sell, transfer or take certain other actions with respect to such shares of Class A
Common Stock for a period of 90 days after the closing of the Business Combination. The shares of Class A Common Stock to be issued
to FF employees on account of their reduced compensation will be subject to a vesting period of 90 days.
Sponsor Lockup Agreement
Under the Merger Agreement, as a condition
to Legacy FF’s obligation to close, PSAC was required to deliver to Legacy FF a lockup agreement executed by the PSAC Sponsor pursuant
to which the PSAC Sponsor agreed that (a) 50% of the shares of PSAC common stock held by the PSAC Sponsor will not be sold, transferred
or otherwise disposed of for a period ending the earlier of (i) the one year anniversary of the closing of the Business Combination,
and (ii) the date on which the closing price of shares of PSAC common stock on the principal securities exchange or securities market
on which such shares are then traded equals or exceeds $12.50 per share for any twenty trading days within any thirty trading day period
after the closing of the Business Combination; and (b) the other 50% of the shares of PSAC common stock held by the PSAC Sponsor
will not be sold, transferred or otherwise disposed of for a period ending earlier of (i) the one year anniversary of the closing
of the Business Combination and (ii) the date on which PSAC completes a liquidation, merger, capital stock exchange or other similar
transaction that results in all of PSAC’s stockholders having the right to exchange their shares for cash, securities or other
property.
Certain Relationships and Related Person Transactions — PSAC
Founder Shares
On February 11, 2020, the PSAC Sponsor purchased
an aggregate of 5,750,000 shares of the PSAC’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 PSAC Sponsor to the extent that the underwriters’
over-allotment was not exercised in full or in part, so that the PSAC Sponsor would collectively own 20% of PSAC’s issued and outstanding
shares after the initial public offering. 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, resulting in there being
5,744,392 Founder Shares issued and outstanding.
The PSAC 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, PSAC completes a liquidation, merger, stock exchange or other similar transaction which results in all of PSAC’s stockholders
having the right to exchange their shares of common stock for cash, securities or other property.
Private Units
Contemporaneously with the closing of the initial
public offering and the exercise of the overallotment option, the PSAC Sponsor purchased an aggregate of 483,420 private units in a private
placement at a price of $10.00 per private unit. Each private unit consists of one share of common stock (“Private Share”)
and one Private Warrant. The private units were identical to the units sold in the initial public offering except that the Private Warrants:
(i) will not be redeemable by PSAC and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the
initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers
or any of their permitted transferees, the Private Warrants will be redeemable by PSAC and exercisable by the holders on the same basis
as the warrants included in the units sold in the initial public offering.
Advances
The PSAC Sponsor advanced PSAC 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.
Promissory Notes
On February 14, 2020, PSAC issued an unsecured
promissory note to the PSAC Sponsor (the “Promissory Note”), pursuant to which PSAC 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 (iii) the date on which PSAC 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.
On February 28, 2021, PSAC issued an unsecured
promissory note to the PSAC Sponsor pursuant to which PSAC may borrow up to an aggregate principal amount of $500,000 and on June 7, 2021
PSAC issued another unsecured promissory note to the PSAC Sponsor pursuant to which PSAC may borrow up a further $200,000 (the “Promissory
Notes”). The Promissory Notes are non-interest bearing. At the Closing, all of the unpaid balance of the notes were converted into
units consisting of one share of Class A Common Stock and one warrant to purchase a share of Class A Common Stock at $10.00 per unit.
Subscription Agreements
In connection with the execution of the Merger
Agreement, PSAC entered into separate Subscription Agreements with certain accredited investors or qualified institutional buyers (collectively,
the “Subscription Investors”) concurrently with the execution of the Merger Agreement on January 27, 2021. The Subscription
Agreements require PSAC to have an effective shelf registration statement registering the resale of the shares of PSAC common stock held
by the Subscription Investors within 60 calendar days (or 90 calendar days if the SEC notifies PSAC that it will review the registration
statement) following the closing of the Business Combination.
Agreement with Riverside Management Group
PSAC entered into a transaction services agreement,
dated as of October 13, 2020 (and amended on October 26, 2020), pursuant to which Riverside provided consulting and advisory services
in connection with the Business Combination in exchange for (i) $10 million in cash from PSAC at the closing of the Business Combination,
(ii) 1,697,500 shares of Class A Common Stock with an equal amount of shares of common stock in PSAC being forfeited by the PSAC
Sponsor for no consideration immediately prior to the Closing, and (iii) Class A Common Stock issued by FF immediately after the
closing of the Business Combination having a value equal to $6,900,000.00, with an attributed value of $10.00 per share of common stock
(the “Original Riverside Agreement”). On July 18, 2021, PSAC entered into an omnibus transaction services fee agreement and
acknowledgement with the Sponsor, FF, Riverside and Philip Kassin, Robert Mancini and James Carpenter (each, a “Service Provider”
and, collectively, the “Service Providers”), pursuant to which the Service Providers, together with such other service providers,
who assisted the Service Providers as identified by the Service Providers, replaced Riverside as the recipients of the cash and share
compensations under the Original Riverside Agreement.
Certain Relationships and Related Person Transactions — Legacy
FF
Restructuring Agreement with Evergrande
In November 2017, Legacy FF received a commitment
from Season Smart Limited (“Season Smart”), an affiliate of Evergrande Health Industry Group (“Evergrande”), to
provide $2.0 billion in funding, subject to certain conditions, in exchange for a 45% preferred equity stake in Legacy FF. Evergrande
initially funded $800 million in 2018, and the terms of the agreement provided that the remaining $1.2 billion would be contributed by
the end of 2019 and 2020, subject to certain conditions.
After a dispute among Legacy FF, Season Smart and
certain of their affiliates regarding, among other things, whether certain conditions to Season Smart’s requirement to provide additional
funding were satisfied, on December 31, 2018, Legacy FF, Season Smart and certain of their affiliates entered into a restructuring agreement
pursuant to which Season Smart’s preferred equity interest in Legacy FF was restructured and reduced to 32% and the Legacy FF affiliated
parties and Season Smart affiliated parties released one another and their respective affiliates from certain claims (including Season
Smart’s obligation to make additional investments in Legacy FF). In addition, the restructuring agreement provides that Legacy FF
may at any time before December 31, 2023 redeem, in part or in whole, the Legacy FF shares held by Season Smart at a predetermined redemption
price. The restructuring agreement also provided that, among other matters, (i) Season Smart agreed that Legacy FF could enter into
new equity financing arrangements without Season Smart’s approval so long as the valuation for such equity financing is not less
than a specified threshold; (ii) Season Smart agreed to acquire Evergrande FF Holding (Hong Kong) Limited, which was previously
a wholly-owned subsidiary of Legacy FF and owned certain Chinese assets of Legacy FF; and (iii) Legacy FF revised its memorandum
and articles of association to provide Season Smart with certain rights. Certain Season Smart approval rights under the restructuring
agreement were terminated at the closing of the Business Combination under the transaction support agreement signed by Season Smart with
PSAC and Legacy FF.
Also pursuant to the restructuring agreement, an
affiliate of Evergrande provided a loan in the principal amount of $10.0 million to Legacy FF, which was drawn down in January 2019.
YT Jia provided a personal guarantee for this loan. The loan bears interest at an annual rate of 10% if repaid by June 30, 2019, and increases
to 15% per annum thereafter. The loan matured on June 30, 2019. Under a support agreement entered into with Evergrande in connection with
the Merger Agreement, the loan was repaid at the closing of the Business Combination.
Borrowings from Related Parties
Affiliate Notes Payable
FF has funded its operations and capital needs
primarily through the proceeds received from capital contributions and the issuance of related party notes payable and notes payable.
The vast majority of notes payable and equity have been funded by entities controlled or previously controlled by FF’s founder and
former CEO. As of December 31, 2020 the outstanding principal balance
of FF’s related party notes payable was $296.8 million.
On March 30, 2018, Smart Technology Holdings, Ltd.,
an exempted company incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of FF (“Smart Technology”)
issued: (a) a promissory note in the principal amount of $212.0 million to Faraday & Future (HK) Limited, a private company
limited by shares established under the laws of Hong Kong previously controlled by FF’s founder (“F&F HK” and
such note, the “$212.0M Note”) and (b) a promissory note in the principal amount of $66.9 million to Leview Mobile HK
Limited, a private company limited by shares established under the laws of Hong Kong controlled by FF’s founder (Leview HK
and such note, the “$66.9M Note” and, together with the $212.0M Note, the “Notes”). The Note accrued simple interest
rate at 12% per annum. The maturity date of the Notes was extended from December 31, 2019 to June 30, 2021. On August 28, 2020, Leview
HK transferred all of its rights, interests and title in and to the $66.9M Note to F&F HK in exchange for F&F HK’s issuance
of a note covering an equivalent amounts to Leview HK (such transfer, the “$66.9M Note Transfer”), and on August 28, 2020
and immediately following the $66.9M Note Transfer, Smart Technology transferred all of its then outstanding obligations under the Notes
to Legacy FF in exchange for Legacy FF’s paid-in capital contributions to Smart Technology being increased by an equivalent amount,
and F&F HK transferred all of its rights under the Notes to CYM Tech Holdings LLC, a Delaware limited liability company (“CYM”)
in exchange for CYM’s issuance of a note covering an equivalent amount to F&F HK. As of December 31, 2020, Legacy FF repaid
$62.9 million of the principal and $36.2 million of accrued interest under the Notes. As of July 21, 2021, the outstanding balance of
the Notes was zero, since the Notes had converted into shares of Legacy FF Class A-2 Ordinary Stock prior to the Closing.
On April 5, 2017, Legacy FF issued a promissory
note in a principal amount of $0.7 million to a Meng Wu, the former executive director of LeSee Automotive (Beijing) Co., Ltd. (the “$0.7M
Note”). The $0.7M Note did not accrue interest. The maturity date of the $0.7M Note was extended from October 2, 2017 to June 30,
2021. At the closing of the Business Combination, the outstanding principal balance was approximately $0.7 million, all of which was converted
into shares of Class A Common Stock at the Closing.
From December 2017 to July 2018, LeSEE
Automotive (Beijing) Co., Ltd., a company incorporated under the laws of the People’s Republic of China and an indirect subsidiary
of FF (“LeSee”), issued multiple promissory notes in an aggregate principal amount of $28.9 million to Beijing Bairui Culture
Media Co., Ltd., an entity previously controlled by FF’s founder (“Bairui” and such notes collectively, the “$28.9M
Notes”). The $28.9M Notes started to bear a simple interest rate of 12% per annum since January 2020. On August 28, 2020, Bairui
transferred all of its rights, interests and title in and to the $28.9M Notes to F&F HK in exchange for F&F HK’s issuance
of a note covering an equivalent amounts to Bairui (such transfer, the “$28.9M Notes Transfer”), and the outstanding interest
of $1.9 million added back to the principal balance of $24.6 million on August 28, 2020 and immediately following the $28.9M Notes Transfer,
LeSee transferred all of its then outstanding obligations under the $28.9M Notes to Legacy FF in exchange for successive paid-in capital
contributions from Legacy FF through Smart Technology, FF Hong Kong Holding Limited and FF Automotive (China) Co., Ltd. to LeSee
being increased by an equivalent amount, and F&F HK transferred all of its rights under the $28.9M Notes to CYM in exchange for CYM’s
issuance of a note covering an equivalent amount to F&F HK. The maturity dates of the $28.9M Notes were extended from December 31,
2020 to June 30, 2021. As of December 31, 2020, Legacy FF had repaid $4.3 million of the principal under the $28.9M Notes. As of July
21, 2021, the outstanding balance of the $28.9M Notes was approximately $19.2 million all of which was converted into shares of Class
A Common Stock at Closing.
On April 29, 2019, Legacy FF entered into a note
purchase agreement (as amended, restated and otherwise modified from time to time, the “Note Purchase Agreement”) with certain
purchasers, with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The notes
are guaranteed by Legacy FF including several of Legacy FF subsidiaries in the U.S., Cayman Islands and Hong Kong. The principal
amount of notes that may be issued under the Note Purchase Agreement was $200 million. During 2019, a total of approximately $43.6 million,
consisting of approximately $27.1 million of notes payable and $16.5 million of related party notes, was loaned to Legacy FF at a 10%
interest rate, payable at the maturity date of the note. All obligations due under the Note Purchase Agreement were collateralized by
a first lien, with second payment priority, on substantially all tangible and intangible assets of the borrowers and guarantors. The loans
under the Note Purchase Agreement were subject to representations, warranties, and covenants and were initially scheduled to mature on
October 31, 2019. All loaned amounts remained outstanding and interest of $0.8 million of the related party interest was accrued as of
December 31, 2019. In October 2020, FF obtained an extension of the maturity date of the loans under the Note Purchase Agreement
to October 6, 2021. In connection with the Business Combination, the loans, amounting to $43.6 million, were repaid in cash.
On May 13, 2021, related party notes payable with
aggregating principal amounts of $90.9 million, was converted into 37,903,302 shares of Class A-1 Convertible Preferred Stock with a conversion
price of $1.67 per share and 14,066,461 shares of Class A-2 Convertible Preferred Stock with a conversion price of $1.96 per share. On
July 21, 2021 Legacy FF converted related party notes payable with an aggregate principal balance of $130.5 million into 66,570,683 shares
of Class A-2 Preferred Stock.
As part of the close of the Business Combination,
FF substantially settled the then outstanding principal amounts of its related party notes payable in an aggregating amount of $60.1 million
by converting them into 4,049,052 shares of Class A Common Stock or repaying them in cash in an amount of $31.8 million. The settlement
of certain related party notes payable was at a premium in accordance with the provisions of the respective agreements.
Subsequent to the close of the Business Combination,
the principal aggregated amount of related party notes payable outstanding is $13.5 million, $9.3 million is due on demand to Chongqing
Leshi Small Loan Co., Ltd. and bears an annual interest rate of 18%. The remaining amount are due on demand to various other Chinese related
party notes payable holders and bear a 0% coupon. Interest at a rate of 10% is imputed on these related party notes payable as the interest
rates prescribed by the respective agreements are below market rates.
Procedures with Respect to Review and Approval of Related Person
Transactions
Following the consummation of the Business Combination,
FF’s board of directors adopted a policy with respect to the review, approval and ratification of related party transactions. Under
the policy, FF’s audit committee is responsible for reviewing and approving related person transactions. In the course of its review
and approval of related party transactions, FF’s audit committee will consider the relevant facts and circumstances to decide whether
to approve such transactions. In particular, FF’s policy requires FF’s audit committee to consider, among other factors it
deems appropriate:
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the related person’s relationship to FF and interest
in the transaction;
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the material facts of the proposed transaction, including the proposed aggregate value of the transaction;
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the impact on a director’s or a director nominee’s independence in the event the related person is a director or director
nominee or an immediate family member of the director or director nominee;
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the benefits to FF of the proposed transaction;
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if applicable, the availability of other sources of comparable products or services; and
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an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party
or to employees generally.
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The audit committee may only approve those
transactions that are in, or are not inconsistent with, FF’s best interests and those of FF’s stockholders, as the audit
committee determines in good faith.
In addition, under FF’s code of business
conduct and ethics, FF’s employees, officers, directors and director nominees have an affirmative responsibility to disclose any
transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
FF’s directors, officers and persons owning more than 10% of Common Stock to file reports of ownership and changes of ownership
with the SEC. Based on its review of the copies of such reports furnished to FF, or representations from certain reporting persons that
no other reports were required, FF believes that all applicable filing requirements were complied with during the quarter ended.
PRINCIPAL STOCKHOLDERS
The following table and accompanying footnotes
set forth information with respect to the beneficial ownership of our Common Stock, as of September 20, 2021, for (1) each person known
by us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock, (2) each member of the Board, (3) each of
our named executive officers and (4) all of the members of the Board and our executive officers, as a group. As of September 20, 2021,
there were outstanding 260,359,920 shares of Class A Common Stock, 64,000,588 shares of Class B Common Stock, no shares of Preferred
Stock, and 28,196,377 outstanding warrants to purchase shares of Class A Common Stock, consisting of 22,977,568 Public Warrants, 674,551
Private Warrants, 3,874,166 ATW NPA Warrants and 670,092 Ares NPA Warrants (as defined below).
The beneficial ownership percentages set forth
in the table below are based on 324,360,508 shares of Common Stock issued and outstanding as of September 20, 2021 and do not take into
account the issuance of any shares of Common Stock upon the exercise of warrants to purchase up to 28,196,377 shares of Common Stock
that remain outstanding. In computing the number of shares of Common Stock beneficially owned by a person, we deemed to be outstanding
all shares of Common Stock subject to warrants, stock options and restricted stock units held by the person that are currently exercisable
or may be exercised or that are scheduled to vest or settle, as applicable, within 60 days of September 20, 2021. We did not deem such
shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Beneficial ownership for the purposes of the following
table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security
if that person has or shares “voting power”, which includes the power to vote or to direct the voting of the security, or
“investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to
acquire such powers within 60 days.
Unless otherwise noted in the footnotes to the
following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment
power with respect to their beneficially owned Common Stock. Unless otherwise indicated, the business address of each person listed in
the table below is c/o Faraday Future Intelligent Electric Inc., 18455 S. Figueroa Street, Gardena, California 90248.
Name and Address of Beneficial Owner
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned
|
|
|
Percentage of
Outstanding
Common
Stock
|
|
Five Percent Holders:
|
|
|
|
|
|
|
Season Smart Limited (1)
|
|
|
66,494,117
|
|
|
|
20.5
|
%
|
FF Top Holding LLC (2)
|
|
|
121,438,964
|
|
|
|
37.4
|
%
|
Founding Future Creditors Trust (3)
|
|
|
19,901,731
|
|
|
|
6.1
|
%
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Dr. Carsten Breitfeld (4)
|
|
|
638,348
|
|
|
|
*
|
|
Zvi Glasman (5)
|
|
|
94,198
|
|
|
|
*
|
|
Yueting Jia (YT Jia)
|
|
|
—
|
|
|
|
—
|
|
Benedikt Hartmann (6)
|
|
|
128,357
|
|
|
|
*
|
|
Matthias Aydt (7)
|
|
|
290,680
|
|
|
|
|
|
Chui Tin Mok (8)
|
|
|
559,142
|
|
|
|
*
|
|
Robert A. Kruse Jr. (9)
|
|
|
91,650
|
|
|
|
*
|
|
Hong Rao (10)
|
|
|
343,255
|
|
|
|
*
|
|
Jiawei Wang (11)
|
|
|
1,285,969
|
|
|
|
*
|
|
Jordan Vogel (12)
|
|
|
5,173,732
|
|
|
|
1.6
|
%
|
Brian Krolicki (13)
|
|
|
103,620
|
|
|
|
*
|
|
Edwin Goh
|
|
|
—
|
|
|
|
—
|
|
Qing Ye (14)
|
|
|
182,193
|
|
|
|
*
|
|
Lee Liu
|
|
|
—
|
|
|
|
—
|
|
Susan G. Swenson
|
|
|
—
|
|
|
|
—
|
|
Scott D. Vogel
|
|
|
—
|
|
|
|
—
|
|
All executive officers and directors as a group (16 individuals)
|
|
|
8,891,144
|
|
|
|
2.
8
|
%
|
(1)
|
Season Smart is an indirect subsidiary of China Evergrande Group, a Cayman company. China Evergrande Group holds its interest in Season Smart through a chain of entities, and China Evergrande Group’s direct and indirect subsidiaries through which it holds interest in Season Smart are New Garland Limited (a British Virgin Islands company) Global Development Limited (a Cayman company), Acelin Global Limited (a British Virgin Islands company), Evergrande Health Industry Holdings Limited (a British Virgin Islands company) and China Evergrande New Energy Vehicle Group Limited (a Hong Kong company) (collectively, the “Evergrande Entities”). Each Evergrande Entity, by reason of its ownership of the voting securities of the subsidiary below it in the ownership structure, has the right to elect or appoint a majority of the members of the governing body of that subsidiary and, therefore, to direct the management and policies of that subsidiary. Mr. Hui Ka Yan (“Mr. Hui”) is a controlling shareholder of China Evergrande Group, through his wholly-owned subsidiary, Xin (BVI) Limited (a British Virgin Islands company). Mr. Hui, by reason of his ownership of the voting securities of Xin (BVI) Limited, has the right to elect or appoint the members of the governing body of China Evergrande Group. As a result, each Evergrande Entity, Mr. Hui and Xin (BVI) Limited may be deemed to be the beneficial owner the shares held of record by Season Smart.
|
(2)
|
Based on a Schedule 13D filed jointly on August 2, 2021 by FF Top Holding
LLC (“FF Top”), Pacific Technology Holding LLC (“Pacific Technology”) and FF Global Partners LLC (“FF Global”),
each a Delaware limited liability company (collectively, the “Reporting Persons”). Includes (i) 57,438,376 shares of Class
A Common Stock held by certain other stockholders of the Company over which the Reporting Persons exercise voting control pursuant to
voting agreements, and (ii) 64,000,588 shares of Class B Common Stock held directly by FF Top. Shares of Class B Common Stock
are convertible into an equal number of shares of Class A Common Stock of the Company at any time. Assumes the conversion of
the Class B Common Stock referred to above into shares of Class A Common Stock. Pacific Technology is the managing member of
FF Top, and FF Global is the managing member of Pacific Technology. FF Global is governed by a board of managers, consisting
of eight managers – YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip Bethell and Carsten Breitfeld.
A majority of the board of managers of FF Global is required to approve any actions of FF Global, including actions relating to the voting
and disposition of shares of Common Stock by FF Top.
|
(3)
|
Based on a Schedule 13D filed by Founding Future Creditors Trust (“Creditor Trust”) on August 9, 2021. Includes 19,901,731 shares of Class A common stock. Creditor Trust also holds a 20% preferred membership interest in Pacific Technology Holding LLC but does not control the disposition of any shares of Class B Common Stock held directly or indirectly by Pacific Technology Holding LLC. Jeffrey D. Prol is the trustee of Creditor Trust (the “Trustee”). The Trustee, solely in his capacity as such and subject to the trust agreement that established and governs Creditor.
|
(4)
|
Includes
options to acquire 117,138 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(5)
|
Includes
options to acquire 94,198 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(6)
|
Includes
options to acquire 114,310 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(7)
|
Includes
options to acquire 234,787 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(8)
|
Includes
options to acquire 391,256 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(9)
|
Includes
options to acquire 80,480 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(10)
|
Includes
options to acquire 133,622 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(11)
|
Includes options
to acquire 1,265,869 shares of Class A Common Stock that have vested or will vest within
60 days of September 20, 2021.
|
(12)
|
These shares consist of (i) 4,610,312 shares of Class A Common Stock
and (ii) 563,420 Private Warrants that are exercisable for 664,551 shares of Class A Common Stock within 60 days of the Closing Date held
by the Sponsor, of which Jordan Vogel and Aaron Feldman are managing members. Accordingly, all securities held by the Sponsor may ultimately
be deemed to be beneficially held by Messrs. Vogel and Feldman. Each such person disclaims any beneficial ownership of the reported shares
other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
|
(13)
|
Includes
options to acquire 103,620 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(14)
|
Includes
options to acquire 164,860 shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
SELLING SECURITYHOLDERS
This prospectus relates to the resale by the Selling
Securityholders from time to time of up to 236,226,156 shares of Class A Common Stock and 674,551 Private Warrants. In addition, this
prospectus relates to the issuance by us, and the offer and sale from time to time by the Selling Securityholders, of up to an aggregate
of 33,848,368 shares of Class A Common Stock issuable upon exercise of Warrants or conversion of the Notes. The Selling Securityholders
listed in the table below may from time to time offer and sell any or all of the shares of Class A Common Stock and Private Warrants set
forth below pursuant to this prospectus and any accompanying prospectus supplement. When we refer to the “Selling Securityholders”
in this prospectus, we refer to the persons listed in the table below, and the pledgees, donees, transferees, assignees, successors and
other permitted transferees that hold any of the Selling Securityholders’ interest in the shares of Class A Common Stock or the
Private Warrants after the date of this prospectus.
The following table sets forth information
provided by or on behalf of each Selling Securityholder as of September 20, 2021 regarding the aggregate number of shares of Class A
Common Stock (including shares of Class A Common Stock issuable upon exercise of Warrants or conversion of the Notes or Class B Common
Stock) and Private Warrants beneficially owned prior to the offering, the aggregate number of shares of Class A Common Stock (including
shares of Class A Common Stock issuable upon exercise of Warrants, conversion of the Notes or Class B Common Stock or achievement of
all earnout thresholds under the Merger Agreement) and Private Warrants that may be offered from time to time by each Selling Securityholder
pursuant to this prospectus and any accompanying prospectus supplement, and the number of shares of Class A Common Stock (including shares
of Class A Common Stock issuable upon exercise of Warrants or conversion of the Notes or Class B Common Stock) and Private Warrants,
and percentage ownership of, each Selling Securityholder after the sale of securities offered hereby. The beneficial ownership percentages
following the offering are based on 260,359,920 shares of Class A Common Stock, 64,000,588 shares of Class B Common Stock and 28,196,377
warrants to purchase shares of Class A Common Stock, in each case issued and outstanding as of September 20, 2021, and have assumed that
each Selling Securityholder will sell all shares of Class A Common Stock and Private Warrants offered pursuant to this prospectus. In
calculating percentages of shares of Class A Common Stock owned by a particular Selling Securityholder, we treated as outstanding
the number of shares of our Class A Common Stock issuable upon exercise of that particular Selling Securityholder’s Warrants
(if any) or conversion of that particular Selling Securityholder’s Notes (if any) and did not assume the exercise or conversion
of any other Selling Securityholder’s Warrants or Notes, as the case may be.
We cannot advise you as to whether the Selling
Securityholders will in fact sell any or all of such shares of Class A Common Stock or Private Warrants. A Selling Securityholder may
sell all, some or none of such securities in this offering. See “Plan of Distribution.” In particular, the Selling
Securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their securities after the date
on which they provided us with information regarding their securities. Any changed or new information given to us by the Selling Securityholders,
including regarding the identity of, and the securities held by, each Selling Securityholder, will be set forth in a prospectus supplement
or amendments to the registration statement of which this prospectus is a part, if and when necessary.
Unless otherwise indicated, the business address
of each person listed in the table below is c/o Faraday Future Intelligent Electric Inc., 18455 S. Figueroa Street, Gardena, California
90248.
|
|
Before the Offering
|
|
|
After the Offering
|
|
Name and Address of Selling Securityholder
|
|
Common
Stock
Beneficially
Owned Prior
to the
Offering
|
|
|
Private
Placement
Warrants
Beneficially
Owned Prior
to the
Offering
|
|
|
Number of
Shares of
Common
Stock
Being
Offered
|
|
|
Number of
Private
Placement
Warrants
Being
Offered
|
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned
After the
Offered
Shares of
Common
Stock are
Sold
|
|
|
Percentage
of
Outstanding
Common
Stock
Beneficially
Owned After
the Offered
Shares of
Common
Stock are
Sold
|
|
|
Number of
Private
Placement
Warrants
Beneficially
Owned After
the Offered
Private
Placement
Warrants
are Sold
|
|
Directors And Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carsten Breitfeld (1)
|
|
|
638,348
|
|
|
|
—
|
|
|
|
576,746
|
|
|
|
—
|
|
|
|
61,602
|
|
|
|
*
|
|
|
|
—
|
|
Zvi Glasman (2)
|
|
|
94,198
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
94,198
|
|
|
|
*
|
|
|
|
—
|
|
Yueting Hia (YT Jia)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Benedikt Hartmann (3)
|
|
|
128,357
|
|
|
|
—
|
|
|
|
14,565
|
|
|
|
—
|
|
|
|
14,565
|
|
|
|
*
|
|
|
|
—
|
|
Matthias Aydt (4)
|
|
|
290,680
|
|
|
|
—
|
|
|
|
60,243
|
|
|
|
—
|
|
|
|
230,437
|
|
|
|
*
|
|
|
|
—
|
|
Chui Tin Mok (5)
|
|
|
559,142
|
|
|
|
—
|
|
|
|
179,162
|
|
|
|
—
|
|
|
|
379,980
|
|
|
|
*
|
|
|
|
—
|
|
Robert Allen Kruse Jr. (6)
|
|
|
91,650
|
|
|
|
—
|
|
|
|
11,170
|
|
|
|
—
|
|
|
|
80,480
|
|
|
|
*
|
|
|
|
—
|
|
Hong Rao (7)
|
|
|
343,255
|
|
|
|
—
|
|
|
|
233,729
|
|
|
|
—
|
|
|
|
109,526
|
|
|
|
*
|
|
|
|
—
|
|
Jiawei Wang (8)
|
|
|
1,285,969
|
|
|
|
—
|
|
|
|
21,060
|
|
|
|
—
|
|
|
|
1,264,909
|
|
|
|
*
|
|
|
|
—
|
|
Jordan Vogel (9)
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Brian Krolicki (10)
|
|
|
103,620
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
103,620
|
|
|
|
*
|
|
|
|
—
|
|
Edwin Goh
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
*
|
|
|
|
—
|
|
Qing Ye (11)
|
|
|
182,193
|
|
|
|
—
|
|
|
|
17,333
|
|
|
|
—
|
|
|
|
164,860
|
|
|
|
—
|
|
|
|
—
|
|
Lee Liu
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Susan G. Swenson
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Scott D. Vogel
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Before the Offering
|
|
|
After the Offering
|
|
Name and Address of Selling Securityholder
|
|
Common
Stock
Beneficially
Owned Prior
to the
Offering
|
|
|
Private
Placement
Warrants
Beneficially
Owned Prior
to the
Offering
|
|
|
Number of
Shares of
Common
Stock
Being
Offered
|
|
|
Number of
Private
Placement
Warrants
Being
Offered
|
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned
After the
Offered
Shares of
Common
Stock are
Sold
|
|
|
Percentage
of
Outstanding
Common
Stock
Beneficially
Owned After
the Offered
Shares of
Common
Stock are
Sold
|
|
|
Number of
Private
Placement
Warrants
Beneficially
Owned After
the Offered
Private
Placement
Warrants
are Sold
|
|
PSAC Sponsor Investors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Solutions Acquisition Sponsor, LLC (12)
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Aaron Feldman (12)
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
5,173,732
|
|
|
|
563,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Amy Kaufmann
|
|
|
2,500
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
David Nussbaum
|
|
|
35,000
|
|
|
|
—
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Edward Kovary
|
|
|
20,000
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Coleen McGlynn
|
|
|
1,500
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gregory Stoupnitzky
|
|
|
1,000
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
EarlyBirdCapital, Inc. (13)
|
|
|
290,762
|
|
|
|
111,131
|
|
|
|
290,762
|
|
|
|
111,131
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gleeson Cox
|
|
|
1,500
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Jacqueline Chang
|
|
|
1,000
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Jillian Carter
|
|
|
2,500
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Joseph Mongiello
|
|
|
1,000
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Marc Van Tricht
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Marc Cangemi
|
|
|
1,000
|
|
|
|
—
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Mauro Conijeski Goldglanz
|
|
|
2,500
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Richard Michael Powell
|
|
|
12,500
|
|
|
|
—
|
|
|
|
12,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Robert Gladstone
|
|
|
2,500
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Steven Levine
|
|
|
35,000
|
|
|
|
—
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Tracy Fezza
|
|
|
1,500
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PIPE Investors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AGR Trading SPC-Series EC Segregated Portfolio (14)
|
|
|
14,157
|
|
|
|
—
|
|
|
|
14,157
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Alpha Hills Investment Limited (15)
|
|
|
300,000
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Altium Growth Fund, LP (16)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Alyeska Master Fund, L.P. (17)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Anatole Partners Enhanced Master Fund, L.P. (18)
|
|
|
2,500,000
|
|
|
|
—
|
|
|
|
2,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Anatole Partners Long Only Master Fund, L.P. (19)
|
|
|
267,088
|
|
|
|
—
|
|
|
|
267,088
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Anatole Partners Master Fund, L.P. (20)
|
|
|
3,232,912
|
|
|
|
—
|
|
|
|
3,232,912
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
AP China Unicorn Fund SPC (21)
|
|
|
300,000
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Arena Capital Advisors as General Partner for the Funds
(22)
|
|
|
2,000,000
|
|
|
|
—
|
|
|
|
2,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Athanor International Master Fund, LP (23)
|
|
|
1,359,900
|
|
|
|
—
|
|
|
|
1,359,900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Athanor Master Fund, LP (24)
|
|
|
3,140,100
|
|
|
|
—
|
|
|
|
3,140,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Baoxin Investment Management Ltd. (98)
|
|
|
10,031,880
|
|
|
|
—
|
|
|
|
8,000,000
|
|
|
|
—
|
|
|
|
2,031,880
|
|
|
|
*
|
|
|
|
—
|
|
BFAM Asian Opportunities Master Fund, LP (25)
|
|
|
3,000,000
|
|
|
|
—
|
|
|
|
3,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
BL FFIE Fundco, LLC (26)
|
|
|
1,100,000
|
|
|
|
—
|
|
|
|
1,100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Blackwell Partners LLC
– Series A (27)
|
|
|
58,822
|
|
|
|
—
|
|
|
|
58,822
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Blackwell Partners LLC – Series A (28)
|
|
|
707,700
|
|
|
|
—
|
|
|
|
707,700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
BNP Paribas Asset Management UK LTD on behalf of BNP
Paribas Funds Energy Transition (29)
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Boothbay Absolute Return Strategies, LP (30)
|
|
|
161,500
|
|
|
|
—
|
|
|
|
161,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Boothbay Absolute Return Strategies, LP (31)
|
|
|
28,089
|
|
|
|
—
|
|
|
|
28,089
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Boothbay Diversified Alpha Master Fund, LP (32)
|
|
|
88,500
|
|
|
|
—
|
|
|
|
88,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Central China Asset Management Company Limited (33)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Citadel Multi-Strategy Equities Master Fund Ltd. (34)
|
|
|
2,600,000
|
|
|
|
—
|
|
|
|
2,600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Chon-hon Hsu
|
|
|
50,000
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Corbin ERISA Opportunity Fund, Ltd. (35)
|
|
|
1,400,000
|
|
|
|
—
|
|
|
|
1,400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Corbin Hedged Equity
Fund, L.P. (36)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Corbin Opportunity Fund, L.P. (37)
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
CVI Investments, Inc. (38)
|
|
|
1,027,120
|
|
|
|
—
|
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
27,120
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Before the Offering
|
|
|
After the Offering
|
|
Name and Address of Selling Securityholder
|
|
Common
Stock
Beneficially
Owned Prior
to the
Offering
|
|
|
Private
Placement
Warrants
Beneficially
Owned Prior
to the
Offering
|
|
|
Number of
Shares of
Common
Stock
Being
Offered
|
|
|
Number of
Private
Placement
Warrants
Being
Offered
|
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned
After the
Offered
Shares of
Common
Stock are
Sold
|
|
|
Percentage
of
Outstanding
Common
Stock
Beneficially
Owned After
the Offered
Shares of
Common
Stock are
Sold
|
|
|
Number of
Private
Placement
Warrants
Beneficially
Owned After
the Offered
Private
Placement
Warrants
are Sold
|
|
Davidson Kempner Institutional Partners,
L.P. (39)
|
|
|
178,800
|
|
|
|
—
|
|
|
|
178,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Davidson Kempner International, Ltd. (40)
|
|
|
219,350
|
|
|
|
—
|
|
|
|
219,350
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Davidson Kempner Partners (41)
|
|
|
87,100
|
|
|
|
—
|
|
|
|
87,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
DSG-Peony Fund SPC – DSG Global Markets SP (42)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Electron Global Master Fund, L.P. (43)
|
|
|
849,953
|
|
|
|
—
|
|
|
|
849,953
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Electron Infrastructure Master Fund, L.P. (44)
|
|
|
607,801
|
|
|
|
—
|
|
|
|
607,801
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Geely Symphony Finance Limited (45)
|
|
|
5,000,000
|
|
|
|
—
|
|
|
|
5,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ghisallo Master Fund LP (46)
|
|
|
300,000
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gratia Fortitude Fund, L.P. (47)
|
|
|
1,050,000
|
|
|
|
—
|
|
|
|
1,050,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
HS-QYNM Family Inc. (48)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Integrated Core Strategies (US) LLC (49)
|
|
|
1,500,000
|
|
|
|
—
|
|
|
|
1,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Owl
Creek Investments III, LLC (50)
|
|
|
1,800,000
|
|
|
|
—
|
|
|
|
1,800,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
J. Yang & Family Foundation (51)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Jane Street Global Trading, LLC (52)
|
|
|
3,422,912
|
|
|
|
—
|
|
|
|
1,850,000
|
|
|
|
—
|
|
|
|
1,572,912
|
|
|
|
|
|
|
|
—
|
|
Joint Power International Limited (53)
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
June Asiralertsiri Lee and Jonathan Lee
|
|
|
100,000
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kepos Alpha Master Fund L.P. (54)
|
|
|
1,181,000
|
|
|
|
—
|
|
|
|
1,181,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Kepos Carbon Transition Master Fund L.P. (55)
|
|
|
69,000
|
|
|
|
—
|
|
|
|
69,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Kuos Investment II LLC (56)
|
|
|
90,000
|
|
|
|
—
|
|
|
|
90,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Linden Capital L.P. (57)
|
|
|
2,483,934
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
—
|
|
|
|
483,934
|
|
|
|
|
|
|
|
—
|
|
Luxor Capital Partners Long Offshore Master Fund, LP
(58)
|
|
|
1,347
|
|
|
|
—
|
|
|
|
1,347
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Luxor Capital Partners Long, LP (59)
|
|
|
4,873
|
|
|
|
—
|
|
|
|
4,873
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Luxor Capital Partners
Offshore Master Fund, LP (60)
|
|
|
115,180
|
|
|
|
—
|
|
|
|
115,180
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Luxor Capital Partners, LP (61)
|
|
|
183,018
|
|
|
|
—
|
|
|
|
183,018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Luxor Wavefront, LP (62)
|
|
|
95,582
|
|
|
|
—
|
|
|
|
95,582
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
M.H. Davidson & Co. (63)
|
|
|
14,750
|
|
|
|
—
|
|
|
|
14,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Marshall Wace Investment Strategies – Eureka
Fund (64)
|
|
|
260,326
|
|
|
|
—
|
|
|
|
237,833
|
|
|
|
—
|
|
|
|
22,493
|
|
|
|
*
|
|
|
|
—
|
|
Marshall Wace Investment Strategies – Market
Neutral TOPS Fund (65)
|
|
|
142,908
|
|
|
|
—
|
|
|
|
130,358
|
|
|
|
—
|
|
|
|
12,550
|
|
|
|
*
|
|
|
|
—
|
|
Marshall Wace Investment Strategies – Systematic
Alpha Plus Fund (66)
|
|
|
57,642
|
|
|
|
—
|
|
|
|
52,767
|
|
|
|
—
|
|
|
|
4,875
|
|
|
|
*
|
|
|
|
—
|
|
Marshall Wace Investment Strategies – TOPS Fund
(67)
|
|
|
86,565
|
|
|
|
—
|
|
|
|
79,042
|
|
|
|
—
|
|
|
|
7,523
|
|
|
|
*
|
|
|
|
—
|
|
Maso Capital Investments Limited (68)
|
|
|
233,700
|
|
|
|
—
|
|
|
|
233,700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Millais Limited (69)
|
|
|
1,045,461
|
|
|
|
—
|
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
45,461
|
|
|
|
*
|
|
|
|
—
|
|
MMCAP International Inc. SPC (70)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
MMF LT, LLC (71)
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
MS Autotech Co., Ltd. (72)
|
|
|
300,000
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Nantahala Capital Partners II Limited Partnership (27)
|
|
|
66,127
|
|
|
|
—
|
|
|
|
66,127
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Nantahala Capital Partners Limited Partnership (27)
|
|
|
22,531
|
|
|
|
—
|
|
|
|
22,531
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Nantahala Capital Partners SI, LP (27)
|
|
|
136,796
|
|
|
|
—
|
|
|
|
136,796
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NCP QR LP (27)
|
|
|
27,613
|
|
|
|
—
|
|
|
|
27,613
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NCP RFM LP (27)
|
|
|
24,698
|
|
|
|
—
|
|
|
|
24,698
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Overseas Opportunity Fund SPC – China
New Economy Growth Fund Segregated Portfolio (73)
|
|
|
200,000
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Overseas Opportunity Fund SPC – China
Healthcare Fund Segregated Portfolio (74)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Before the Offering
|
|
|
After the Offering
|
|
Name and Address of Selling Securityholder
|
|
Common
Stock
Beneficially
Owned Prior
to the
Offering
|
|
|
Private
Placement
Warrants
Beneficially
Owned Prior
to the
Offering
|
|
|
Number
of
Shares of
Common
Stock
Being
Offered
|
|
|
Number
of
Private
Placement
Warrants
Being
Offered
|
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned
After the
Offered
Shares of
Common
Stock are
Sold
|
|
|
Percentage
of
Outstanding
Common
Stock
Beneficially
Owned After
the Offered
Shares of
Common
Stock are
Sold
|
|
|
Number of
Private
Placement
Warrants
Beneficially
Owned After
the Offered
Private
Placement
Warrants
are Sold
|
|
New China Overseas Opportunity Fund SPC – New
China Stable Return Segregated Portfolio (75)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Capital Management Limited (76)
|
|
|
500,000
|
|
|
|
—
|
|
|
|
500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 2 Segregated Portfolio (77)
|
|
|
250,000
|
|
|
|
—
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 3 Segregated Portfolio (78)
|
|
|
250,000
|
|
|
|
—
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 4 Segregated Portfolio (79)
|
|
|
250,000
|
|
|
|
—
|
|
|
|
250,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 5 Segregated Portfolio (80)
|
|
|
350,000
|
|
|
|
—
|
|
|
|
350,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
New China Innovation Fund SPC - New China Innovation
Fund 19 Segregated Portfolio (81)
|
|
|
5,000,000
|
|
|
|
—
|
|
|
|
5,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Palantir Technologies Inc. (82)
|
|
|
2,500,000
|
|
|
|
—
|
|
|
|
2,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Park West Investors Master Fund, Limited (83)
|
|
|
2,731,000
|
|
|
|
—
|
|
|
|
2,731,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Park West Partners International, Limited (84)
|
|
|
269,000
|
|
|
|
—
|
|
|
|
269,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Pinehurst Partners, L.P. (85)
|
|
|
400,000
|
|
|
|
—
|
|
|
|
400,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Polar Long/Short Master Fund (86)
|
|
|
579,235
|
|
|
|
—
|
|
|
|
579,235
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Polar Multi-Strategy Master Fund (86)
|
|
|
420,765
|
|
|
|
—
|
|
|
|
420,765
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Silver Creek CS SAV, L.L.C. (27)
|
|
|
13,413
|
|
|
|
—
|
|
|
|
13,413
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Star V Partners LLC (87)
|
|
|
308,600
|
|
|
|
—
|
|
|
|
308,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Tech Opportunities LLC (88)
|
|
|
1,500,000
|
|
|
|
—
|
|
|
|
1,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Tenor Opportunity Master Fund, Ltd. (89)
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
William Investment Group Ltd. (90)
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other Selling Securityholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FF Adventures SPV XVIII LLC (91)
|
|
|
12,200,000
|
|
|
|
—
|
|
|
|
4,600,000
|
|
|
|
—
|
|
|
|
7,600,000
|
|
|
|
2.3
|
%
|
|
|
—
|
|
FF Aventuras SPV XI LLC (92)
|
|
|
1,767,494
|
|
|
|
—
|
|
|
|
1,155,000
|
|
|
|
—
|
|
|
|
612,494
|
|
|
|
*
|
|
|
|
—
|
|
FF Ventures SPV IX LLC (93)
|
|
|
3,955,819
|
|
|
|
—
|
|
|
|
2,584,999
|
|
|
|
—
|
|
|
|
1,370,820
|
|
|
|
*
|
|
|
|
—
|
|
FF Venturas SPV X LLC (94)
|
|
|
2,840,615
|
|
|
|
—
|
|
|
|
1,856,250
|
|
|
|
—
|
|
|
|
984,365
|
|
|
|
*
|
|
|
|
—
|
|
FF Top Holding LLC (95)
|
|
|
121,438,964
|
|
|
|
—
|
|
|
|
71,831,588
|
|
|
|
—
|
|
|
|
57,438,376
|
|
|
|
17.7
|
%
|
|
|
—
|
|
Season Smart Limited (96)
|
|
|
66,494,117
|
|
|
|
—
|
|
|
|
79,831,617
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
D. James Carpenter (97)
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Robert Mancini (97)
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Philip Kassin (97)
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
2,387,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Founding Future Creditors Trust (99)
|
|
|
19,901,731
|
|
|
|
—
|
|
|
|
19,901,731
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
Common Stock beneficially owned includes options to acquire 117,138
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021, and “Shares being offered”
includes 55,536 Earnout Shares not currently beneficially owned that Carsten has the contingent right to receive pursuant to the
Merger Agreement.
|
(2)
|
Common Stock beneficially owned includes options to acquire 94,198
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(3)
|
Common Stock beneficially owned includes options to acquire 114,310
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021, and “Shares being offered”
includes 518 Earnout Shares not currently beneficially owned that Benedikt Hartmann has the contingent right to receive pursuant
to the Merger Agreement.
|
(4)
|
Common Stock beneficially owned includes options to acquire 234,787
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, and “Shares being offered”
includes 4,350 Earnout Shares not currently beneficially owned that Matthew Aydt has the contingent right to receive pursuant to
the Merger Agreement.
|
(5)
|
Common Stock beneficially owned includes options to acquire 391,256
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021, and “Shares being offered”
includes and 11,276 Earnout Shares that Chui Tin Mok has the contingent right to receive pursuant to the Merger Agreement.
|
(6)
|
Common Stock beneficially owned includes options to acquire 80,480
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(7)
|
Common Stock beneficially owned includes options to acquire 133,622
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021, and “Shares being offered”
includes 24,096 Earnout Shares not currently beneficially owned that Hong Rao has the contingent right to receive pursuant
to the Merger Agreement.
|
(8)
|
Common Stock beneficially owned includes options to acquire 1,265,869
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, and “Shares being offered”
includes 960 Earnout Shares not currently beneficially owned that Jerry Wang has the contingent right to receive pursuant to
the Merger Agreement.
|
(9)
|
Common Stock beneficially owned includes (i) 4,610,312 shares of Class A Common Stock and (ii) 563,420 Private Warrants that are exercisable for 563,420 shares of Class A Common Stock within 60 days of the Closing Date held by the Sponsor, of which Jordan Vogel and Aaron Feldman are managing members. Accordingly, all securities held by the Sponsor may ultimately be deemed to be beneficially held by Messrs. Vogel and Feldman. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
|
(10)
|
Common Stock beneficially owned includes options to acquire 103,620
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(11)
|
Common Stock beneficially owned includes options to acquire 164,860
shares of Class A Common Stock that have vested or will vest within 60 days of September 20, 2021.
|
(12)
|
These shares consist of (i) 4,610,312 shares of Class A Common Stock and (ii) 563,420 Private Warrants that are exercisable for 563,420 shares of Class A Common Stock held by Property Solutions Acquisition Sponsor, LLC, of which Jordan Vogel and Aaron Feldman are managing members. Accordingly, all securities held by Property Solutions Acquisition Sponsor, LLC may ultimately be deemed to be beneficially held by Messrs. Vogel and Feldman. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
|
(13)
|
These shares consist of (i) 179,631 shares of Class A Common Stock and (ii) 111,131 Private Warrants that are exercisable for 111,131 shares. David Nussbaum and Steven Levine are directors, and Amy Kauffmann is an officer of, EarlyBirdCapital, Inc., and as such, Mr. Nussbaum, Mr. Levine and Ms. Kauffmann may be deemed to beneficially own the shares held by EarlyBirdCapital, Inc.
|
(14)
|
James Shaver is the Managing Member of the Sub-Investment Advisor, Electron Capital Partners, LLC., and as such, Mr. Shaver be deemed to beneficially own the shares held by AGR Trading SPC-Series EC Segregated Portfolio.
|
(15)
|
Hau Him Howard Chan is the Director of Alpha Hills Investment Limited, and as such, Mr. Chan be deemed to beneficially own the shares held by Alpha Hills Investment Limited.
|
(16)
|
Altium Capital Management, LP, the investment manager of Altium Growth Fund, LP, has voting and investment power over these securities. Jacob Gottlieb is the managing member of Altium Capital Growth GP, LLC, which is the general partner of Altium Growth Fund, LP. Each of Altium Growth Fund, LP and Jacob Gottlieb disclaims beneficial ownership over these securities. The principal address of Altium Capital Management, LP is 152 West 57th Street, 20th Floor, New York, NY 10019.
|
(17)
|
Alyeska Investment Group, L.P., the investment manager of Alyeska Master Fund, L.P. (the “Selling Securityholder”), has voting and investment control of the shares held by the Selling Securityholder. Anand Parekh is the Chief Executive Officer of Alyeska Investment Group, L.P. and may be deemed to be the beneficial owner of such shares. Mr. Parekh, however, disclaims any beneficial ownership of the shares held by the Selling Securityholder. The registered address of Alyeska Master Fund, L.P. is at c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street George Town, Grand Cayman, KY1-1104, Cayman Islands. Alyeska Investment Group, L.P. is located at 77 W. Wacker, Suite 700, Chicago IL 60601.
|
(18)
|
The general partner of Anatole Partners Enhanced Master Fund, L.P. is Anatole Partners GP Enhanced Ltd., and the directors of Anatole Partners GP Enhanced Ltd. are Xiaofan Yang and Gary Lee and, as such, Mr. Yang and Mr. Lee may be deemed to have voting power and investment discretion over the shares held by Anatole Partners Enhanced Master Fund, L.P.
|
(19)
|
The general partner of Anatole Partners Long Only Master Fund, L.P. is Anatole Partners Long Only GP Ltd., and the directors of Anatole Partners Long Only GP Ltd. are Xiaofan Yang and Gary Lee and, as such, Mr. Yang and Mr. Lee may be deemed to have voting power and investment discretion over the shares held by Anatole Partners Long Only Master Fund, L.P.
|
(20)
|
The general partner of Anatole Partners Master Fund, L.P. is Anatole Partners GP Ltd., and the directors of Anatole Partners GP Ltd. are Xiaofan Yang and Gary Lee, as such, Mr. Yang and Mr. Lee may be deemed to have voting power and investment discretion over the shares held by Anatole Partners Master Fund, L.P.
|
(21)
|
Hai Huang is the beneficial owner and director of record holder, as such, Mr. Huang may be deemed to beneficially own the shares held by AP China Unicorn Fund SPC.
|
(22)
|
Represents (a) 375,000 shares of Class A Common Stock owned of
record by Arena Capital Fund, LP – Series 3, (b) 375,000 shares of Class A Common Stock owned of record by Arena
Capital Fund, LP – Series 4, (c) 375,000 shares of Class A Common Stock owned of record by Arena Capital Fund, LP –
Series 5, (d) 375,000 shares of Class A Common Stock owned of record by Arena Capital Fund, LP – Series 6, (e) 400,000
shares of Class A Common Stock owned of record by Arena Capital Fund, LP – Series 9, and (f) 100,000 shares
of Class A Common Stock owned of record by Arena Capital Fund, LP – Series 14. Arena Capital Advisors, LLC is the General
Partner of the Arena Funds and may be deemed to have voting control and investment discretion over the securities. The partners of
Arena Capital Advisors are Daniel Elperin, Jeremy Sagi and Sanije Perrett, and as such Mr. Elperin, Mr. Sagi and Mr. Perrett may
be deemed to beneficially own the shares held by the Arena Funds..
|
(23)
|
Parvinder Thiara, located at 888 7th Avenue, 21st Floor, New York, NY 10019, owns Athanor International Fund GP, LP, the general partner of Athanor International Master Fund, LP, which is the sole beneficial owner of the shares. As such, Mr. Thiara may be deemed to beneficially own the shares.
|
(24)
|
Parvinder Thiara, located at 888 7th Avenue, 21st Floor, New York, NY 10019, owns Athanor Capital Partners, LP, the general partner of Athanor Master Fund, LP, which is the sole beneficial owner of the shares. As such, Mr. Thiara may be deemed to beneficially own the shares.
|
(25)
|
Benjamin Aaron Fuchs is the Chief Exective Officer and Chief Investment Officer of BFAM Partners (Hong Kong) Limited, the relevant legal entity that, pursuant to a sub-advisory agreement with BFAM Partners (Cayman) Limited provides discretionary investment management services to BFAM Asian Opportunities Master Fund, LP.
|
(26)
|
Jack Butler is the managing
member of Birch Lake Holdings, GP, LLC, the general partner of Birch Lake Holdings, LP, the managing member of Birch Lake Warehouse
VI, LLC, the sole member of BL FF FFIE Fundco, LLC. As such, Mr. Butler may be deemed to have voting and disposition power over the
shares.
|
(27)
|
Nantahala Capital Management,
LLC is a Registered Investment Adviser and has been delegated the legal power to vote and/or direct the disposition of such securities
on behalf of the Selling Securityholder as a General Partner or Investment Manager and would be considered the beneficial owner of
such securities. The above shall not be deemed to be an admission by the record owners or the Selling Securityholder that they are
themselves beneficial owners of these securities for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended,
or the Exchange Act, or any other purpose. Wilmot Harkey and Daniel Mack are managing members of Nantahala Capital Management, LLC
and may be deemed to have voting and dispositive power over the shares held by the Selling Securityholder.
|
(28)
|
Manoj Jain and Sohit Khurana
are the Directors and Co-Chief Investment Officers of the Investment Manager, and as such, may be deemed to be the beneficial owner
of the shares.
|
(29)
|
Edward Lees and Ulrik Fugmann
are both Senior Portfolio managers of the Energy Transition Fund. As such, they may be deemed to be the beneficial owner of the shares.
|
(30)
|
Seven Grand Managers, LLC
is the investment manager of Boothbay Absolute Return Strategies, LP and Boothbay Diversified Alpha Master Fund, LP (collectively,
the “Seven Grand Securityholders”). Chris Fahy may be deemed to have investment discretion and voting power over Common
Stock held by the Seven Grand Securityholders. The address of each entity listed in this footnote is 81 Pondfield Road, Suite 302,
Bronxville NY 10708
|
(31)
|
James Shaver is the Managing
Member of the Sub-Investment Advisor, Electron Capital Partners, LLC, and as such, Mr. Shaver may be deemed to beneficially own the
shares.
|
(32)
|
Seven Grand Managers, LLC
is the investment manager of Boothbay Absolute Return Strategies, LP and Boothbay Diversified Alpha Master Fund, LP (collectively,
the “Seven Grand Securityholders”). Chris Fahy may be deemed to have investment discretion and voting power over Common
Stock held by the Seven Grand Securityholders. The address of each entity listed in this footnote is 81 Pondfield Road, Suite 302,
Bronxville NY 10708
|
(33)
|
Liang Junsheng, Zhao Lili,
Gu Jianfei and Cui Bin are the ultimate beneficial owners of Central China Asset Management Company Limited, and as such, may be
deemed to beneficially own the shares.
|
(34)
|
Pursuant to a portfolio management
agreement, Citadel Advisors LLC, an investment advisor registered under the U.S. Investment Advisers Act of 1940 (“CAL”),
holds the voting and dispositive power with respect to the shares held by Citadel Multi-Strategy Equities Master Fund Ltd. Citadel
Advisors Holdings LP (“CAH”) is the sole member of CAL. Citadel GP LLC is the general partner of CAH. Kenneth Griffin
(“Griffin”) is the President and Chief Executive Officer of and sole member of Citadel GP LLC. Citadel GP LLC and Griffin
may be deemed to be the beneficial owners of the stock through their control of CAL and/or certain other affiliated entities.
|
(35)
|
Craig Bergstrom is the Chief
Investment Officer of Corbin Capital Partners, L.P., the investment manager of this Selling Securityholder, and accordingly may be
deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Bergstrom disclaims
beneficial ownership of such shares.
|
(36)
|
Craig Bergstrom is the Chief
Investment Officer of Corbin Capital Partners, L.P., the investment manager of this Selling Securityholder, and accordingly may be
deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Bergstrom disclaims
beneficial ownership of such shares.
|
(37)
|
Craig Bergstrom is the Chief
Investment Officer of Corbin Capital Partners, L.P., the investment manager of this Selling Securityholder, and accordingly may be
deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Bergstrom disclaims
beneficial ownership of such shares.
|
(38)
|
Common Stock beneficially owned prior to the offering includes 27,120 shares issuable upon
exercise of the Public Warrants. Heights Capital Management, Inc., the authorized agent of
CVI Investments, Inc. (“CVI”), has discretionary authority to vote and dispose
of the shares held by CVI and may be deemed to be the beneficial owner of these shares.
Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management, Inc.,
may also be deemed to have investment discretion and voting power over the shares held by
CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. The principal
business address of CVI is c/o Heights Capital Management, Inc., 101 California Street, Suite
3250, San Francisco, California 94111.
|
(39)
|
Voting and dispositive authority
over the Registrable Securities is held by Davidson Kempner Capital Management LP (“DKCM”). Anthony A. Yoseloff, Eric
P. Epstein, Conor Bastable, Shulamit Leviant, Morgan P. Blackwell, Patrick W. Dennis, Gabriel T. Schwartz, Zachary Z. Altschuler,
Joshua D. Morris and Suzanne K. Gibbons, through DKCM, are responsible for the voting and investment decisions relating to the Registrable
Securities. Each of the aforementioned entities and individuals disclaims beneficial ownership of the Registrable Securities held
by any other entity or individual named in this footnote except to the extent of such entity or individual’s pecuniary interest
therein, if any. The address of each of the entities and individuals in this footnote is c/o Davidson Kempner Capital Management
LP, 520 Madison Avenue, 30th Floor, New York, New York 10022.
|
(40)
|
Voting and dispositive authority
over the Registrable Securities is held by Davidson Kempner Capital Management LP (“DKCM”). Anthony A. Yoseloff, Eric
P. Epstein, Conor Bastable, Shulamit Leviant, Morgan P. Blackwell, Patrick W. Dennis, Gabriel T. Schwartz, Zachary Z. Altschuler,
Joshua D. Morris and Suzanne K. Gibbons, through DKCM, are responsible for the voting and investment decisions relating to the Registrable
Securities. Each of the aforementioned entities and individuals disclaims beneficial ownership of the Registrable Securities held
by any other entity or individual named in this footnote except to the extent of such entity or individual’s pecuniary interest
therein, if any. The address of each of the entities and individuals in this footnote is c/o Davidson Kempner Capital Management
LP, 520 Madison Avenue, 30th Floor, New York, New York 10022.
|
(41)
|
Voting and dispositive authority
over the Registrable Securities is held by Davidson Kempner Capital Management LP (“DKCM”). Anthony A. Yoseloff, Eric
P. Epstein, Conor Bastable, Shulamit Leviant, Morgan P. Blackwell, Patrick W. Dennis, Gabriel T. Schwartz, Zachary Z. Altschuler,
Joshua D. Morris and Suzanne K. Gibbons, through DKCM, are responsible for the voting and investment decisions relating to the Registrable
Securities. Each of the aforementioned entities and individuals disclaims beneficial ownership of the Registrable Securities held
by any other entity or individual named in this footnote except to the extent of such entity or individual’s pecuniary interest
therein, if any. The address of each of the entities and individuals in this footnote is c/o Davidson Kempner Capital Management
LP, 520 Madison Avenue, 30th Floor, New York, New York 10022.
|
(42)
|
Yingshi Pan is the Director of DSG-Peony Fund SPC – DSG Global Markets SP. As such, Mr. Pan may be deemed to beneficially own the shares.
|
(43)
|
James Shaver is the Managing Member of the GP, Electron GP, LLC. As such, Mr. Shaver may be deemed to beneficially own the shares.
|
(44)
|
James Shaver is the Managing Member of the GP, Electron Infrastructure GP, LLC. As such, Mr. Shaver may be deemed to beneficially own the shares.
|
(45)
|
Mr. Quan Zhang as the director of Geely Symphony Finance Limited also has voting or investment control over the Registerable Securities, and as such, may be deemed to beneficially own the shares.
|
(46)
|
Michael Germino is the managing member of Ghisallo Capital Management LLC, the investment manager of the Selling Shareholder, and as such, Mr. Germino may be deemed to beneficially own the shares.
|
(47)
|
Steve Pei is the Managing Member of the General Partner. As such, Mr. Pei may be deemed to beneficially own the shares.
|
(48)
|
Christiana Trust Company of Delaware and Warren Wang, as trustees of the QYNM Family Trust, may be deemed to have beneficial ownership over the shares held by the Selling Securityholder.
|
(49)
|
Integrated Core Strategies (US) LLC, a Delaware limited liability company (“Integrated Core Strategies”), beneficially owned 1,500,000 shares of the Company’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”) (which shares of the Company’s Class A Common Stock were purchased in a private placement pursuant to a subscription agreement dated January 27, 2021 (the “PIPE”). The table above excludes 180,102 shares of the Company’s Class A Common Stock beneficially owned by ICS Opportunities II LLC, a Cayman Islands limited liability company (“ICS Opportunities II”) and 12,200 shares of the Company’s Class A Common Stock beneficially owned by Integrated Assets, Ltd., an exempted company organized under the laws of the Cayman Islands (“Integrated Assets”). ICS Opportunities II and Integrated Assets are affiliates of Integrated Core Strategies. Millennium International Management LP, a Delaware limited partnership (“Millennium International Management”), is the investment manager to ICS Opportunities II and Integrated Assets and may be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities II and Integrated Assets. Millennium Management LLC, a Delaware limited liability company (“Millennium Management”), is the general partner of the managing member of Integrated Core Strategies and may be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies. Millennium Management is also the general partner of the 100% owner of ICS Opportunities II and Integrated Assets and may also be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities II and Integrated Assets. Millennium Group Management LLC, a Delaware limited liability company (“Millennium Group Management”), is the managing member of Millennium Management and may also be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies. Millennium Group Management is also the general partner of Millennium International Management and may also be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities II and Integrated Assets. The managing member of Millennium Group Management is a trust of which Israel A. Englander, a United States citizen (“Mr. Englander”), currently serves as the sole voting trustee. Therefore, Mr. Englander may also be deemed to have shared voting control and investment discretion over securities owned by Integrated Core Strategies, ICS Opportunities II and Integrated Assets. The foregoing should not be construed in and of itself as an admission by Millennium International Management, Millennium Management, Millennium Group Management or Mr. Englander as to beneficial ownership of the securities owned by Integrated Core Strategies, ICS Opportunities II or Integrated Assets, as the case may be. The address of Integrated Core Strategies (US) LLC is c/o Millennium Management LLC, 399 Park Avenue, New York, New York 10022.
|
(50)
|
Ahmed Fattouh is the manager of InterPrivate Capital LLC (“IPC”),
the entity in which the shares were initially registered. IPC is the manager of the Selling Securityholder. In his capacity as manager
of IPC, and by virtue of the fact that IPC is the manager of the Selling Securityholder, Mr. Fattouh can cause the Selling Securityholder
to exercise voting and investment control over the Registrable Securities and as such, may be deemed to beneficially own the shares.
Owl Creek Asset Management, L.P., as manager of Owl Creek Investments III, LLC (“OC III”) may be deemed to control OC
III. Owl Creek GP, L.L.C., as general partner of Owl Creek Asset Management, L.P. may be deemed to control Owl Creek Asset Management,
L.P. Jeffrey A. Altman, as managing member of Owl Creek GP, LLC may be deemed to control such entity and, as such, may be deemed
to beneficially own the shares.
|
(51)
|
Mr. Jackson Yang is the Chief Executive Officer of J. Yang & Family Foundation. As such, Mr. Yang may be deemed to beneficially own the shares.
|
(52)
|
Common Stock beneficially owned prior to the offering includes 483,934
shares issuable upon exercise of the Public Warrants. Jane Street Global Trading, LLC is a wholly owned subsidiary of Jane Street
Group, LLC. Michael A. Jenkins and Robert. A. Granieri are the members of the Operating Committee of Jane Street Group, LLC. As such,
Mr. Jenkins and Mr. Granieri may be deemed to beneficially own the shares.
|
(53)
|
The beneficial owner is the GJ Family Trust (an irrevocable discretionary trust). Rustem Limited is the director of Joint Power International Limited.
|
(54)
|
Kepos Capital LP is the investment manager of the Selling Securityholder and Kepos Partners LLC is the General Partner of the Selling Securityholder and each may be deemed to have voting and dispositive power with respect to the shares. The general partner of Kepos Capital LP is Kepos Capital GP LLC (the “Kepos GP”) and the Managing Member of Kepos Partners LLC is Kepos Partners MM LLC (“Kepos MM”). Mark Carhart controls Kepos GP and Kepos MM and, accordingly, may be deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Carhart disclaims beneficial ownership of the shares held by the Selling Securityholder.
|
(55)
|
Kepos Capital LP is the investment manager of the Selling Securityholder and Kepos Partners LLC is the General Partner of the Selling Securityholder and each may be deemed to have voting and dispositive power with respect to the shares. The general partner of Kepos Capital LP is Kepos Capital GP LLC (the “Kepos GP”) and the Managing Member of Kepos Partners LLC is Kepos Partners MM LLC (“Kepos MM”). Mark Carhart controls Kepos GP and Kepos MM and, accordingly, may be deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Carhart disclaims beneficial ownership of the shares held by the Selling Securityholder.
|
(56)
|
Wei Guo owns 100% of Kuos Investment II LLC. As such, Mr. Guo may be deemed to beneficially own the shares.
|
(57)
|
Common Stock beneficially owned prior to the offering includes 483,934 shares issuable upon exercise of the Public Warrants. The securities held by Linden Capital L.P. are indirectly held by Linden Advisors LP (the investment manager of Linden Capital L.P.), Linden GP LLC (the general partner of Linden Capital L.P.), and Mr. Siu Min (Joe) Wong (the principal owner and the controlling person of Linden Advisors LP and Linden GP LLC). Linden Capital L.P., Linden Advisors LP, Linden GP LLC and Mr. Wong share voting and dispositive power with respect to the securities held by Linden Capital L.P.
|
(58)
|
Christian Leone, Portfolio Manager of Luxor Capital Group, LP, is the Investment Manager of the Selling Securityholder and, as such, may be deemed to beneficially own the shares.
|
(59)
|
Christian Leone, Portfolio Manager of Luxor Capital Group, LP, is the Investment Manager of the Selling Securityholder and, as such, may be deemed to beneficially own the shares.
|
(60)
|
Christian Leone, Portfolio Manager of Luxor Capital Group, LP, is the Investment Manager of the Selling Securityholder and, as such, may be deemed to beneficially own the shares.
|
(61)
|
Christian Leone, Portfolio Manager of Luxor Capital Group, LP, is the Investment Manager of the Selling Securityholder and, as such, may be deemed to beneficially own the shares.
|
(62)
|
Christian Leone, Portfolio Manager of Luxor Capital Group, LP, is the Investment Manager of the Selling Securityholder and, as such, may be deemed to beneficially own the shares.
|
(63)
|
Voting and dispositive authority over the Registrable Securities is held by Davidson Kempner Capital Management LP (“DKCM”). Anthony A. Yoseloff, Eric P. Epstein, Conor Bastable, Shulamit Leviant, Morgan P. Blackwell, Patrick W. Dennis, Gabriel T. Schwartz, Zachary Z. Altschuler, Joshua D. Morris and Suzanne K. Gibbons, through DKCM, are responsible for the voting and investment decisions relating to the Registrable Securities. Each of the aforementioned entities and individuals disclaims beneficial ownership of the Registrable Securities held by any other entity or individual named in this footnote except to the extent of such entity or individual’s pecuniary interest therein, if any. The address of each of the entities and individuals in this footnote is c/o Davidson Kempner Capital Management LP, 520 Madison Avenue, 30th Floor, New York, New York 10022.
|
(64)
|
Common Stock beneficially owned prior to the offering includes 22,493
shares issuable upon exercise of the Public Warrants. Marshall Wace, LLP, a limited liability partnership formed in England (the “Investment
Manager”), is the investment manager of each of the Marshall Wace Funds. Each of the Marshall Wace Funds are sub-trusts of Marshall
Wace Investment Strategies, an umbrella unit trust established in Ireland with limited liability between sub-trusts. The Investment Manager
has delegated certain authority for US operations and trading to Marshall Wace North America L.P. Each of the foregoing other than the
Investment Manager disclaims beneficial ownership of the securities listed above. The address of the Marshall Wace Funds is 32 Molesworth
Street, Dublin 2, Ireland.
|
(65)
|
Common Stock beneficially owned prior to the offering includes 12,550
shares issuable upon exercise of the Public Warrants. Marshall Wace, LLP, a limited liability partnership formed in England (the “Investment
Manager”), is the investment manager of each of the Marshall Wace Funds. Each of the Marshall Wace Funds are sub-trusts of Marshall
Wace Investment Strategies, an umbrella unit trust established in Ireland with limited liability between sub-trusts. The Investment Manager
has delegated certain authority for US operations and trading to Marshall Wace North America L.P. Each of the foregoing other than the
Investment Manager disclaims beneficial ownership of the securities listed above. The address of the Marshall Wace Funds is 32 Molesworth
Street, Dublin 2, Ireland.
|
(66)
|
Common Stock beneficially owned prior to the offering includes 4,875 shares
issuable upon exercise of the Public Warrants. Marshall Wace, LLP, a limited liability partnership formed in England (the “Investment
Manager”), is the investment manager of each of the Marshall Wace Funds. Each of the Marshall Wace Funds are sub-trusts of Marshall
Wace Investment Strategies, an umbrella unit trust established in Ireland with limited liability between sub-trusts. The Investment Manager
has delegated certain authority for US operations and trading to Marshall Wace North America L.P. Each of the foregoing other than the
Investment Manager disclaims beneficial ownership of the securities listed above. The address of the Marshall Wace Funds is 32 Molesworth
Street, Dublin 2, Ireland.
|
(67)
|
Common Stock beneficially owned prior to the offering includes 7,523 shares
issuable upon exercise of the Public Warrants. Marshall Wace, LLP, a limited liability partnership formed in England (the “Investment
Manager”), is the investment manager of each of the Marshall Wace Funds. Each of the Marshall Wace Funds are sub-trusts of Marshall
Wace Investment Strategies, an umbrella unit trust established in Ireland with limited liability between sub-trusts. The Investment Manager
has delegated certain authority for US operations and trading to Marshall Wace North America L.P. Each of the foregoing other than the
Investment Manager disclaims beneficial ownership of the securities listed above. The address of the Marshall Wace Funds is 32 Molesworth
Street, Dublin 2, Ireland.
|
(68)
|
Manoj Jain and Sohit Khurana are the Directors and Co-Chief Investment Officers of the Investment Manager and as such, may be deemed to be the beneficial owner of the shares.
|
(69)
|
Common Stock beneficially owned prior to the offering includes 45,461
shares issuable upon exercise of the Public Warrants. Andrew Dodd and Michael Bell are directors of the Selling Securityholder. Mr. Dodd
and Mr. Bell both disclaim beneficial ownership of the securities held by the Selling Securityholder.
|
(70)
|
Matthew MacIssac is the Secretary of MM Asset Management Inc., the Investment Advisor to MMCAP International Inc. SPC, and as such, may be deemed to be the beneficial owner of the shares.
|
(71)
|
Moore Capital Management, LP, the investment manager of MMF LT, LLC, has voting and investment control of the shares held by MMF LT, LLC. Mr. Louis M. Bacon controls the general partner of Moore Capital Management, LP and may be deemed the beneficial owner of the shares of the Company held by MMF LT, LLC. Mr. Bacon also is the indirect majority owner of MMF LT, LLC. The address of MMF LT, LLC, Moore Capital Management, LP and Mr. Bacon is 11 Times Square, New York, New York 10036.
|
(72)
|
The Representative Director is Bum Jun Kim. As such, Mr. Kim may be deemed to be the beneficial owner of the shares.
|
(73)
|
Chao Xing, Bin Li and Shuqi Peng are the directors of New China Overseas Opportunity Fund SPC, and Chi Zhang, Yijang Chen, Quan Li, Xigang Wang, Hongjun An are the directors of IM (as defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Asset Management (Hong Kong) Limited as the investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying securities.
|
(74)
|
Chao Xing, Bin Li and Shuqi Peng are the directors of New China Overseas Opportunity Fund SPC, and Chi Zhang, Yijang Chen, Quan Li, Xigang Wang, Hongjun An are the directors of IM (as defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Asset Management (Hong Kong) Limited as the investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying securities.
|
(75)
|
Chao Xing, Bin Li and Shuqi Peng are the directors of New China Overseas Opportunity Fund SPC, and Chi Zhang, Yijang Chen, Quan Li, Xigang Wang, Hongjun An are the directors of IM (as defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Asset Management (Hong Kong) Limited as the investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying securities.
|
(76)
|
Hongjun An, Quan Li and Shuqi Peng are the directors
of New China Capital Management Limited.
|
(77)
|
Chao Xing, Bin Li and Shuqi Peng are the directors
of New China Multi-Strategy Fund SPC (the “SPC Fund”), and Hongjun An, Quan Li and Shuqi Peng are directors of IM (as
defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Capital Management Limited as the
investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying
securities and may be deemed to beneficially own these shares.
|
(78)
|
Chao Xing, Bin Li and Shuqi Peng are the directors
of New China Multi-Strategy Fund SPC (the “SPC” Fund), and Hongjun An, Quan Li and Shuqi Peng are directors of IM (as
defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Capital Management Limited as the
investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying
securities and may be deemed to beneficially own these shares.
|
(79)
|
Chao Xing, Bin Li and Shuqi Peng are the directors
of New China Multi-Strategy Fund SPC (the “SPC Fund”) and Hongjun An, Quan Li and Shuqi Peng are directors of IM (as
defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Capital Management Limited as the
investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying
securities and may be deemed to beneficially own these shares.
|
(80)
|
Chao Xing, Bin Li and Shuqi Peng are the directors
of New China Multi-Strategy Fund SPC (the “SPC Fund”) and Hongjun An, Quan Li and Shuqi Peng are directors of IM (as
defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Capital Management Limited as the
investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached to the underlying
securities and may be deemed to beneficially own these shares.
|
(81)
|
Chao Xing, Bin Li and Shuqi Peng are the directors of New China Innovation
Fund SPC (the “SPC Fund”), and Sheldon Hiu Tung Tse, Jyun Chu, Quan Li, Ping Tse, Hongun An are the directors of IM (as
defined below). Further, unless otherwise instructed by the Directors of the SPC Fund, New China Capital International Management
Limited as the investment manager of the Sub-Fund (the “IM”) shall be entitled to exercise the voting powers attached
to the underlying securities and may be deemed to beneficially own these shares.
|
(82)
|
Palantir Technologies Inc. is currently controlled by its seven-member
board of directors. For more information, please see Palantir Technologies Inc.’s public filings with the SEC.
|
(83)
|
Park West Asset Management LLC is the investment manager to Park West Investors Master Fund, Limited. Peter S. Park, through one or more affiliated entities, is the controlling manager of Park West Asset Management LLC. As such, Mr. Park may be deemed to have beneficial ownership of the shares.
|
(84)
|
Park West Asset Management LLC is the investment manager to Park West Partners International, Limited. Peter S. Park, through one or more affiliated entities, is the controlling manager of Park West Asset Management LLC. As such, Mr. Park may be deemed to have beneficial ownership of the shares.
|
(85)
|
Craig Bergstrom is the Chief Investment Officer of Corbin Capital Partners, L.P., the investment manager of this Selling Securityholder, and accordingly may be deemed to have voting and dispositive power with respect to the shares held by this Selling Securityholder. Mr. Bergstrom disclaims beneficial ownership of such shares. As such, Mr. Bergstrom may be deemed to have beneficial ownership of the shares.
|
(86)
|
Polar Long/Short Master Fund and Polar Multi-Strategy Master Fund (“Polar
Funds”) are under management by Polar Asset Management Partners Inc. (“PAMPI”). PAMPI serves as investment advisor
of the Polar Funds and has control and discretion over the shares held by the Polar Funds. As such, PAMPI may be deemed the beneficial
owner of the shares held by the Polar Funds. PAMPI disclaims any beneficial ownership of the reported shares other than to the extent
of any pecuniary interest therein. The business address of the Polar Funds is c/o Polar Asset Management Partners Inc., 16 York Street,
Suite 2900, Toronto, ON M5J 0E6.
|
(87)
|
Manoj Jain and Sohit Khurana are the Directors and Co-Chief Investment Officers of the Investment Manager and as such, may be deemed to be the beneficial owner of the shares.
|
(88)
|
Hudson Bay Capital Management LP, the investment manager of Tech Opportunities LLC, has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Tech Opportunities LLC and Sander Gerber disclaims beneficial ownership over these securities.
|
(89)
|
Tenor Capital Management Company,
L.P. serves as the investment adviser for Tenor Opportunity Master Fund, Ltd. and therefore
may be deemed to share voting and investment power with respect to these shares in such capacity.
Tenor Management GP, LLC is the general partner of Tenor Capital Management Company, L.P. and Robin
R. Shah is the sole managing member of Tenor Management GP, LLC. As such, Mr. Shah may be deemed to
have beneficial ownership over the shares.
|
(90)
|
William Chen is the director of William Investment Group Ltd. As such,
Mr. Chen may be deemed to have beneficial ownership over the shares.
|
(91)
|
Includes (i) 4,600,000 shares of Class A Common Stock issuable upon conversion
of the ATW June Notes, (ii) 1,500,000 shares of Class A Common Stock issuable upon conversion of the ATW NPA Existing Warrants, (iii)
4,600,000 shares of Class A Common Stock issuable upon conversion of ATW Optional Notes and (iv) 1,500,000 shares of Class A Common Stock
issuable upon exercise of ATW Optional Warrants. Antonio Ruiz-Gimenez, Kerry Propper are the Managing Members and General Partners of
the Selling Securityholder, and as such, may be deemed to have beneficial ownership over the shares.
|
(92)
|
Includes (i) 245,000 shares of Class A Common Stock issuable upon conversion of the ATW NPA Existing Warrants, (ii) 910,000 shares of Class A Common Stock issuable upon conversion of the Notes and (iii) 245,000 shares of Class A Common Stock issuable upon exercise of the ATW NPA New Warrants. Antonio Ruiz-Gimenez, Kerry Propper are the Managing Members and General Partners of the Selling Securityholder, and as such, may be deemed to have beneficial ownership over the shares.
|
(93)
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Includes (i) 548,333 shares of Class A Common Stock issuable upon conversion of the ATW NPA Existing Warrants, (ii) 2,036,666 shares of Class A Common Stock issuable upon conversion of the Notes and (iii) 548,333 shares of Class A Common Stock issuable upon exercise of the ATW NPA New Warrants. Antonio Ruiz-Gimenez, Kerry Propper are the Managing Members and General Partners of the Selling Securityholder, and as such, may be deemed to have beneficial ownership over the shares.
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(94)
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Includes (i) 393,750 shares of Class A Common Stock issuable upon conversion of the ATW NPA Existing Warrants, (ii) 1,462,500 shares of Class A Common Stock issuable upon conversion of the Notes and (iii) 393,750 shares of Class A Common Stock issuable upon exercise of the ATW NPA New Warrants. Antonio Ruiz-Gimenez, Kerry Propper are the Managing Members and General Partners of the Selling Securityholder, and as such, may be deemed to have beneficial ownership over the shares.
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(95)
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Includes (i) 57,438,376 shares of Class A Common Stock held by certain other stockholders of the Company over which FF Top exercises voting control pursuant to voting agreements and (ii) 64,000,588 shares of Class B Common Stock held directly by FF Top. “Shares being offered” includes 7,831,000 Earnout Shares not currently beneficially owned that FF Top has the contingent right to receive pursuant to the Merger Agreement. Assumes the conversion of the Class B Common Stock referred to above into shares of Class A Common Stock. Shares of Class B Common Stock are convertible into an equal number of shares of Class A Common Stock of the Company at any time. Pacific Technology Holding LLC (“Pacific Technology”) is the managing member of FF Top, and FF Global Partners LLC (“FF Global”) is the managing member of Pacific Technology. FF Global is governed by a board of managers, consisting of eight managers – YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip Bethell and Carsten Breitfeld. A majority of the board of managers of FF Global is required to approve any actions of FF Global, including actions relating to the voting and disposition of shares of Common Stock by FF Top. Other than the Founding Future Creditors Trust Creditor Trust, no other stockholders subject to voting agreements in favor of FF Top own more than 5% of the issued and outstanding shares of Company Common Stock.
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(96)
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“Shares being offered” includes 13,337,500 Earnout Shares not currently beneficially owned that Season Smart has the contingent right to receive pursuant to the Merger Agreement. Season Smart is an indirect subsidiary of China Evergrande Group, a Cayman company. China Evergrande Group holds its interest in Season Smart through a chain of entities, and China Evergrande Group’s direct and indirect subsidiaries through which it holds interest in Season Smart are New Garland Limited (a British Virgin Islands company) Global Development Limited (a Cayman company), Acelin Global Limited (a British Virgin Islands company), Evergrande Health Industry Holdings Limited (a British Virgin Islands company) and China Evergrande New Energy Vehicle Group Limited (a Hong Kong company) (collectively, the “Evergrande Entities”). Each Evergrande Entity, by reason of its ownership of the voting securities of the subsidiary below it in the ownership structure, has the right to elect or appoint a majority of the members of the governing body of that subsidiary and, therefore, to direct the management and policies of that subsidiary. Mr. Hui Ka Yan (“Mr. Hui”) is a controlling shareholder of China Evergrande Group, through his wholly-owned subsidiary, Xin (BVI) Limited (a British Virgin Islands company). Mr. Hui, by reason of his ownership of the voting securities of Xin (BVI) Limited, has the right to elect or appoint the members of the governing body of China Evergrande Group. As a result, each Evergrande Entity, Mr. Hui and Xin (BVI) Limited may be deemed to be the beneficial owner the shares held of record by Season Smart.
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(97)
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Includes 2,387,500 shares of Class A Common Stock that will be issued by the Company to either Messrs. Carpenter, Mancini or Kassin or other holders as directed by Messrs. Carpenter, Mancini and Kassin, acting together. Given that Messrs. Carpenter, Mancini and Kassin together have the sole ability to direct ownership of such shares, each may be deemed to have or share beneficial ownership of the shares. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
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(98)
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Aihua Yang is the sole director
of Baoxin Investment Management Ltd. and its beneficial owner. As such, Mr. Yang may be deemed to be
the beneficial owner of the shares.
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(99)
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Jeffrey D. Prol, solely in his
capacity as Trustee of the Trustee (“Trustee”) is the beneficial owner of the Trust. Founding
Future Creditors Trust (the “Trust”) holds a 20% preferred interest in Pacific Technology
Holding LLC (“Pacific”), which is the managing member of FF Top Holding LLC (“FF Top”).
According to SEC filings, FF Top owns 64,000,588 shares of Class B Common Stock of the Company and holds
voting agreements with respect to 57,438,376 shares of Class A Common Stock of the Company owned by
others (including the 19,901,731 shares owned by the Trust). However, neither the Trust nor the Trustee
exercises any control over Pacific or FF Top or their investment or voting decisions with respect to
any securities of the Company; accordingly, the Trustee does not believe the securities deemed to be
beneficially owned by Pacific and/or FF Top (other than securities directly owned by the Trust) may
be beneficially owned by the Trust or the Trustee. The Trustee, on behalf of the Trust, has voting and
investment control over the registerable securities. The Trustee, on behalf of the Trust, has entered
into a Voting Agreement with FF Top pursuant to which the Trust and Trustee have agreed to issue to
FF Top a proxy in connection with any vote of the shareholders of the Issuer upon written request by
FF Top unless issuance of such proxy is reasonable likely or would constitute a breach of the fiduciary
duties of the Trust or Trustee. Pacific is the governing member of FF Top. FF Global Partners LLC (“FF
Global”) is the managing member of Pacific. FF Global is governed by a board of managers, consisting
of eight managers: YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng, Philip
Bethell and Carsten Breitfeld. A majority of the board of managers of FF Global is required to approve
any actions of FF Global, including actions relating to the voting and disposition of the registrable
securities by FF Top.
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Certain Relationships with the Selling Securityholders
Lockup Agreements
In
connection with the Business Combination, certain Selling Securityholders entered into lockup agreements with PSAC (the “Lockup
Agreements”), pursuant to which such Selling Securityholders agreed to one of the following three lock-up arrangements: (i) not
to sell, transfer or take certain other actions with respect to their shares of Common Stock for a period of 180 days after the
closing of the Business Combination, subject to certain customary exceptions; (ii) with respect to (A) 33⅓% of their shares of
Common Stock, not to sell, transfer or take certain other actions for a period of 30 days after the closing of the Business Combination,
(B) 33⅓% of their shares of Common Stock, not to sell, transfer or take certain other actions for a period of 60 days after
the closing of the Business Combination, and (C) the remaining 33⅓% of their shares of Common Stock, not to sell, transfer
or take certain other actions for a period of 90 days after the closing of the Business Combination or (iii) with respect to (A)
50% of their shares of Common Stock, not to sell, transfer or take certain other actions for a period ending the earlier of (x) the
one year anniversary of the closing of the Business Combination, and (y) the date on which the closing price of shares of Common
Stock on the principal securities exchange or securities market on which such shares are then traded equals or exceeds $12.50 per share
for any twenty trading days within any thirty trading day period after the closing of the Business Combination and (B) the other
50% of their shares of Common Stock, not to sell, transfer or take other actions for a period ending earlier of (x) the one year
anniversary of the closing of the Business Combination and (y) the date on which FF completes a liquidation, merger, capital stock
exchange or other similar transaction that results in all of FF’s stockholders having the right to exchange their shares for cash,
securities or other property.
Founder Shares
The PSAC 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, PSAC completes
a liquidation, merger, stock exchange or other similar transaction which results in all of PSAC’s stockholders having the right
to exchange their shares of Common Stock for cash, securities or other property.
Subscription Agreements
On July 21, 2021, the Subscribers purchased from
the Company an aggregate of 76,140,000 PIPE Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $761,400,000,
pursuant to the Subscription Agreements. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the
Subscribers with respect to the PIPE Shares. The sale of the PIPE Shares was consummated concurrently with the Closing.
Amended and Restated Registration Rights Agreement
In connection with the consummation of the Business Combination, the
A&R RRA Parties entered into the A&R RRA with the Company, which became effective upon the consummation of the Business Combination.
In accordance with the A&R RRA, the A&R RRA Parties are entitled to have registered, in certain circumstances,
the resale of shares of Company Common Stock (and the shares of Class A Common Stock underlying Company Warrants) held by or issued to
them at the closing of the Business Combination, subject to the terms and conditions set forth therein. Within 45 days of the Closing,
the Company is obligated to file a shelf registration statement to register the resale of certain securities and the Company is required
to use its reasonable best efforts to have such shelf registration statement declared effective as soon as practicable after the filing
thereof and no later than the earlier of (x) the 90th calendar day following the filing date if the SEC notifies the Company that it will
“review” the shelf registration statement and (y) the tenth (10th) business day after the date the Company is notified in
writing by the SEC that such shelf registration statement will not be “reviewed” or will not be subject to further review.
Additionally, at any time and from time to time after one year (or 180 days with respect to Season Smart Ltd.) after the Closing, the
A&R RRA Parties representing a majority-in-interest of the total number of shares of Class A Common Stock issued and outstanding on
a fully diluted basis held by the A&R RRA Parties (or Season Smart) may make a written demand for registration for resale under the
Securities Act of all or part of the shares of Company Common Stock (and the shares of Class A Common Stock underlying Company Warrants)
held by or issued to them at the closing of the Business Combination in an underwritten offering involving gross proceeds of no less than
$50,000,000. The Company will not be obligated to effect more than an aggregate of two underwritten offerings per year (or three underwritten
offerings per year demanded by Season Smart) and, with respect to Season Smart, such shares of Class A Common Stock do not exceed more
than 10% of the outstanding shares of the Company. The A&R RRA Parties will also be entitled to participate in certain registered
offerings by the Company, subject to certain limitations and restrictions. The Company will be required to pay certain expenses incurred
in connection with the exercise of the registration rights under the A&R RRA.
DESCRIPTION OF SECURITIES
The following summary of the material terms of
our securities is not intended to be a complete summary of the rights and preferences of such securities, and is qualified by reference
to our Amended and Restated Charter, our Amended and Restated Bylaws and the warrant-related documents described herein, which are exhibits
to the registration statement of which this prospectus is a part. We urge to you reach each of the Amended and Restated Charter, the Amended
and Restated Bylaws and the warrant-related documents described herein in their entirety for a complete description of the rights and
preferences of our securities.
General
The Amended and Restated Charter authorizes the
issuances of 750,000,000 shares of Class A common stock, 75,000,000 shares of Class B common stock and 10,000,000 shares of
preferred stock, par value $0.0001 per share (the “Preferred Stock”).
As of September 20, 2021, there were outstanding
260,359,920 shares of Class A Common Stock, 64,000,588 shares of Class B Common Stock, no shares of Preferred Stock outstanding, 22,977,568
Public Warrants, 674,551 Private Warrants, 3,874,166 ATW NPA Warrants and 670,092 Ares NPA Warrants (as defined below).
Common Stock
The holders of Class A Common Stock and Class B
Common Stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders until the occurrence
of a Qualifying Equity Market Capitalization, following which holders of Class B Common Stock shall be entitled to ten votes per
share and shall continue to be entitled to ten votes per share regardless of whether the Qualifying Equity Market Capitalization shall
continue to exist or not thereafter.
A “Qualifying Equity Market Capitalization”
means FF, at the end of any 20 consecutive trading days, has a volume weighted average total equity market capitalization of at least
$20 billion as determined by multiplying the average closing sale price per share of Class A Common Stock on the NASDAQ (or such
other securities exchange on which PSAC’s securities are then listed for trading) at the time of determination by the then total
number of issued shares of Class A Common Stock, Class B Common Stock and other shares of FF.
Shares of Class B Common Stock have the right
to convert into shares of Class A Common Stock at any time at the rate of one share of Class A Common Stock for each share of
Class B Common Stock. Class A Common Stock does not have the right to convert into Class B Common Stock.
There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the voting power represented by shares of Common Stock voted
for the election of directors can elect all of the directors.
Holders of Common Stock will not have any conversion,
preemptive or other subscription rights and there will be no sinking fund or redemption provisions applicable to the Common Stock.
Preferred Stock
The Amended and Restated Charter authorizes the
issuance of 10,000,000 shares of Preferred Stock with such designations, rights and preferences as may be determined from time to time
by FF’s board of directors. FF’s board of directors are empowered, without stockholder approval, to issue the preferred stock
with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders
of Common Stock; provided that any issuance of Preferred Stock with more than one vote per share will require the prior approval of the
holders of a majority of the outstanding shares of Class B Common Stock. In addition, the Preferred Stock could be utilized as a
method of discouraging, delaying or preventing a change in control of FF.
Description of Warrants
Public Warrants and Private Warrants
As of September 20, 2021, FF has Public Warrants
outstanding to purchase an aggregate of 22,977,568 shares of Class A Common Stock and Private Warrants outstanding to purchase an aggregate
of 674,551 shares of Class A Common Stock. References in this “—Public Warrants and Private Warrants” subsection to
“Warrant” or “Warrants” refer only to the Public Warrants and Private Warrants. Each outstanding whole Warrant
represents the right to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment as discussed
below, at any time commencing on the later of 30 days after the consummation of a business combination and 12 months from the closing
of the initial public offering.
No Warrants will be exercisable for cash unless
there is an effective and current registration statement covering the shares of Class A Common Stock issuable upon exercise of the Warrants
and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, if a registration statement covering
the shares of Class A Common Stock issuable upon exercise of the Public Warrants is not effective within a specified period following
the consummation of the Business Combination, Warrant holders may, until such time as there is an effective registration statement and
during any period when FF 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. In the event of such
cashless exercise, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Class A Common Stock
equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants,
multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the
fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of
Class A Common Stock for the 5 trading days ending on the trading day prior to the date of exercise. The Warrants will expire on the fifth
anniversary of completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Private Warrants, as well as any Warrants underlying
additional units issued to the PSAC Sponsor or PSAC’s officers, directors or their affiliates in payment of working capital loans,
are identical to the Warrants underlying the units offered in the initial public offering except that such Warrants will be exercisable
for cash or on a cashless basis, at the holder’s option, and will not be redeemable by FF, in each case so long as they are still
held by the PSAC Sponsor or its permitted transferees.
FF may call the Warrants for redemption (excluding
the Private Warrants and any Warrants underlying additional units issued to the PSAC Sponsor, PSAC’s officers, directors or their
affiliates in payment of working capital loans made to PSAC), in whole and not in part, at a price of $0.01 per Warrant,
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at any time while the Warrants are exercisable;
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upon not less than 30 days’ prior written notice
of redemption to each Warrant holder;
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if, and only if, the reported last sale price of the shares of Class
A 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
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if, and only if, there is a current registration statement
in effect with respect to the shares underlying such Warrants.
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The right to exercise will be forfeited unless the
Warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a
Warrant will have no further rights except to receive the redemption price for such holder’s Warrant upon surrender of such Warrant.
If FF calls the Warrants for redemption as described
above, its management will have the option to require all holders that wish to exercise Warrants to do so on a “cashless basis.”
In such event, each holder would pay the exercise price by surrendering the Warrants for that number of shares of Class A Common Stock
equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the Warrants,
multiplied by the difference between the exercise price of the Warrants and the “fair market value” (defined below) by (y) the
fair market value. The “fair market value” shall mean the average reported last sale price of the shares of Class A Common
Stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders
of Warrants.
The exercise price and number of shares of Class
A Common Stock issuable on exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend,
extraordinary dividend or FF’s recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted
for issuances of shares of Class A Common Stock at a price below their respective exercise prices.
The Warrants may be exercised upon surrender
of the Warrant certificate on or prior to the expiration date at the offices of the Warrant agent, with the exercise form on the reverse
side of the Warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified
or official bank check payable to us, for the number of Warrants being exercised. The Warrant holders do not have the rights or privileges
of holders of shares of Class A Common Stock and any voting rights until they exercise their Warrants and receive shares of Class A Common
Stock. After the issuance of shares of Class A Common Stock upon exercise of the Warrants, each holder will be entitled to one vote for
each share held of record on all matters to be voted on by stockholders.
Warrant holders may elect to be subject to a restriction
on the exercise of their Warrants such that an electing Warrant holder would not be able to exercise their Warrants to the extent that,
after giving effect to such exercise, such holder would beneficially own in excess of 9.8% of the shares of Class A Common Stock outstanding.
No fractional shares will be issued upon exercise
of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, FF will, upon
exercise, round up to the nearest whole number the number of shares of Class A Common Stock to be issued to the Warrant holder.
NPA Warrants and Notes
From September 2020 through June 2021, in connection
with the issuance of certain Notes (defined below), the Company issued warrants to purchase up to 2,687,083 shares of Class A Common Stock
(the “ATW NPA Existing Warrants”) to FF Ventures SPV IX LLC, FF Venturas SPV X LLC, FF Aventuras SPV XI LLC and FF Adventures
SPV XVIII LLC (collectively, the “ATW Warrant Holders”), entities affiliated with ATW Partners, LLC, pursuant to the terms
of the NPA. Each ATW NPA Existing Warrant entitles the ATW Warrant Holder, at any time on or prior to 5:00 p.m. (New York City time) the
date that is seven (7) years following the initial issuance date of such ATW NPA Existing Warrant, to purchase a certain number of shares
of Class A Common Stock at a price per share of $10.00, subject to adjustment. The ATW NPA Existing Warrant exercise price is subject
to customary anti-dilution adjustments upon (among other triggering events) the occurrence of a change of control transaction and certain
dilutive transactions, including subsequent equity sales, share dividends and splits occurring following the issuance of the applicable
ATW NPA Existing Warrant. The ATW Warrant Holders may also exercise the ATW NPA Existing Warrants on a cashless (or “net exercise”)
basis. Any adjustments to the ATW NPA Existing Warrant exercise price are capped such that the ATW New Warrant Holders are not entitled
to exercise the ATW NPA Existing Warrants to the extent such exercise would result in the ATW Warrant Holders holding shares in excess
of 4.99% of the fully diluted capitalization of the Company.
In August 2021, in connection with the issuance
of certain Notes (defined below), the Company issued warrants to purchase up to 1,187,083 shares of Class A Common Stock (the “ATW
NPA New Warrants”) to FF Ventures SPV IX LLC, FF Venturas SPV X LLC and FF Aventuras SPV XI LLC (collectively, the “ATW New
Warrant Holders”), entities affiliated with ATW Partners, LLC, pursuant to the terms of the NPA. The issuance by us of 1,187,083
shares of Class A Common Stock upon exercise of the ATW NPA New Warrants in accordance with their terms is included in the registration
statement of which this prospectus forms a part. Each ATW NPA New Warrant entitles the ATW New Warrant Holder, at any time on or prior
to 5:00 p.m. (New York City time) on June 9, 2028, to purchase a certain number of shares of Class A Common Stock at a price per share
of $10.00, subject to adjustment. The ATW NPA New Warrant exercise price is subject to customary anti-dilution adjustments upon (among
other triggering events) the occurrence of a change of control transaction and certain dilutive transactions, including subsequent equity
sales, share dividends and splits occurring following the issuance of the applicable ATW NPA New Warrant. The ATW New Warrant Holders
may also exercise the ATW NPA New Warrants on a cashless (or “net exercise”) basis. Any adjustments to the ATW NPA New Warrant
exercise price are capped such that the ATW New Warrant Holders are not entitled to exercise the ATW NPA New Warrants to the extent such
exercise would result in the ATW Warrant Holders holding shares in excess of 4.99% of the fully diluted capitalization of the Company..
On June 9, 2021, pursuant to the NPA, the Company
issued a promissory note (the “ATW June 8% Note”) in favor of FF Adventures SPV XVIII LLC, a third party investment firm
affiliated with ATW Partners, LLC, for an aggregate principal amount of $20.0 million, receiving net proceeds of $18.4 million, inclusive
of an 8% original issue discount. The promissory note matures on December 9, 2022, subject to the right of FF Adventures SPV XVIII LLC
to extend the maturity date to December 9, 2023. The promissory note bears interest at 0% per annum through and including December 9,
2022. In the event that FF Adventures SPV XVIII LLC extends the maturity date, the promissory note bears interest at 10% per annum from
December 10, 2022 until December 9, 2023. At the election of the holder of the ATW June 8% Note, the principal amount converts into that
number of shares of Class A Common Stock equal to 130% of the outstanding principal amount divided by the applicable conversion price.
As of September 20, 2021, the promissory note is currently convertible into 2,600,000 shares of Class A Common Stock. The conversion
to shares shall not include any portion of the promissory note that would cause the total converted share amount to be in excess of 4.99%
of the fully diluted capitalization of the Company. The conversion price is subject to customary anti-dilution adjustments upon (among
other triggering events) the occurrence of a change of control transaction and certain dilutive transactions, including subsequent equity
issuances, share dividends and splits occurring following the issuance of the promissory note. Pursuant to the NPA, upon purchasing the
ATW June 8% Note, FF Adventures SPV XVIII LLC became entitled to purchase from the Company, at its option, at any time during the twelve
(12) month period commencing July 21, 2021, an additional promissory note (the “ATW Optional 8% Note”) for an aggregate principal
amount of up to $20.0 million with an original issue discount of 8%. At the election of the holder of the ATW 8% Optional Note, the principal
amount would be convertible into that number of shares of Class A Common Stock equal to 130% of the outstanding principal amount divided
by the applicable conversion price. In addition, pursuant to the NPA, if FF Adventures SPV XVIII LLC elected to purchase the ATW Optional
8% Note, it would be entitled to receive from the Company a warrant (the “ATW Optional 8% Warrant”) to purchase that number
of shares of Class A Common Stock of the Company equal to 37.5% of the principal amount of the ATW Optional 8% Note divided by the applicable
exercise price. As of September 20, 2021, if FF Adventures elected to purchase an ATW Optional 8% Note with an aggregate principal amount
of $20.0 million, (i) such ATW Optional 8% Note would be convertible into 2,600,000 shares of Class A Common Stock and (ii) the related
ATW Optional 8% Warrant would be exercisable into 750,000 shares of Class A Common Stock.
On June 9, 2021, pursuant to the NPA, the Company
issued a promissory note (the “ATW June 13% Note”, and together with the ATW June 8% Note, the “ATW June Notes”)
in favor of FF Adventures SPV XVIII LLC, a third party investment firm affiliated with ATW Partners, LLC, for an aggregate principal
amount of $20.0 million, receiving net proceeds of $17.4 million, inclusive of a 13% original issue discount. The promissory note matures
on December 9, 2022, subject to the right of FF Adventures SPV XVIII LLC to extend the maturity date to December 9, 2023. The promissory
note bears interest at 0% per annum through and including December 9, 2022. In the event that FF Adventures SPV XVIII LLC extends the
maturity date, the promissory note bears interest at 10% per annum from December 10, 2022 until December 9, 2023. At the election of
the holder of the ATW June 13% Note, the principal amount is convertible into that number of shares of Class A Common Stock equal to
100% of the outstanding principal amount divided by the applicable conversion price. As of September 20, 2021, the promissory note is
currently convertible into 2,000,000 shares of Class A Common Stock. The conversion to shares shall not include any portion of the promissory
note that would cause the total converted share amount to be in excess of 4.99% of the fully diluted capitalization of the Company. The
conversion price is subject to customary anti-dilution adjustments upon (among other triggering events) the occurrence of a change of
control transaction and certain dilutive transactions, including subsequent equity issuances, share dividends and splits occurring following
the issuance of the promissory note. Pursuant to the NPA, upon purchasing the ATW June 13% Note, FF Adventures SPV XVIII LLC became entitled
to purchase from the Company, at its option, at any time during the twelve (12) month period commencing July 21, 2021, an additional
promissory note (the “ATW Optional 13% Note”, and togetther with the ATW 8% Optional Note, the “ATW Optional Notes”)
for an aggregate principal amount of up to $20.0 million with an original issue discount of 13%. At the election of holder of the ATW
Optional 13% Note, the principal amount would be convertible into that number of shares of Class A Common Stock equal to 100% of the
outstanding principal amount divided by the applicable conversion price. In addition, pursuant to the NPA, if FF Adventures SPV XVIII
LLC elected to purchase the ATW Optional 13% Note, it would be entitled to receive from the Company a warrant (the “ATW Optional
13% Warrant”, and together with the ATW Optional 8% Warrant, the “ATW Optional Warrants”) to purchase that number of
shares of Class A Common Stock of the Company equal to 37.5% of the principal amount of the ATW Optional 13% Note divided by the applicable
exercise price. As of September 20, 2021, if FF Adventures elected to purchase an ATW Optional 13% Note with an aggregate principal amount
of $20.0 million, (i) such ATW Optional 13% Note would be convertible into 2,000,000 shares of Class A Common Stock and (ii) the related
ATW Optional 13% Warrant would be exercisable into 750,000 shares of Class A Common Stock..
On August 10, 2021, pursuant to the NPA, the
Company issued a promissory note in favor of FF Ventures SPV IX LLC, a third party investment firm affiliated with ATW Partners, LLC,
for an aggregate principal amount of $15.7 million. The promissory note matures on February 10, 2023 and bears interest at 0% per annum.
At the election of the holder, the principal amount is convertible into that number of shares of Class A Common Stock equal to 130% of
the outstanding principal amount divided by the applicable conversion price. As of September 20, 2021, the promissory note is currently
convertible into 2,036,666 shares of Class A Common Stock. The issuance by us of 2,036,666 shares of Class A Common Stock upon conversion
of the principal amount of the promissory note in accordance with its terms is included in the registration statement of which this prospectus
forms a part. The conversion price is subject to customary anti-dilution adjustments upon (among other triggering events) the occurrence
of a change of control transaction and certain dilutive transactions, including subsequent equity issuances, share dividends and splits
occurring following the issuance of the promissory note.
On August 10, 2021, pursuant to the NPA, the
Company issued a promissory note in favor of FF Venturas SPV X LLC, a third party investment firm affiliated with ATW Partners, LLC,
for an aggregate principal amount of $11.3 million. The promissory note matures on February 10, 2023 and bears interest at 0% per annum.
At the election of the holder, the principal amount is convertible into that number of shares of Class A Common Stock equal to 130% of
the outstanding principal amount divided by the applicable conversion price. As of September 20, 2021, the promissory note is currently
convertible into 1,462,500 shares of Class A Common Stock. The issuance by us of 1,462,500 shares of Class A Common Stock upon conversion
of the principal amount of the promissory note in accordance with its terms is included in the registration statement of which this prospectus
forms a part. The conversion price is subject to customary anti-dilution adjustments upon (among other triggering events) the occurrence
of a change of control transaction and certain dilutive transactions, including subsequent equity issuances, share dividends and splits
occurring following the issuance of the promissory note.
On August 10, 2021, pursuant to the NPA, the
Company issued a promissory note in favor of FF Aventuras SPV XI LLC, a third party investment firm affiliated with ATW Partners, LLC,
for an aggregate principal amount of $7.0 million. The promissory note matures on February 10, 2023 and bears interest at 0% per annum.
At the election of the holder, the principal amount is convertible into that number of shares of Class A Common Stock equal to 130% of
the outstanding principal amount divided by the applicable conversion price. As of September 20, 2021, the promissory note is currently
convertible into 910,000 shares of Class A Common Stock. The issuance by us of 910,000 shares of Class A Common Stock upon conversion
of the principal amount of the promissory note in accordance with its terms is included in the registration statement of which this prospectus
forms a part. The conversion price is subject to customary anti-dilution adjustments upon (among other triggering events) the occurrence
of a change of control transaction and certain dilutive transactions, including subsequent equity issuances, share dividends and splits
occurring following the issuance of the promissory note.
The foregoing promissory notes issued under the NPA to entities affiliated
with ATW Partners, LLC are referred to collectively throughout this prospectus as the “Notes.”
Certain Anti-Takeover Provisions of Delaware Law
Under the Amended and Restated Charter, FF has certain
anti-takeover provisions in place as follows:
Special Meeting of Stockholders
The Amended and Restated Bylaws provide that special
meetings of stockholders may be called only by (i) the chairperson of the board of directors, (ii) the chief executive officer
or (iii) a majority vote of FF’s board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations
The Amended and Restated Bylaws provide that stockholders
seeking to bring business before FF’s special meeting of stockholders, or to nominate candidates for election as directors at FF’s
special meeting of stockholders, must provide timely notice of their intent in writing subject to certain exceptions for FF Top board
designees under the Shareholder Agreement. To be timely, a stockholder’s notice will need to be received by FF secretary at FF’s
principal executive offices not later than the close of business on the 90th day nor earlier than the open of business on the
120th day prior to the anniversary date of the immediately preceding special meeting of stockholders. Pursuant to Rule 14a-8
of the Exchange Act, proposals seeking inclusion in FF’s annual proxy statement must comply with the notice periods contained therein.
The Amended and Restated Bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions
may preclude FF stockholders from bringing matters before the special meeting of stockholders or from making nominations for directors
at FF’s special meeting of stockholders.
Authorized but Unissued Shares
FF’s authorized but unissued Common Stock
and Preferred Stock will be available for future issuances without stockholder approval and could be utilized for a variety of corporate
purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of
FF by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum Selection
The Amended and Restated Charter requires, to the
fullest extent permitted by law, that derivative actions brought in FF’s name, actions against directors, officers and employees
for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought
outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s
counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable
party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction
of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court
or forum other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. The Amended
and Restated Charter also requires that the federal district courts of the United States of America be the exclusive forum for the
resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and/or the Securities Exchange
Act of 1934, as amended. Any person or entity purchasing or otherwise acquiring any interest in shares of Common Stock shall be deemed
to have notice of and consented to the forum provisions in the Amended and Restated Charter.
This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with FF or any of FF’s directors, officers, other
employees or stockholders, which may discourage lawsuits with respect to such claims. FF cannot be certain that a court will decide that
this provision is either applicable or enforceable, and if a court were to find the choice of forum provision contained in the Amended
and Restated Charter to be inapplicable or unenforceable in an action, FF may incur additional costs associated with resolving such action
in other jurisdictions, which could harm FF’s business, operating results and financial condition.
The Amended and Restated Charter provides that the
exclusive forum provision will be applicable to the fullest extent permitted by applicable law.
Limitation on Liability and Indemnification of Directors and
Officers
The Amended and Restated Charter provides that directors
and officers will be indemnified by FF to the fullest extent authorized by Delaware law as it now exists or may in the future be amended.
The Amended and Restated Bylaws also permit FF to
secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether
Delaware law would permit indemnification. FF has purchased a policy of directors’ and officers’ liability insurance that
insures FF’s directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures
FF against its obligations to indemnify the directors and officers.
These provisions may discourage stockholders from
bringing a lawsuit against FF’s directors for breach of their fiduciary duty. These provisions also may have the effect of reducing
the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit
FF and FF stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent FF pays the costs of settlement
and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions, the insurance
and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to FF’s directors, officers and controlling persons pursuant to the foregoing provisions,
or otherwise, FF has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS
The following is a summary of material United States
federal income tax consequences of the purchase, ownership and disposition of our Class A Common Stock as of the date hereof. This discussion
is limited to non-U.S. holders (as defined below) who purchase our Class A Common Stock pursuant to this offering and who hold our Class
A Common Stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment).
A “non-U.S. holder” means a beneficial
owner of our Class A Common Stock (other than an entity or arrangement treated as a partnership for United States federal income tax purposes)
that is not, for United States federal income tax purposes, any of the following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to United States federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person for United States federal income tax purposes.
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This summary is based upon provisions of the United
States Internal Revenue Code of 1986, or the “Code,” United States Treasury regulations promulgated thereunder, rulings, judicial
decisions, published positions of the Internal Revenue Service, or “IRS,” and other applicable authorities, as of the date
hereof. Those authorities are subject to different interpretations and may be changed, perhaps retroactively, so as to result in United
States federal income tax consequences different from those summarized below. This summary does not address all aspects of United States
federal income taxes and does not deal with any estate or gift tax consequences or any foreign, state, local or other tax considerations
(including any aspects of the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of
2010) that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed
description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United
States federal income tax laws (including if you are a former citizen or long-term resident of the United States, foreign pension fund,
tax qualified retirement plan, bank, financial institution, insurance company, investment fund, tax-exempt organization, governmental
organization, trader, broker or dealer in securities, “controlled foreign corporation,” “passive foreign investment
company,” a partnership or other pass-through entity for United States federal income tax purposes (or an investor in such a pass-through
entity), person subject to the alternative minimum tax, person that owns, or has owned, actually or constructively, more than 5% of our
Class A Common Stock, person who has elected to mark securities to market, person who acquired shares of our Class A Common Stock as compensation
or otherwise in connection with the performance of services, person who has acquired shares of our Class A Common Stock as part of a straddle,
hedge, conversion transaction or other integrated investment or an accrual-method taxpayer subject to special tax accounting rules under
Section 451(b) of the Code). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe
in this summary.
If a partnership (or other entity or arrangement
treated as a partnership for United States federal income tax purposes) holds our Class A Common Stock, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership (or other entity
or arrangement treated as a partnership for United States federal income tax purposes) or partner of a partnership holding our Class A
Common Stock, you should consult your tax advisors.
If you are considering the
purchase of our Class A common stock, you should consult your own tax advisors concerning the particular United States federal income
tax consequences to you of the purchase, ownership and disposition of our Class A common stock, as well as the consequences to you arising
under other United States federal tax laws, the laws of any other taxing jurisdiction, OR AN APPLICABLE TAX TREATY. IN ADDITION, YOU SHOULD
CONSULT WITH YOUR TAX ADVISOR WITH RESPECT TO POTENTIAL CHANGES IN UNITED STATES FEDERAL TAX LAW AS WELL AS POTENTIAL CHANGES IN STATE,
LOCAL OR FOREIGN TAX LAWS.
Dividends
In the event that we make a distribution of cash
or other property (other than certain pro rata distributions of our stock) in respect of our Class A Common Stock, the distribution generally
will be treated as a dividend for United States federal income tax purposes to the extent it is paid from our current or accumulated earnings
and profits, as determined under United States federal income tax principles. Any portion of a distribution that exceeds our current and
accumulated earnings and profits generally will be treated first as a tax-free return of capital, causing a reduction in the adjusted
tax basis of a non-U.S. holder’s Class A Common Stock, and to the extent the amount of the distribution exceeds a non-U.S. holder’s
adjusted tax basis in our Class A Common Stock, the excess will be treated as gain from the disposition of our Class A Common Stock (the
tax treatment of which is discussed below under “— Gain on Disposition of Class A Common Stock”).
Subject to the discussions below regarding effectively
connected income, backup withholding and Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”),
dividends paid to a non-U.S. holder generally will be subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. A non-U.S. holder who wishes to claim the benefit of an applicable
treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to provide the applicable withholding
agent with a properly executed IRS Form W-8BEN or Form W- 8BEN-E (or other applicable form) certifying under penalty of perjury that such
holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our Class A Common Stock
is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury
regulations. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than
corporations or individuals. A non-U.S. holder eligible for a reduced rate of United States federal withholding tax pursuant to an income
tax treaty may be eligible to obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the
IRS.
Dividends that are effectively connected with the
conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are
attributable to a United States permanent establishment) are not subject to the withholding tax. To claim the exemption, the non-U.S.
holder must generally furnish a valid IRS Form W-8ECI (or applicable successor form) to the applicable withholding agent certifying eligibility
for exemption. However, any such effectively connected dividends paid on our Class A Common Stock generally will be subject to United
States federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under
the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional “branch profits
tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
Gain on Disposition of Class A Common Stock
Subject to the discussion of backup withholding
and FATCA below, any gain realized by a non-U.S. holder on the sale or other disposition of our Class A Common Stock generally will not
be subject to United States federal income tax unless:
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the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);
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the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or
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we are or have been a “United States real property holding corporation” for United States federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder’s holding period for our Class A Common Stock, and our Class A Common Stock is not regularly traded on an established securities market during the calendar year in which the sale or other disposition occurs.
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A non-U.S. holder described in the first bullet
point immediately above will be subject to tax on the gain derived from the sale or other disposition in the same manner as if the non-U.S.
holder were a United States person as defined under the Code. In addition, if any non-U.S. holder described in the first bullet point
immediately above is a foreign corporation, the gain realized by such non-U.S. holder may be subject to an additional “branch profits
tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described
in the second bullet point immediately above will be subject to a 30% (or such lower rate as may be specified by an applicable income
tax treaty) tax on the gain derived from the sale or other disposition, which gain may be offset by United States source capital losses
even though the individual is not considered a resident of the United States, provided that the non-U.S. holder has timely filed United
States federal income tax returns with respect to such losses.
Generally, a corporation is a “United States
real property holding corporation” if the fair market value of its United States real property interests equals or exceeds 50% of
the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business
(all as determined for United States federal income tax purposes). We believe we are not and do not anticipate becoming a “United
States real property holding corporation” for United States federal income tax purposes.
Non-U.S. holders should consult their tax advisors
regarding any applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Annual reports are required to be filed with the
IRS and provided to each non-U.S. holder indicating the amount of distributions on our Class A Common Stock paid to such holder and the
amount of any tax withheld with respect to such distributions. These information reporting requirements apply even if no withholding was
required because the distributions were effectively connected with the non-U.S. holder’s conduct of a United States trade or business,
or withholding was reduced or eliminated by an applicable income tax treaty. Copies of the information returns reporting such distributions
and any withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions
of an applicable income tax treaty.
A non-U.S. holder will not be subject to backup
withholding on dividends received if such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not
have actual knowledge or reason to know that such holder is a United States person as defined under the Code), including by providing
a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or such holder otherwise establishes an exemption.
Information reporting and backup withholding generally
are not required with respect to the amount of any proceeds from the sale or other disposition of our Class A Common Stock by a non-U.S.
holder outside the United States through a foreign office of a foreign broker that does not have certain specified connections to the
United States. However, if a non-U.S. holder sells or otherwise disposes of its shares of Class A Common Stock through a United States
broker or the United States offices of a foreign broker, the broker will generally be required to report the amount of proceeds paid to
the non-U.S. holder to the IRS and also backup withhold on that amount unless such non-U.S. holder provides appropriate certification
to the broker of its status as a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a
United States person) or otherwise establishes an exemption. Information reporting will also apply if a non-U.S. holder sells its shares
of Class A Common Stock through a foreign broker deriving more than a specified percentage of its income from United States sources or
having certain other connections to the United States, unless such broker has documentary evidence in its records that such non-U.S. holder
is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person) and certain
other conditions are met, or such non-U.S. holder otherwise establishes an exemption.
Backup withholding is not an additional tax and
any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holder’s United
States federal income tax liability provided the required information is timely furnished to the IRS.
Additional Withholding Requirements
Under FATCA, a 30% United States federal withholding
tax may apply to any dividends paid on our Class A Common Stock paid to (i) a “foreign financial institution” (as specifically
defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption
from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental
agreement with the United States) in a manner which avoids withholding, or (ii) a “non-financial foreign entity” (as specifically
defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption
from FATCA, or (y) adequate information regarding certain substantial United States beneficial owners of such entity (if any). If a dividend
payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under “— Dividends,”
the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. An intergovernmental agreement
between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a non-U.S. holder
might be eligible for refunds or credits of such taxes. FATCA currently applies to dividends paid on our Class A Common Stock. The Treasury
Secretary has issued proposed regulations providing that the withholding provisions under FATCA do not apply with respect to gross proceeds
from a sale or other disposition of our Class A Common Stock, which may be relied upon by taxpayers until final regulations are issued.
You should consult your own tax advisors regarding these requirements and whether they may be relevant to your ownership and disposition
of our Class A Common Stock.
PLAN OF DISTRIBUTION
We are registering (i) up to 236,226,156 shares
of Class A Common Stock for possible sale by the Selling Securityholders from time to time, (ii) up to 674,551 Private Warrants for possible
sale by the Selling Securityholders from time to time and (iii) up to 33,848,368 shares of Class A Common Stock that are issuable upon
the exercise of the Warrants or the conversion of the Notes and subsequent possible sale by the holders thereof from time to time. We
are required to pay all fees and expenses incident to the registration of the shares of our Class A Common Stock and Warrants to be offered
and sold pursuant to this prospectus. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their
sale of shares of our Class A Common Stock or Warrants
We will not receive any of the proceeds from the
sale of the securities by the Selling Securityholders. We will receive proceeds from Warrants exercised in the event that such Warrants
are exercised for cash. The aggregate proceeds to the Selling Securityholders will be the purchase price of the securities less any discounts
and commissions borne by the Selling Securityholders.
The shares of Class A Common Stock beneficially
owned by the Selling Securityholders covered by this prospectus may be offered and sold from time to time by the Selling Securityholders.
The term “Selling Securityholders” includes donees, pledgees, transferees or other successors in interest selling securities
received after the date of this prospectus from a Selling Securityholder as a gift, pledge, partnership distribution or other transfer.
The Selling Securityholders will act independently of us in making decisions with respect to the timing, manner and size of each sale.
Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and under terms then prevailing
or at prices related to the then current market price or in negotiated transactions. The Selling Securityholders may sell their shares
of Class A Common Stock or Warrants by one or more of, or a combination of, the following methods:
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purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;
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ordinary brokerage transactions and transactions in which the broker solicits purchasers;
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block trades in which the broker-dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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an over-the-counter distribution in accordance with the rules of NASDAQ;
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through trading plans entered into by a Selling Securityholder pursuant to Rule 10b5-1 under the Exchange Act, that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described in such trading plans;
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to or through underwriters or broker-dealers;
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in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;
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in privately negotiated transactions;
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in options transactions;
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through a combination of any of the above methods of sale; or
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any other method permitted pursuant to applicable law.
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In addition, any shares that qualify for sale pursuant
to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus.
To the extent required, this prospectus may be
amended or supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the shares
or otherwise, the Selling Securityholders may enter into hedging transactions with broker-dealers or other financial institutions. In
connection with such transactions, broker-dealers or other financial institutions may engage in short sales of shares of Class A Common
Stock in the course of hedging transactions, broker-dealers or other financial institutions may engage in short sales of shares of Class
A Common Stock in the course of hedging the positions they assume with Selling Securityholders. The Selling Securityholders may also sell
shares of Class A Common Stock short and redeliver the shares to close out such short positions. The Selling Securityholders may also
enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such broker- dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Securityholders may also pledge
shares to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution, may
effect sales of the pledged shares pursuant to this prospectus (as supplemented or amended to reflect such transaction).
A Selling Securityholder may enter into derivative
transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions.
If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered
by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities
pledged by any Selling Securityholder or borrowed from any Selling Securityholder or others to settle those sales or to close out any
related open borrowings of stock, and may use securities received from any Selling Securityholder in settlement of those derivatives to
close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be identified
in the applicable prospectus supplement (or a post-effective amendment). In addition, any Selling Securityholder may otherwise loan or
pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such
financial institution or other third party may transfer its economic short position to investors in our securities or in connection with
a concurrent offering of other securities.
In effecting sales, broker-dealers or agents engaged
by the Selling Securityholders may arrange for other broker-dealers to participate. Broker- dealers or agents may receive commissions,
discounts or concessions from the Selling Securityholders in amounts to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus,
the Selling Securityholders and any broker-dealers who execute sales for the Selling Securityholders may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. Any profits realized by the Selling Securityholders and the compensation
of any broker-dealer may be deemed to be underwriting discounts and commissions.
In order to comply with the securities laws of
certain states, if applicable, the shares must be sold in such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available and is complied with.
We have advised the Selling Securityholders that
the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of
the Selling Securityholders and their affiliates. In addition, we will make copies of this prospectus available to the Selling Securityholders
for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Selling Securityholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising
under the Securities Act.
At the time a particular offer of shares is made,
if required, a prospectus supplement will be distributed that will set forth the number of shares being offered and the terms of the offering,
including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other
item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
A holder of Warrants may exercise its Warrants
in accordance with the Warrant Agreement on or before the expiration date set forth therein by surrendering, at the office of the warrant
agent, Continental Stock Transfer & Trust Company, the certificate evidencing such Warrant, with the form of election to purchase
set forth thereon, properly completed and duly executed, accompanied by full payment of the exercise price and any and all applicable
taxes due in connection with the exercise of the Warrant, subject to any applicable provisions relating to cashless exercises in accordance
with the Warrant Agreement.
The Selling Securityholders party to the A&R
RRA have agreed, and the other Selling Securityholders may agree, to indemnify the underwriters, their officers, directors and each person
who controls such underwriters (within the meaning of the Securities Act), against certain liabilities related to the sale of the securities,
including liabilities under the Securities Act.
Restrictions to Sell
Pursuant to the Lockup Agreements, the restricted
stockholders agreed to one of the following three lock-up arrangements: (i) not to sell, transfer or take certain other actions with
respect to their shares of Common Stock for a period of 180 days after the closing of the Business Combination, subject to certain
customary exceptions; (ii) with respect to (A) 33⅓% of their shares of Common Stock, not to sell, transfer or take certain other
actions for a period of 30 days after the closing of the Business Combination, (B) 33⅓% of their shares of Common Stock,
not to sell, transfer or take certain other actions for a period of 60 days after the closing of the Business Combination, and (C) the
remaining 33⅓% of their shares of Common Stock, not to sell, transfer or take certain other actions for a period of 90 days
after the closing of the Business Combination or (iii) with respect to (A) 50% of their shares of Common Stock, not to sell, transfer
or take certain other actions for a period ending the earlier of (x) the one year anniversary of the closing of the Business Combination,
and (y) the date on which the closing price of shares of Common Stock on the principal securities exchange or securities market
on which such shares are then traded equals or exceeds $12.50 per share for any twenty trading days within any thirty trading day period
after the closing of the Business Combination and (B) the other 50% of their shares of Common Stock, not to sell, transfer or take
other actions for a period ending earlier of (x) the one year anniversary of the closing of the Business Combination and (y) the
date on which FF completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of FF’s
stockholders having the right to exchange their shares for cash, securities or other property.
LEGAL MATTERS
The validity of the securities offered by this
prospectus has been passed upon for us by Sidley Austin LLP, San Francisco, California. If the validity of any securities is also passed
upon by counsel for the underwriters, dealers or agents of an offering of those securities, that counsel will be named in the applicable
prospectus supplement.
EXPERTS
The financial statements of Property Solutions
Acquisition Corp. at December 31, 2020 and for the period from February 11, 2020 (inception) through December 31, 2020 included in this
prospectus, have been audited by Marcum LLP (“Marcum”), independent registered public accounting firm, as set forth in their
report thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of Property Solutions Acquisition
Corp. to continue as a going concern as described in Note 1 to the financial statements, and an explanatory paragraph relating to the
restatement of the 2020 financial statements as described in Note 2 to the financial statements), appearing elsewhere in this prospectus,
and are included in reliance on such report given on the authority of said firm as experts in auditing and accounting.
The financial statements of FF Intelligent
Mobility Global Holdings Ltd. as of December 31, 2020 and 2019 and for the years then ended included in this prospectus have been so
included in reliance on the report (which contains an explanatory paragraph relating to FF Intelligent Mobility Global Holdings Ltd.’s
ability to continue as a going concern as described in Note 2 to the financial statements) of PricewaterhouseCoopers LLP,
an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
CHANGE IN INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
As previously disclosed in FF’s
Current Report on Form 8-K filed with the SEC on July 22, 2021, on July 21, 2021, the FF board of directors informed Marcum that it
would be dismissed as the Company’s independent registered public accounting firm following completion of the Company’s
review of the quarter ended June 30, 2021. The effective date of Marcum’s dismissal was August 13, 2021 following completion
of Marcum’s review of the quarter ended June 30, 2021 and the Company’s filing on the same date of its Quarterly Report
on Form 10-Q for the quarter ended June 30, 2021. The FF board of directors has approved the engagement of PricewaterhouseCoopers
LLP (“PwC”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial
statements for the year ending December 31, 2021. PwC served as the independent registered public accounting firm of Legacy FF prior
to the Business Combination.
The audit report of Marcum on the Company’s
financial statements as of December 31, 2020 and for the year ended December 31, 2020 and for the period from February 11, 2020 (date
of inception) to December 31, 2020, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified
as to uncertainties, audit scope, or accounting principles except for an explanatory paragraph in such report regarding substantial doubt
about the Company’s ability to continue as a going concern.
During the period from February 11, 2020 (inception)
through December 31, 2020, and the subsequent period through August 13, 2021, there were no “disagreements” (as such term
is defined in Item 304(a)(1)(iv) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused Marcum
to make reference thereto in its reports on PSAC’s financial statements for such periods. During the period from February 11, 2020
(inception) through December 31, 2020 and the subsequent interim period through August 13, 2021, there have been no “reportable
events” (as such term is defined in Item 304(a)(1)(v) of Regulation S-K), other than the material weakness in internal controls
identified by management related to the accounting for warrants issued in connection with PSAC’s initial public offering, which
resulted in the restatement of PSAC’s financial statements as set forth Amendment No. 1 to PSAC’s Form 10-K for the year
ended December 31, 2020, as filed with the SEC on May 27, 2021.
During
the period from February 11, 2020 (inception) through December 31, 2020 and the subsequent
interim period through August 13, 2021, (i) the Company did not both (a) consult with PwC as to the application of accounting
principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s
financial statements and (b) receive a written report or oral advice that PwC concluded was an important factor considered by the
Company in reaching a decision as to such accounting, auditing, or financial reporting issue; and (ii) the Company did not consult
PwC on any matter that was either the subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of
Regulation S-K).
The Company has provided Marcum with a copy
of the foregoing disclosures pursuant to Item 304(a) of Regulation S-K under the Exchange Act (“Regulation S-K”) and has
requested that Marcum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements herein made
by the registrant set forth above. A letter from Marcum is filed as Exhibit 16.1 to the registration statement of which this prospectus
forms a part.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement
on Form S-1 under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which forms a part of
such registration statement, does not contain all of the information included in the registration statement. For further information pertaining
to us and our securities, you should refer to the registration statement and to its exhibits. The registration statement has been filed
electronically and may be obtained in any manner listed below. Whenever we make reference in this prospectus to any of our contracts,
agreements or other documents, the references are not necessarily complete. If a contract or document has been filed as an exhibit to
the registration statement or a report we file under the Exchange Act, you should refer to the copy of the contract or document that has
been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit to a registration statement or report
is qualified in all respects by the filed exhibit.
We file annual, quarterly and current reports,
proxy statements and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC’s
website at www.sec.gov and on our website, free of charge, at www.ff.com. The information found on, or that can be accessed
from or that is hyperlinked to, our website is not part of this prospectus. You may inspect a copy of the registration statement through
the SEC’s website, as provided herein.
INDEX TO FINANCIAL STATEMENTS
|
Page
|
FF Intelligent Mobility Global Holdings Ltd.
|
|
|
|
Unaudited Condensed Consolidated Financial Statements
|
|
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020
|
F-2
|
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020
|
F-3
|
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the three and six months ended June 30, 2021 and 2020
|
F-4
|
Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020
|
F-6
|
Notes to Condensed Consolidated Financial Statements
|
F-8
|
|
|
Audited Consolidated Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
F-33
|
Consolidated Balance Sheets as of December 31, 2020 and 2019
|
F-34
|
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2020 and 2019
|
F-35
|
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the years ended December 31, 2020 and 2019
|
F-36
|
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
|
F-37
|
Notes to Consolidated Financial Statements
|
F-39
|
|
|
PROPERTY SOLUTIONS ACQUISITION CORP.
|
|
|
|
Unaudited Condensed Financial Statements
|
|
Condensed Balance Sheets as of June 30, 2021 and December 31, 2020
|
F-90
|
Condensed Statements of Operations for the three and six months ended June 30, 2021, three months ended June 30, 2020 and the period from February 11, 2020 (inception) through June 30, 2020
|
F-91
|
Condensed Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2021 and the period from February 11, 2020 (inception) through June 30, 2020
|
F-92
|
Condensed Statement of Cash Flows for the six months ended June 30, 2021 and the period from February 11, 2020 (inception) June 30, 2020
|
F-93
|
Notes to Condensed Financial Statements
|
F-94
|
|
|
Audited Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
F-108
|
Balance Sheet as of December 31, 2020 (as restated)
|
F-109
|
Statement of Operations for the period from February 11, 2020 to December 31, 2020 (as restated)
|
F-110
|
Statement of Changes in Stockholders’ Equity for the period from February 11, 2020 to December 31, 2020 (as restated)
|
F-111
|
Statement of Cash Flows for the period from February 11, 2020 to December 31, 2020 (as restated)
|
F-112
|
Notes to Financial Statements
|
F-113
|
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share
data)
(Unaudited)
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
52,527
|
|
|
$
|
1,124
|
|
Restricted cash
|
|
|
5,721
|
|
|
|
703
|
|
Deposits
|
|
|
6,574
|
|
|
|
6,412
|
|
Other current assets
|
|
|
5,084
|
|
|
|
6,200
|
|
Total current assets
|
|
|
69,906
|
|
|
|
14,439
|
|
Property and equipment, net
|
|
|
287,718
|
|
|
|
293,933
|
|
Other non-current assets
|
|
|
11,749
|
|
|
|
8,010
|
|
Total assets
|
|
$
|
369,373
|
|
|
$
|
316,382
|
|
Liabilities, redeemable preferred stock, and stockholders’ deficit
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
67,486
|
|
|
$
|
86,601
|
|
Accrued expenses and other current liabilities
|
|
|
59,721
|
|
|
|
52,382
|
|
Related party accrued interest
|
|
|
47,274
|
|
|
|
78,583
|
|
Accrued interest
|
|
|
50,776
|
|
|
|
39,707
|
|
Related party notes payable
|
|
|
207,755
|
|
|
|
299,403
|
|
Notes payable, current portion
|
|
|
297,454
|
|
|
|
182,151
|
|
Vendor payables in trust
|
|
|
109,574
|
|
|
|
110,224
|
|
Total current liabilities
|
|
|
840,040
|
|
|
|
849,051
|
|
Capital leases, less current portion
|
|
|
38,040
|
|
|
|
36,501
|
|
Other liability, less current portion
|
|
|
7,880
|
|
|
|
1,000
|
|
Notes payable, less current portion
|
|
|
36,172
|
|
|
|
9,168
|
|
Total liabilities
|
|
|
922,132
|
|
|
|
895,720
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Redeemable Preference Convertible Stock, $0.00001 par value; 470,588,235 shares authorized, issued, and outstanding; redemption amount of $800,000
|
|
|
724,823
|
|
|
|
724,823
|
|
Class A-1 Convertible Preferred Stock, $0.00001 par value; 87,617,555 shares authorized and 57,513,413 shares issued and outstanding as of June 30, 2021 and no shares authorized, issued or outstanding as of December 31, 2020
|
|
|
96,048
|
|
|
|
—
|
|
Class A-2 Convertible Preferred Stock, $0.00001 par value; 158,479,868 shares authorized and 19,546,600 shares issued and outstanding as of June 30, 2021 and no shares authorized, issued or outstanding as of December 31, 2020
|
|
|
38,311
|
|
|
|
—
|
|
Class B Convertible Preferred Stock, $0.00001 par value; 452,941,177 and 600,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 452,941,177 shares issued and outstanding; redemption amount of $1,106,988
|
|
|
697,643
|
|
|
|
697,643
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Class A Ordinary Stock, $0.00001 par value; 665,209,680 and 400,000,000 shares authorized; 64,224,007 and 41,234,448 shares issued and outstanding as of June 30, 2021, and December 31, 2020, respectively
|
|
|
—
|
|
|
|
—
|
|
Class B Ordinary Stock, $0.00001 par value; 180,000,000 shares authorized; 150,052,834 and 147,058,823 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
|
|
|
1
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
416,504
|
|
|
|
395,308
|
|
Accumulated other comprehensive loss
|
|
|
(6,650
|
)
|
|
|
(5,974
|
)
|
Accumulated deficit
|
|
|
(2,519,439
|
)
|
|
|
(2,391,139
|
)
|
Total stockholders’ deficit
|
|
|
(2,109,584
|
)
|
|
|
(2,001,804
|
)
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
|
$
|
369,373
|
|
|
$
|
316,382
|
|
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Operations
and Comprehensive Loss
(in thousands, except share and per share
data)
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
8,673
|
|
|
$
|
4,222
|
|
|
$
|
15,394
|
|
|
$
|
11,184
|
|
Sales and marketing
|
|
|
2,585
|
|
|
|
166
|
|
|
|
4,267
|
|
|
|
1,470
|
|
General and administrative
|
|
|
16,430
|
|
|
|
11,952
|
|
|
|
27,423
|
|
|
|
18,732
|
|
Total operating expenses
|
|
|
27,688
|
|
|
|
16,340
|
|
|
|
47,084
|
|
|
|
31,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(27,688
|
)
|
|
|
(16,340
|
)
|
|
|
(47,084
|
)
|
|
|
(31,386
|
)
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
|
(10,730
|
)
|
|
|
585
|
|
|
|
(35,912
|
)
|
|
|
8,662
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,735
|
)
|
|
|
—
|
|
Interest expense
|
|
|
(9,077
|
)
|
|
|
(7,281
|
)
|
|
|
(28,933
|
)
|
|
|
(15,672
|
)
|
Related party interest expense
|
|
|
(3,728
|
)
|
|
|
(8,388
|
)
|
|
|
(12,798
|
)
|
|
|
(16,650
|
)
|
Other expense, net
|
|
|
(1,552
|
)
|
|
|
(278
|
)
|
|
|
(1,835
|
)
|
|
|
(751
|
)
|
Loss before income taxes
|
|
|
(52,775
|
)
|
|
|
(31,702
|
)
|
|
|
(128,297
|
)
|
|
|
(55,797
|
)
|
Income tax provision
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
Net loss
|
|
$
|
(52,775
|
)
|
|
$
|
(31,702
|
)
|
|
$
|
(128,300
|
)
|
|
$
|
(55,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per Ordinary Stock – Class A and Class B – basic and diluted
|
|
$
|
(0.25
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(1.36
|
)
|
Weighted average Ordinary Stock outstanding – Class A and Class B – basic and diluted
|
|
|
215,453,875
|
|
|
|
40,909,813
|
|
|
|
213,329,158
|
|
|
|
40,906,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(52,775
|
)
|
|
$
|
(31,702
|
)
|
|
$
|
(128,300
|
)
|
|
$
|
(55,797
|
)
|
Change in foreign currency translation adjustment
|
|
|
(1,184
|
)
|
|
|
(44
|
)
|
|
|
(676
|
)
|
|
|
1,777
|
|
Total comprehensive loss
|
|
$
|
(53,959
|
)
|
|
$
|
(31,746
|
)
|
|
$
|
(128,976
|
)
|
|
$
|
(54,020
|
)
|
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Redeemable
Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share
data)
(Unaudited)
|
|
Redeemable
Convertible Preferred Stock
|
|
|
Ordinary
Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Preference
|
|
|
Class
B
|
|
|
Class
A-1
|
|
|
Class
A-2
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance
as of March 31, 2021
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
452,941,177
|
|
|
$
|
697,643
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
50,113,600
|
|
|
$
|
—
|
|
|
|
150,052,834
|
|
|
$
|
1
|
|
|
$
|
405,329
|
|
|
$
|
(5,466
|
)
|
|
$
|
(2,466,664
|
)
|
|
$
|
(2,066,800
|
)
|
Conversion
of related party notes payable to Class A-1 Convertible Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,513,413
|
|
|
|
96,048
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Conversion
of related party notes payable to Class A-2 Convertible Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,546,600
|
|
|
|
38,311
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
948
|
|
|
|
—
|
|
|
|
—
|
|
|
|
948
|
|
Exercise
of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,110,407
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,102
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,102
|
|
Issuance
of warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,125
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,125
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,184
|
)
|
|
|
—
|
|
|
|
(1,184
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(52,775
|
)
|
|
|
(52,775
|
)
|
Balance
as of June 30, 2021
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
452,941,177
|
|
|
$
|
697,643
|
|
|
|
57,513,413
|
|
|
$
|
96,048
|
|
|
|
19,546,600
|
|
|
$
|
38,311
|
|
|
|
64,224,007
|
|
|
$
|
—
|
|
|
|
150,052,834
|
|
|
$
|
1
|
|
|
$
|
416,504
|
|
|
$
|
(6,650
|
)
|
|
$
|
(2,519,439
|
)
|
|
$
|
(2,109,584
|
)
|
|
|
Redeemable
Convertible Preferred Stock
|
|
|
Ordinary
Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Preference
|
|
|
Class B
|
|
|
Class
A-1
|
|
|
Class
A-2
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance
as of December 31, 2020
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
452,941,177
|
|
|
$
|
697,643
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
41,234,448
|
|
|
$
|
—
|
|
|
|
147,058,823
|
|
|
$
|
1
|
|
|
$
|
395,308
|
|
|
$
|
(5,974
|
)
|
|
$
|
(2,391,139
|
)
|
|
$
|
(2,001,804
|
)
|
Conversion
of related party notes payable to Class A-1 Convertible Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,513,413
|
|
|
|
96,048
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Conversion
of related party notes payable to Class A-2 Convertible Preferred Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,546,600
|
|
|
|
38,311
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,468
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,468
|
|
Conversion
of The9 Conditional Obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
2,994,011
|
|
|
|
—
|
|
|
|
2,863
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,863
|
|
Exercise
of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,989,559
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,752
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,752
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(676
|
)
|
|
|
—
|
|
|
|
(676
|
)
|
Issuance
of warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,113
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,113
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(128,300
|
)
|
|
|
(128,300
|
)
|
Balance
as of June 30, 2021
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
452,941,177
|
|
|
$
|
697,643
|
|
|
|
57,513,413
|
|
|
$
|
96,048
|
|
|
|
19,546,600
|
|
|
$
|
38,311
|
|
|
|
64,224,007
|
|
|
$
|
—
|
|
|
|
150,052,834
|
|
|
$
|
1
|
|
|
$
|
416,504
|
|
|
$
|
(6,650
|
)
|
|
$
|
(2,519,439
|
)
|
|
$
|
(2,109,584
|
)
|
The accompanying notes are
an integral part of these Condensed Consolidated Financial Statements.
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Redeemable
Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share
data)
(Unaudited)
|
|
Redeemable
Preferred Stock
|
|
|
Ordinary
Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Preference
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance
as of March 31, 2020
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,882,964
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
159,474
|
|
|
$
|
(1,463
|
)
|
|
$
|
(2,268,149
|
)
|
|
$
|
(2,110,138
|
)
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,884
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,884
|
|
Exercise
of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,082
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
—
|
|
|
|
(44
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,702
|
)
|
|
|
(31,702
|
)
|
Balance
as of June 30, 2020
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,915,046
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
162,363
|
|
|
$
|
(1,507
|
)
|
|
$
|
(2,299,851
|
)
|
|
$
|
(2,138,995
|
)
|
|
|
Redeemable
Preferred Stock
|
|
|
Ordinary
Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Preference
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance
as of December 31, 2019
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,879,124
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
158,704
|
|
|
$
|
(3,284
|
)
|
|
$
|
(2,244,054
|
)
|
|
$
|
(2,088,634
|
)
|
Stock-based
compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,651
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,651
|
|
Exercise
of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35,922
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,777
|
|
|
|
—
|
|
|
|
1,777
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(55,797
|
)
|
|
|
(55,797
|
)
|
Balance
as of June 30, 2020
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,915,046
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
162,363
|
|
|
$
|
(1,507
|
)
|
|
$
|
(2,299,851
|
)
|
|
$
|
(2,138,995
|
)
|
The accompanying notes are
an integral part of these Condensed Consolidated Financial Statements.
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
Six Months
Ended
June 30,
2021
|
|
|
Six Months
Ended
June 30,
2020
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(128,300
|
)
|
|
$
|
(55,797
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
2,047
|
|
|
|
2,104
|
|
Stock-based compensation
|
|
|
3,468
|
|
|
|
3,651
|
|
Change in fair value measurement of related party notes payable, notes payable, and warrant liabilities
|
|
|
35,912
|
|
|
|
(8,662
|
)
|
Loss on disposal of property and equipment
|
|
|
647
|
|
|
|
—
|
|
Loss on cancellation of lease
|
|
|
—
|
|
|
|
206
|
|
Gain on foreign exchange
|
|
|
(1,823
|
)
|
|
|
(775
|
)
|
Gain on forgiveness of accounts payable and deposits, net
|
|
|
(862
|
)
|
|
|
—
|
|
Non-cash interest expense
|
|
|
37,938
|
|
|
|
32,286
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
1,735
|
|
|
|
—
|
|
Loss on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net
|
|
|
1,309
|
|
|
|
314
|
|
Transfer of accounts payable to vendor payables in trust
|
|
|
—
|
|
|
|
(134
|
)
|
Gain on forgiveness of vendor payables in trust
|
|
|
(1,731
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Deposits and other current assets
|
|
|
733
|
|
|
|
(1,969
|
)
|
Other non-current assets
|
|
|
312
|
|
|
|
(225
|
)
|
Accounts payable
|
|
|
(15,206
|
)
|
|
|
6,020
|
|
Deferred rent, accrued expenses, and other current liabilities
|
|
|
11,510
|
|
|
|
3,188
|
|
Net cash used in operating activities
|
|
|
(52,311
|
)
|
|
|
(19,793
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds from notes receivable
|
|
|
—
|
|
|
|
3,600
|
|
Payments for equipment
|
|
|
(1,386
|
)
|
|
|
(100
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(1,386
|
)
|
|
|
3,500
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from related party notes payable
|
|
|
200
|
|
|
|
8,735
|
|
Proceeds from notes payable
|
|
|
111,740
|
|
|
|
9,468
|
|
Payments of related party notes payable
|
|
|
(1,528
|
)
|
|
|
—
|
|
Payments of capital lease obligations
|
|
|
(2,212
|
)
|
|
|
(1,531
|
)
|
Proceeds from exercise of stock options
|
|
|
7,751
|
|
|
|
8
|
|
Payments of notes payable issuance costs
|
|
|
(3,355
|
)
|
|
|
(123
|
)
|
Payments of Class A-1 and A-2 Convertible Preferred Stock issuance costs
|
|
|
(1,071
|
)
|
|
|
—
|
|
Transfer of accounts payable to vendor payables in trust
|
|
|
—
|
|
|
|
134
|
|
Net cash provided by financing activities
|
|
|
111,525
|
|
|
|
16,691
|
|
Effect of exchange rate changes on cash and restricted cash
|
|
|
(1,407
|
)
|
|
|
143
|
|
Net increase in cash and restricted cash
|
|
|
56,421
|
|
|
|
541
|
|
Cash and restricted cash, beginning of period
|
|
|
1,827
|
|
|
|
3,354
|
|
Cash and restricted cash, end of period
|
|
$
|
58,248
|
|
|
$
|
3,895
|
|
FF Intelligent Mobility Global Holdings Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
The following table provides
a reconciliation of cash and restricted cash reported within the Condensed Consolidated Balance Sheets that aggregate to the total of
the same such amounts shown in the Condensed Consolidated Statements of Cash Flows:
|
|
Six Months
Ended
June 30,
2021
|
|
|
Six Months
Ended
June 30,
2020
|
|
Cash
|
|
$
|
1,124
|
|
|
$
|
2,221
|
|
Restricted cash
|
|
|
703
|
|
|
|
1,133
|
|
Total cash and restricted cash, beginning of period
|
|
$
|
1,827
|
|
|
$
|
3,354
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
52,527
|
|
|
$
|
3,241
|
|
Restricted cash
|
|
|
5,721
|
|
|
|
654
|
|
Total cash and restricted cash, end of period
|
|
$
|
58,248
|
|
|
$
|
3,895
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash investing and financing activities
|
|
|
|
|
|
|
|
|
Conversion of customer deposit to notes payable
|
|
$
|
—
|
|
|
$
|
11,635
|
|
Conversion of The9 Conditional Obligation to equity
|
|
|
2,863
|
|
|
|
—
|
|
Conversion of related party notes payable and related party accrued interest to Class A-1 and A-2 Convertible Preferred Stock
|
|
|
134,359
|
|
|
|
—
|
|
Acquisitions of property and equipment included in accounts payable and accrued liabilities
|
|
|
939
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
6,584
|
|
|
$
|
14
|
|
The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
1.
|
Nature of Business and Organization
and Basis of Presentation
|
Nature of Business and Organization
FF Intelligent Mobility Global
Holdings Ltd. (the “Company” or “FF”) is an exempted company formed under the laws of the Cayman Islands founded
in 2014 and is headquartered in Los Angeles, California. The Company operates in a single operating segment and designs and engineers
next-generation, smart, electric, connected vehicles. The Company expects to manufacture vehicles at its production facility in Hanford,
California and has additional engineering, sales, and operations capabilities in China. The Company has created innovations in technology,
products, and a user-centered business model that are being incorporated into its planned electric vehicle platform. The Company’s
operations are conducted through its wholly-owned subsidiaries FF Inc. and FF Hong Kong Holding Ltd.
The Company changed its name
from Smart King Ltd. to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020.
Principles of Consolidation and Basis of Presentation
The Company consolidates
financial statements of all entities in which the Company has a controlling financial interest, including the accounts of any Variable
Interest Entity (“VIE”) in which the Company has a controlling financial interest and for which it is the primary beneficiary.
All intercompany transactions and balances have been eliminated upon consolidation.
The accompanying Condensed
Consolidated Financial Statements have been prepared in conformity with generally accepted accounting principles in the United States
(“GAAP”) for interim financial information and are unaudited.
These unaudited Condensed
Consolidated Financial Statements do not include all disclosures that are normally included in annual audited financial statements prepared
in accordance with GAAP and should be read in conjunction with the Company’s audited Consolidated Financial Statements for the year
ended December 31, 2020. Accordingly, the Condensed Consolidated Balance Sheet as of December 31, 2020, has been derived from the
Company’s annual audited Consolidated Financial Statements.
In the opinion of the Company,
the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of its financial position as of June 30, 2021 and December 31, 2020, its results of operations
for the three and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020. The
accounting policies used in the preparation of these Condensed Consolidated Financial Statements are the same as those disclosed in the
audited Consolidated Financial Statements and related notes for the year ended December 31, 2020, included in Faraday Future Intelligent
Electric Inc.’s (“FFIE”) Form S-4 filed on June 23, 2021, definitive proxy statement/consent solicitation statement/prospectus
(the “Proxy/Prospectus”).
Use of Estimates
The preparation of financial
statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment,
that the Company believes are most dependent on the application of estimates and assumptions. On an ongoing basis, management evaluates
its estimates, including those related to: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities;
(iii) recognition and disclosure of contingent liabilities, including litigation reserves; (iv) fair value of related party notes payable
and notes payable; (v) estimated useful lives of long-lived assets; and (vi) fair value of options granted to employees and non-employees
and warrants. Such estimates often require the selection of appropriate valuation methodologies and financial models and may involve significant
judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions,
financial inputs, or circumstances. Given the global economic climate, unpredictable nature, and unknown duration of the COVID-19 pandemic,
estimates are subject to additional volatility.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
As of the date of the Company’s
Condensed Consolidated Financial Statements, the Company is not aware of any specific event or circumstance that would require it to update
its estimates or judgments or to revise the carrying value of its assets or liabilities. However, these estimates and judgments may change
as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s consolidated
financial statements in future periods. While the Company considered the effects of COVID-19 on its estimates and assumptions, due to
the level of uncertainty regarding the economic and operational impacts of COVID-19 on the Company’s business, there may be other
judgments and assumptions that the Company has not considered. Such judgments and assumptions could result in a meaningful impact on the
Company’s financial statements in future periods. Actual results could differ from those estimates and any such differences may
have a material impact on the Company’s Condensed Consolidated Financial Statements.
Merger Agreement
On January 27, 2021, Property
Solutions Acquisition Corp. (“PSAC”), a Delaware corporation, entered into an Agreement and Plan of Merger (“Merger
Agreement”) by and among PSAC, PSAC Merger Sub, Ltd., an exempted company with limited liability incorporated under the laws of
the Cayman Islands and wholly-owned subsidiary of PSAC (“Merger Sub”), and the Company.
Pursuant to the Merger Agreement,
Merger Sub merged with and into the Company, with the Company surviving the merger (the “Business Combination” and, together
with the other transactions contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, the
Company became a wholly-owned subsidiary of PSAC, with the stockholders of the Company becoming stockholders of PSAC, which was renamed
Faraday Future Intelligent Electric Inc. (“New FF”). On July 21, 2021 (the “Closing Date”), PSAC consummated the
previously announced Business Combination with the Company and changed its name from Property Solutions Acquisition Corp. to Faraday Future
Intelligent Electric Inc. FFIE’s Common Stock trades on The Nasdaq Global Select Market under the ticker symbol FFIE. Upon closing
the Business Combination, the Company raised $229,653 in proceeds from PSAC, net of redemptions of $206.
The Company has incurred certain
merger-related costs in connection with the Business Combination, primarily consisting of legal costs and other professional services.
The Company capitalized $1,736 and $4,600 of merger-related costs for the three and six months ended June 30, 2021, respectively.
The Company has capitalized a total of $7,865 of merger-related costs, which is included in Other Non-current Assets on the Condensed
Consolidated Balance Sheets as of June 30, 2021.
On the Closing Date, the outstanding
shares of the Company and the majority of the outstanding convertible related party notes payable and notes payable converted into shares
of FFIE Class A Common Stock and, for FF Top Holdings LLC (“FF Top”), shares of FFIE Class B Common Stock using an exchange
ratio of 0.14130 (the “Exchange Ratio”). Additionally, each of the Company’s outstanding options or warrants immediately
prior to the closing of the Business Combination remained outstanding and converted into the right to purchase FFIE Class A Common Stock
equal to the number of Ordinary Stock of the Company 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. In addition, in conjunction
with the closing of the Business Combination, the outstanding warrants issued to a US-based investment firm, in conjunction with notes
issued on various dates, were adjusted to increase the shares allowed to be purchased from 10,198,958 shares of FFIE Class A Common Stock
to 19,016,865 shares of FFIE Class A Common Stock in accordance with an anti-dilution provision included in the warrant agreements.
Concurrently with the execution
of the Merger Agreement, the Company entered into separate subscription agreements with a number of investors (the “PIPE Investors”)
pursuant to which, on the Closing Date, the PIPE Investors purchased an aggregate of 76,140,000 FFIE Class A Common Stock, for a purchase
price of $10 per share with an aggregate purchase price of $761,400 in a private placement (the “PIPE Financing”).
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
2.
|
Liquidity and Capital Resources
|
The Company has evaluated
whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability
to continue as a going concern within one year after the date that the unaudited Condensed Consolidated Financial Statements were available
to be issued.
Since inception, the Company
has incurred cumulative losses from operations, negative cash flows from operating activities and has an accumulated deficit of $2,519,439
as of June 30, 2021. The Company expects to continue to generate significant operating losses for the foreseeable future. The Company
has funded its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related
party notes payable and notes payable (Note 8. Related Party Notes Payable and Note 9. Notes Payable), and the sale of Preferred
and Ordinary Stock (Note 12. Preferred and Ordinary Stock). The majority of related party notes payable, notes payable,
and equity have been funded by entities controlled or previously controlled by the Company’s founder and former CEO. Since its formation,
the Company has devoted substantial effort and capital resources to strategic planning, engineering, design, and development of its planned
electric vehicle platform, development of initial electric vehicle models, and capital raising. The aforementioned efforts and capital
resources have positioned the Company for a commercial launch of its first passenger vehicle, the FF 91, which is anticipated during July
2022.
The Company’s audit
report for the year ended December 31, 2020 from the Company’s independent registered public accounting firm includes an explanatory
paragraph stating that the Company’s recurring losses from operations and cash outflows from operating activities raise substantial
doubt about FF’s ability to continue as a going concern. However, after the closing of the Business Combination and the PIPE Financing
on July 21, 2021, the Company received cash aggregating $991,053 and made payments, through the date that the unaudited Condensed
Consolidated Financial Statements were available to be issued, of (i) $28,355 to vendors with payables in the Vendor Trust; (ii) $31,820
to related party notes payable holders and $57,691 to notes payable holders for principal and accrued interest; (iii) $9,592 to active
and former employees; and (iv) $17,466 to other vendors. Management expects that the net proceeds from the Business Combination along
with cash balances held by the Company prior to the Closing Date will be sufficient to complete the final stages of the development and
production of the FF 91 electric vehicle. Achievement of the Company’s operating plan as well as its ability to maintain an adequate
level of liquidity are subject to various risks associated with the Company’s ability to continue to successfully close additional
sources of funding and/or refinance existing notes payable arrangements. The Company’s forecasts and projections of working capital
reflect significant judgment and estimates for which there are inherent risks and uncertainties.
There can be no assurance
that the Company will be successful in achieving its strategic plans, that the Company’s future capital raises will be sufficient
to support its ongoing operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at
all. If events or circumstances occur such that the Company does not meet its strategic plans, the Company will be required to reduce
discretionary spending, alter or scale back vehicle development programs, be unable to develop new or enhanced production methods, or
be unable to fund capital expenditures. Any such events would have a material adverse effect on the Company’s financial position,
results of operations, cash flows, and ability to achieve its intended business objectives.
As of June 30, 2021, the
Company was in default on related party notes payable and notes payable with principal amounts of $147,093 and $40,935, respectively.
Immediately prior to the Business Combination, the Company converted (i) related party notes payable and notes payables with aggregated
principal amounts of $130,479 and $56,000 respectively, into 119,191,029 shares of Class A-2 Preferred Stock; (ii) notes payable with
an aggregate principal balance of $17,600 into 15,792,771 shares of Class A-1 Preferred Stock; and (iii) notes payable with a principal
balance of $1,500 into 1,281,976 shares of Class A-3 Preferred Stock. As part of the close of the Business Combination and through the
date that the unaudited Condensed Consolidated Financial Statements were available to be issued, the Company converted into equity or
paid in cash related party notes payable with aggregated principal amounts of $60,104 and notes payables with principal amounts aggregating
$116,518, including the aforementioned amounts in default at June 30, 2021. As such, no adverse action was taken or is expected to be
taken by the respective note holders. See Note 15. Subsequent Events for more information related to the Business Combination.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
COVID-19 Pandemic
The World Health Organization
declared a global emergency on March 11, 2020, with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There
are many uncertainties regarding the current global COVID-19 pandemic. The Company is closely monitoring the impact of the pandemic on
all aspects of its business, including the impact on its employees, suppliers, vendors, and business partners.
The pandemic has resulted
in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines,
stay-at-home or shelter-in-place orders, and business shutdowns. For example, the Company’s employees based in California have been
subject to stay-at-home orders from state and local governments. These measures may adversely impact the Company’s employees and
operations and the operations of suppliers and business partners and could negatively impact the construction schedule of the Company’s
manufacturing facility and the production schedule of the FF 91 electric vehicle. In addition, various aspects of the Company’s
business and manufacturing facility cannot be conducted remotely. The extent of the continuing impact of the COVID-19 pandemic on the
Company’s operational and financial performance is uncertain and will depend on many factors outside the Company’s control,
including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness
of vaccines; the imposition of protective public safety measures; and the impact of the pandemic on the global economy and demand for
consumer products. Future measures taken by government authorities in response the COVID-19 pandemic could adversely affect the Company’s
construction and manufacturing plans, sales and marketing activities, and business operations.
At the date these financial
statements were available to be issued, the Company does not anticipate any material impairments as a result of COVID-19. The Company
will continue to evaluate the impacts of COVID-19 on an ongoing basis.
|
3.
|
Variable Interest Entities and
Joint Ventures
|
The LeSee Arrangement
In November 2017, as
part of a broader corporate reorganization and to facilitate third-party investment, the Company incorporated its top-level holding company,
Smart King, Ltd., in the Cayman Islands to enable effective control over the Company’s Chinese operating entity, FF Hong Kong
Holding Ltd., and its subsidiaries without direct equity ownership. The Company entered into a series of contractual arrangements (“VIE
contractual arrangements”) with LeSEE and LeSEE Zhile Technology Co., Ltd. (“LeSEE Zhile”), a related party of the Company,
to enable the Company to exercise effective control over LeSEE and its subsidiaries, to receive substantially all of the economic benefits
of such entities, and to have an exclusive option to purchase all or part of the equity interests in LeSEE.
On August 5, 2020, an
equity transfer agreement (the “Equity Transfer Agreement”) was entered into between the Company and LeSEE Zhile, pursuant
to which, LeSEE Zhile transferred 48% equity of LeSEE to the Company for no consideration. After the transfer, LeSEE Zhile owned 1% of
LeSEE and the Company owned 99% of LeSEE, making LeSEE a majority-owned subsidiary of the Company and no longer a VIE, since LeSEE is
consolidated through majority voting and equity interests.
The The9 Arrangement
On March 24, 2019, the
Company entered into a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”). Pursuant to the JVA, the Company
and The9 agreed to establish an equity joint venture in Hong Kong, which would in turn establish a wholly-owned subsidiary in China,
intended to engage in the business of manufacturing, marketing, selling, and distributing the planned Faraday Future Icon V9 model electric
vehicle in China. The Company and The9 would each be 50% owners of the joint venture. The9 made a $5,000 non-refundable initial deposit
(“The9 Conditional Obligation”) to the Company to participate in the joint venture. The9 has the right to convert the initial
deposit into various classes of stock in the Company. For accounting purposes, the deposit is a financial instrument that embodies a conditional
obligation that the issuer may settle by issuing a variable number of shares. The9 Conditional Obligation was measured at fair value,
was remeasured at each reporting period, and represents a Level 3 financial instrument under the fair value hierarchy. (See Note 7. Fair
Value of Financial Instruments). The fair value of The9 Conditional Obligation was $1,128 as of December 31, 2020 and is included
in Current Liabilities on the unaudited Condensed Consolidated Balance Sheets. On November 22, 2020, the parties entered into an agreement to convert the initial deposit into
Class B Ordinary Stock in the Company. Neither the Company nor The9 have made contributions to the joint venture as of June 30, 2021
and it has yet to commence business activities. The9 Conditional Obligation was converted into 2,944,011 shares of Class B Ordinary Stock
on February 23, 2021.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The Tier-1 Chinese City Arrangement
In September 2020, the Company
entered into a non-binding memorandum of understanding with a tier-1 city in China, whose affiliated entities are subscribers in the PIPE
Financing, pursuant to which the Company established a joint venture entity (the “JV”) in China. The Company operates and
controls the JV. The strategic partnership is subject to a binding definitive agreement and certain related transactions and agreement
by the parties, under which the Company will receive capital of no less than $500,000 through the closing of the Merger Agreement. In
December 2020, the JV was established as an entity wholly-owned by the Company, which will primarily engage in the activities contemplated
in the memorandum of understanding. The tier-1 Chinese city will be allocated its respective equity interest in the JV upon contribution
of assets to the JV. There has been no activity related to, or contributions of assets into, the JV by either party as of June 30,
2021.
The Geely Arrangement
In December 2020, the Company
entered into a non-binding memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), who
is also a subscriber in the PIPE Financing, pursuant to which the parties contemplate a strategic cooperation in various areas including
engineering, technology, supply chain, and contract manufacturing (“Geely JV”).
In January 2021, the Company
and Geely Holding entered into a cooperation framework agreement and a license agreement that set forth the major commercial understanding
of the proposed cooperation among the parties in the areas of potential investment into the Geely JV, engineering, technology, and contract
manufacturing support. The foregoing framework agreement and the license agreement may be terminated if the parties fail to enter into
the joint venture definitive agreement or to close the Merger Agreement and related transactions.
|
4.
|
New Accounting Pronouncements
|
Recently Adopted Accounting Pronouncements
In August 2018, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles
— Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which aligns the requirements
for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software
license). The amendments in this update were effective for fiscal periods beginning after December 15, 2020. The Company adopted
ASU 2018-15 as of January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial position,
results of operations, or cash flows.
In December 2019, the
FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This
amendment was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing
intra-period allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain
areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. ASU 2019-12
is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022.
The Company early adopted the standard as of January 1, 2021. The adoption did not have a material effect on the Company’s financial
position, results of operations, or cash flows.
Recently Issued Accounting Pronouncements Not
Yet Adopted
In February 2016, the
FASB issued ASU 2016-02, Leases (Topic 842) (“Topic 842”), which outlines a comprehensive lease accounting model that
supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets
for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements
of lease arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) - Targeted Improvements, which provides
the option of an additional transition method that allows entities to initially apply the new lease guidance at the adoption date and
recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB
issued ASU No 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) - Effective Dates for Certain Entities,
that delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021 for private companies. It also changed
the definition of a lease and expands the disclosure requirements of lease arrangements. The Company is expected to be an emerging growth
company and will delay adopting Topic 842 until the fiscal year ending December 31, 2022. The Company is currently evaluating the impact
the adoption of this standard will have on its consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
In August 2020, the FASB
issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).
The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt —
Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion
features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial
premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The
convertible debt instruments will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments
to the earnings per share guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use
of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions
to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative
accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is
effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. Adoption of the ASU can either
be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact the adoption of this standard
will have on its consolidated financial statements.
|
5.
|
Property and Equipment, Net
|
Property and equipment, net, consists of the following
as of the following dates:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Land
|
|
$
|
13,043
|
|
|
$
|
13,043
|
|
Buildings
|
|
|
21,899
|
|
|
|
21,899
|
|
Building improvements
|
|
|
8,940
|
|
|
|
8,940
|
|
Computer hardware
|
|
|
4,058
|
|
|
|
4,058
|
|
Tooling, machinery, and equipment
|
|
|
5,475
|
|
|
|
5,451
|
|
Vehicles
|
|
|
583
|
|
|
|
583
|
|
Computer software
|
|
|
7,095
|
|
|
|
7,095
|
|
Leasehold improvements
|
|
|
298
|
|
|
|
298
|
|
Construction in process
|
|
|
246,817
|
|
|
|
251,633
|
|
Less: Accumulated depreciation
|
|
|
(20,490
|
)
|
|
|
(19,067
|
)
|
Total property and equipment, net
|
|
$
|
287,718
|
|
|
$
|
293,933
|
|
For the six months ended
June 30, 2021, the Company entered into an agreement to finalize the cost of certain construction in process assets. As a result of the
agreement, the Company reduced the cost of these assets in construction in process as well as the corresponding liability within Accounts
Payable and Accrued Expenses by $5,744 on the Condensed Consolidated Balance Sheet as of June 30, 2021.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
6.
|
Accrued Expenses and Other Current
Liabilities
|
Accrued expenses and other current liabilities
consist of the following as of the following dates:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
|
|
Accrued payroll and benefits
|
|
$
|
27,039
|
|
|
$
|
19,180
|
|
Accrued legal contingencies
|
|
|
12,333
|
|
|
|
5,025
|
|
Capital lease, current portion
|
|
|
1,926
|
|
|
|
4,396
|
|
Deferred rent, current portion
|
|
|
—
|
|
|
|
3
|
|
Tooling, machinery, and equipment received not invoiced
|
|
|
795
|
|
|
|
509
|
|
Deposits from customers
|
|
|
3,667
|
|
|
|
3,523
|
|
Due to affiliates
|
|
|
7,658
|
|
|
|
5,123
|
|
Other current liabilities
|
|
|
6,303
|
|
|
|
14,623
|
|
Total accrued expenses and other current liabilities
|
|
$
|
59,721
|
|
|
$
|
52,382
|
|
|
7.
|
Fair Value of Financial Instruments
|
Fair Value Measurements
The Company applies the provisions
of ASC 820, Fair Value Measurement, which defines a single authoritative definition of fair value, sets out a framework for measuring
fair value and expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets
and liabilities as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies
that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard
establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
Level 1
|
Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds.
|
|
|
|
|
Level 2
|
Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. Government and agency debt securities and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds.
|
|
|
|
|
Level 3
|
Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models or similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The Company has elected
to apply the fair value option to certain related party notes payable and notes payable with conversion features as discussed in Note
8. Related Party Notes Payable and Note 9. Notes Payable.
Related Party Notes Payable and Notes Payable
at Fair Value
The Company has elected to
measure certain related party notes payable and notes payable at fair value issued under the Notes Purchase Agreement, as amended (“NPA,
as amended”) because they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (See
Note 8. Related Party Notes Payable and Note 9. Notes Payable). The Company employed the yield method to value the related
party notes payable and notes payable. This valuation method uses a discounted cash flow analysis, estimating the expected cash flows
for the debt instrument in different scenarios and then discounting them at the market yield. The significant unobservable input used
in the fair value measurement is the market yield. The market yield is determined using external market yield data, including yields exhibited
by publicly traded bonds by S&P credit rating as well as the borrowing rates of guideline public companies. The yield is affected
by the market movements in credit spreads and bond yields. In general, increases in the yield would decrease the fair value of the liability,
and conversely, decreases in the yield would increase the fair value of the liability.
The fair value adjustments
related to related party notes payables and notes payables were recorded in Change in Fair Value Measurement of Related Party Notes Payable
and Notes Payable, and Warrant Liabilities on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
Warrants
In conjunction with notes
payable agreements entered into with Ares Capital Corporation (“Ares”) on March 1, 2021, the Company agreed to issue warrants
to purchase a variable number of FFIE shares (“Ares Warrants”). The Ares Warrants meet the definition of derivative, since
the Ares Warrants are not indexed to the entity’s own equity and therefore do not meet the scope exception in ASC 815. The Company
records any changes in fair value of the warrant liability on the unaudited Condensed Consolidated Statements of Operations and Comprehensive
Loss. The Company initially recorded the warrant liability at its fair value of $5,000, with any difference between the proceeds received
and the initial fair values of the debt and warrants recorded in Interest Expense. As of June 30, 2021, the fair value of the warrants
was $7,880. The warrant liability is included in Other Liability, Less Current Portion on the unaudited Condensed Consolidated Balance
Sheets as of June 30, 2021, and the fair value adjustment related to the warrants was recorded in Change in Fair Value Measurement
of Related Party Notes Payable, Notes Payable, and Warrant Liabilities in the unaudited Condensed Consolidated Statements of Operations
and Comprehensive Loss (see Note 9. Notes Payable).
The Company used the Black-Scholes
option pricing model to value the Ares Warrants. The Black-Scholes model requires the use of several assumptions including, the exercise
price of the warrant, the term over which the warrants can be exercised, the risk-free rate, the stock price, and the volatility of the
underlying stock price. Additionally, upon their issuance, the Ares Warrants were valued under two scenarios using the Black-Scholes option
pricing model, one with an 80 percent probability that the Business Combination would occur and a second with a 20 percent probability
that the Business Combination would not occur. As of June 30, 2021, the probability of close of the merger increased to 95%. Fair value
measurements associated with the warrant liabilities, the related party notes payable, and notes payable represent Level 3 valuations
under the fair value hierarchy.
In conjunction with additional
notes issued under the NPA, as amended, (see Note 9. Notes Payable) on various dates in January and March 2021, the Company issued
warrants to purchase an aggregate of 2,437,454 shares of Class A Ordinary Stock of the Company. The fair value of the warrants was
recorded in equity because the warrants meet the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s
own equity. The Company estimated the fair value of the warrants to be $1,988 which is included in Additional Paid-in Capital (“APIC”)
on the unaudited Condensed Consolidated Balance Sheets as of June 30, 2021.
In conjunction with the issuance
of notes payable to a US-based investment firm on June 9, 2021, (see Note 9. Notes Payable) the Company issued warrants to
purchase up to 5,831,357 of the Company’s Class A Ordinary Stock for $2.5723 per share (“Exercise Price”) on or before
June 9, 2028. Upon the occurrence of: (i) a merger of the Company; (ii) a sale of substantially all of the Company’s assets;
(iii) a change in control; (iv) a reclassification, reorganization or recapitalization of the Ordinary Stock; or (v) the closing of the
Business Combination (collectively, “Fundamental Transaction”), the warrants shall be exercisable within 15 days and the Exercise
Price of the warrants shall be adjusted to equal the lower of: (i) $2.5723 per share; (ii) the pre-money valuation ascribed to the Company
in connection with the Fundamental Transaction divided by the pro-forma fully diluted capitalization of the Company; and (iii) the lowest
effective net price per share of Class A Ordinary Stock paid for by any third party at the time of, or in connection with, the Fundamental
Transaction. The Company determined the warrants are indexed to the Company’s equity and, as such, meets the scope exception in
accordance with ASC 815. The Company estimated the fair value of the warrants to be $5,125, which is included in APIC on the unaudited
Condensed Consolidated Balance Sheets as of June 30, 2021.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The Company employed the
Black-Scholes valuation model to value the June 9, 2021 warrants. The Black-Scholes model requires the use of several assumptions including
the warrant exercise price, the term of the warrants, the risk-free rate, the stock price, and the volatility of the underlying stock
price.
The significant assumptions
used in the valuations of the June 9, 2021 notes payable and warrants were the probability of close of the Business Combination and the
weight assigned to the PSAC’s Class A Common Shares and the Company’s Class A Ordinary Shares, whereas as of the issuance
date and June 30, 2021, the probability scenarios were 80 percent and 60 percent versus 95 percent and 75 percent, respectively. Management
has determined that progress made towards the close of the Business Combination, mainly PSAC’s Form S-4 being declared effective
on June 24, 2021, contributed to additional certainty with regards to the close.
Fair value measurements associated
with the warrant liabilities, the related party notes payable, and notes payable represent Level 3 valuations under the fair value hierarchy.
Recurring Fair Value Measurements
Financial assets and financial
liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The
following tables present financial assets and liabilities remeasured on a recurring basis by level within the fair value hierarchy:
|
|
June 30, 2021
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Related party notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,769
|
|
Notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
213,504
|
|
Warrant liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
7,880
|
|
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Related party notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,627
|
|
Notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
71,064
|
|
The9 Conditional Obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,128
|
|
The carrying amounts of the
Company’s financial assets and liabilities, including cash, restricted cash, deposits, and accounts payable approximate fair value
because of their short-term nature or contractually defined value.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The following table summarizes the activity of
the Level 3 fair value measurements:
|
|
Related
Party Notes
Payable at
Fair Value
|
|
|
Notes
Payable at
Fair Value
|
|
|
The9
Conditional
Obligation
|
|
|
Warrant
Liabilities
|
|
Balance as of December 31, 2020
|
|
$
|
21,627
|
|
|
$
|
71,064
|
|
|
$
|
1,128
|
|
|
$
|
—
|
|
Proceeds, net of original issuance discount
|
|
|
—
|
|
|
|
111,641
|
|
|
|
—
|
|
|
|
—
|
|
Consent fees
|
|
|
—
|
|
|
|
1,334
|
|
|
|
—
|
|
|
|
—
|
|
Original issue discount (1)
|
|
|
—
|
|
|
|
9,060
|
|
|
|
—
|
|
|
|
—
|
|
Issue costs paid by lender
|
|
|
—
|
|
|
|
1,900
|
|
|
|
—
|
|
|
|
—
|
|
Conversion to equity
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,863
|
)
|
|
|
—
|
|
Proceeds allocated to warrants
|
|
|
—
|
|
|
|
(5,125
|
)
|
|
|
—
|
|
|
|
—
|
|
Recognition of warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
Changes in fair value
|
|
|
142
|
|
|
|
23,630
|
|
|
|
1,735
|
|
|
|
2,880
|
|
Balance as of June 30, 2021
|
|
$
|
21,769
|
|
|
$
|
213,504
|
|
|
$
|
—
|
|
|
$
|
7,880
|
|
|
(1)
|
Included in Change in Fair Value
Measurement of Related Party Notes Payable, Notes Payable, and Warrant Liabilities on the Condensed Consolidated Statements of Operations
and Comprehensive Loss.
|
|
8.
|
Related Party Notes Payable
|
The Company has been significantly
funded by notes payable from related parties. These related parties include employees as well as affiliates and other companies controlled
or previously controlled by the Company’s founder and former CEO.
Related party notes payable consists of the following
as of June 30, 2021:
Note Name
|
|
Contractual
Maturity
Date
|
|
Contractual
Interest
Rates
|
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
Net
Carrying
Value
|
|
|
Interest
Expense for the Three Months
Ended
June 30,
2021
|
|
|
Interest
Expense for the
Six Months
Ended
June 30,
2021
|
|
Related party note(1)
|
|
June 30, 2021
|
|
|
12.00
|
%
|
|
$
|
149,674
|
|
|
$
|
—
|
|
|
$
|
149,674
|
|
|
|
1,369
|
|
|
$
|
8,486
|
|
Related party note(3)
|
|
Due on Demand
|
|
|
15.00
|
%
|
|
|
10,000
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
392
|
|
|
|
779
|
|
Related party notes – NPA tranche(2)
|
|
October 9, 2021
|
|
|
10.00
|
%
|
|
|
18,112
|
|
|
|
3,657
|
|
|
|
21,769
|
|
|
|
457
|
|
|
|
910
|
|
Related party notes –China
|
|
Due on Demand
|
|
|
18.00
|
%
|
|
|
9,288
|
|
|
|
—
|
|
|
|
9,288
|
|
|
|
817
|
|
|
|
1,586
|
|
Related party notes – China various other
|
|
Due on Demand
|
|
|
0% coupon, 10.00% imputed
|
|
|
|
5,002
|
|
|
|
—
|
|
|
|
5,002
|
|
|
|
69
|
|
|
|
183
|
|
Related party notes – China various other(3)
|
|
Due on Demand
|
|
|
8.99
|
%
|
|
|
1,410
|
|
|
|
—
|
|
|
|
1,410
|
|
|
|
32
|
|
|
|
63
|
|
Related party notes – Other(3)
|
|
June 30, 2021
|
|
|
6.99
|
%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
4,160
|
|
|
|
72
|
|
|
|
144
|
|
Related party notes – Other(3)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
6,452
|
|
|
|
—
|
|
|
|
6,452
|
|
|
|
129
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
$
|
204,098
|
|
|
$
|
3,657
|
|
|
$
|
207,755
|
|
|
$
|
3,337
|
|
|
$
|
12,407
|
|
|
(1)
|
On April 9, 2021, the Company
signed agreements with certain of its related party notes holders to convert their notes with principal amounts of $194,810 and accrued
interest of $71,764 into 57,513,413 shares of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and 87,003,560
shares of A-2 Preferred Stock with a conversion price of $1.96 per share. Under the agreements, the notes ceased to accrue interest on
March 31, 2021. On May 13, 2021, related party notes payable with aggregating principal amounts of $90,869 and accrued interest
of $43,490 was converted into 57,513,413 shares of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and
19,546,600 shares of Class A-2 Convertible Preferred Stock with a conversion price of $1.96 per share. The outstanding principal balance
subsequent to the conversion was $149,674 as of June 30, 2021. The Class A-1 and A-2 Preferred Stock will convert into FFIE Class A Common
Stock based on the Exchange Ratio. As of June 30, 2021, $125,071 of the related party notes payable were in default.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
(2)
|
On April 29, 2019, the Company executed the Note Purchase
Agreement (“NPA”) with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral
agent. The aggregate principal amount that may be issued under the NPA was $200,000. Upon both a Company Preferred Stock offering and
prepayment notice by the holder, or on the maturity date of the notes payable, the holder may elect to convert all of the outstanding
principal and accrued interest of the notes payable, plus a 20.00% premium, into shares of Preferred Stock in the offering. The Company
elected the fair value option for these notes payable. (See Note 7. Fair Value of Financial Instruments.)
|
|
(3)
|
As of June 30, 2021, the Company
was in default on twelve of its related party notes with a principal value of $22,022. The Company was in compliance with all covenants
under its remaining related party notes payable agreements as of June 30, 2021.
|
For the six months ended
June 30, 2021, the Company received $200 in proceeds from a related party in the form of a bridge loan, which was fully paid during
the period. In addition, the Company repaid bridge loans received in December 2020 aggregating $424.
Just prior to the Business
Combination, the Company converted related party notes payable with an aggregate principal amount of $130,479 into 81,855,608 shares of
Class A-2 Preferred Stock. Related party notes payable with principal amounts of $60,104 were either converted into equity or repaid in
cash as part of the close of the Business Combination. See Note 15. Subsequent Events.
Fair Value of Related Party Notes Payable Not
Carried at Fair Value
The estimated fair value
of the Company’s related party notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy,
was $147,995 and $265,663 as of June 30, 2021 and December 31, 2020, respectively.
Schedule of Principal Maturities of Related Party Notes Payable
The future scheduled principal maturities of related
party notes payable as of June 30, 2021 were as follows:
Due on demand
|
|
$
|
185,986
|
|
2021
|
|
|
18,112
|
|
|
|
$
|
204,098
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The Company has entered into
notes payable agreements with third parties. Notes Payable consists of the following as of June 30, 2021:
Note Name
|
|
Contractual
Maturity Date
|
|
Contractual
Interest
Rates
|
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
Proceeds Allocated to Warrants
|
|
|
Net
Carrying
Value
|
|
|
Interest Expense for the
Three Months
Ended
June 30,
2021
|
|
|
Interest Expense for the
Six Months
Ended
June 30,
2021
|
|
Note payable
|
|
Repayment in 10% increments contingent on a specified fundraising event
|
|
|
12.00
|
%
|
|
$
|
56,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56,000
|
|
|
$
|
2,081
|
|
|
$
|
3,552
|
|
Notes payable – NPA tranche
|
|
October 6, 2021
|
|
|
10.00
|
%
|
|
|
27,117
|
|
|
|
5,473
|
|
|
|
—
|
|
|
|
32,590
|
|
|
|
676
|
|
|
|
1,345
|
|
Notes payable(1)
|
|
October 6, 2021
|
|
|
14.00
|
%
|
|
|
55,000
|
|
|
|
11,232
|
|
|
|
—
|
|
|
|
66,232
|
|
|
|
1,920
|
|
|
|
2,574
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
12.00
|
%
|
|
|
19,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,100
|
|
|
|
576
|
|
|
|
1,147
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,400
|
|
|
|
17
|
|
|
|
33
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,240
|
|
|
|
50
|
|
|
|
100
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300
|
|
|
|
6
|
|
|
|
12
|
|
Notes payable(2)
|
|
October 6, 2021
|
|
|
8.00
|
%
|
|
|
3,750
|
|
|
|
1,475
|
|
|
|
—
|
|
|
|
5,225
|
|
|
|
149
|
|
|
|
268
|
|
Notes payable(2)
|
|
October 6, 2021
|
|
|
15.75
|
%
|
|
|
5,600
|
|
|
|
2,202
|
|
|
|
—
|
|
|
|
7,802
|
|
|
|
223
|
|
|
|
282
|
|
Notes payable(3)
|
|
October 6, 2021
|
|
|
0.00
|
%
|
|
|
18,250
|
|
|
|
5,241
|
|
|
|
—
|
|
|
|
23,491
|
|
|
|
—
|
|
|
|
—
|
|
Notes payable(3)
|
|
December 9, 2022
|
|
|
0.00
|
%
|
|
|
20,000
|
|
|
|
649
|
|
|
|
(2,563
|
)
|
|
|
18,086
|
|
|
|
—
|
|
|
|
—
|
|
Notes payable(3)
|
|
December 9, 2022
|
|
|
0.00
|
%
|
|
|
20,000
|
|
|
|
648
|
|
|
|
(2,562
|
)
|
|
|
18,086
|
|
|
|
—
|
|
|
|
—
|
|
Note payable(4)
|
|
March 9, 2022
|
|
|
0.00
|
%
|
|
|
15,667
|
|
|
|
4,499
|
|
|
|
—
|
|
|
|
20,166
|
|
|
|
—
|
|
|
|
—
|
|
Note payable(5)
|
|
October 6, 2021
|
|
|
12.75
|
%
|
|
|
15,666
|
|
|
|
6,160
|
|
|
|
—
|
|
|
|
21,826
|
|
|
|
792
|
|
|
|
1,197
|
|
Notes payable – China various other
|
|
Various Dates 2021
|
|
|
6.00
|
%
|
|
|
4,917
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,917
|
|
|
|
74
|
|
|
|
146
|
|
Notes payable – China various other
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,715
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,715
|
|
|
|
169
|
|
|
|
335
|
|
Notes payable – China various other(6)
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
5,387
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,387
|
|
|
|
—
|
|
|
|
6
|
|
Notes payable – various other notes(7)
|
|
June 30, 2021
|
|
|
6.99
|
%
|
|
|
1,260
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,260
|
|
|
|
22
|
|
|
|
44
|
|
Notes payable – various other notes(7)
|
|
Due on Demand
|
|
|
8.99
|
%
|
|
|
500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
|
11
|
|
|
|
22
|
|
Notes payable – various other notes(7)
|
|
June 30, 2021
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
11
|
|
|
|
21
|
|
Notes payable(7)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
11,635
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,635
|
|
|
|
232
|
|
|
|
462
|
|
Notes payable
|
|
April 17, 2022
|
|
|
1.00
|
%
|
|
|
9,168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,168
|
|
|
|
22
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
$
|
301,172
|
|
|
$
|
37,579
|
|
|
$
|
(5,125
|
)
|
|
$
|
333,626
|
|
|
$
|
7,031
|
|
|
$
|
11,591
|
|
|
(1)
|
On March 1, 2021, the Company amended the NPA to permit the
issuance of additional notes payable with principal amounts up to $85,000. On the same day, the Company entered into notes payable agreements
with Ares for an aggregate principal of $55,000, receiving net proceeds of $51,510, inclusive of a 4.00% original issue discount and
$90 of debt issuance costs paid directly by the lender. The notes payable are collateralized by a first lien on virtually all tangible
and intangible assets of the Company and bear interest at 14% per annum. The notes payable mature on the earliest of (i) March 1, 2022,
(ii) October 6, 2021, if the Qualified SPAC Merger contemplated in the Merger Agreement has not been consummated by July 27, 2021, (iii)
the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as a default. The Company has elected the
fair value option because the notes include features, such as a contingently exercisable put option, which meet the definition of an
embedded derivative. Additionally, the notes payable agreements contain a minimum cash provision, which requires the Company to maintain
at least $5,000 of cash on hand at all times. The Company has classified the related $5,000 in Restricted Cash on its unaudited Condensed
Consolidated Balance Sheets as of June 30, 2021.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
In addition, in conjunction
with the issuance of the notes payable, the Company committed to issue warrants to the lender to purchase the Company’s Class A
Ordinary Stock no later than August 11, 2021, or, if earlier, 15 days after consummation of the Merger. The warrants will have a
term of 6 years, be equal to 0.20% of the fully diluted capitalization of FFIE’s Class A Common Stock and have an exercise price
of $10 per share. The warrants meet the definition of a derivative, were accounted for as a liability, and will be marked to fair value
at the end of each reporting period with the changes in fair market value recorded in the Condensed Consolidated Statements of Operations
and Comprehensive Loss. The Company determined the commitment to issue warrants was a liability as of March 1, 2021, and estimated the
fair value of the warrants to be $5,000 using the Black-Scholes option-pricing model under two scenarios (See Note 7. Fair Value of
Financial Instruments). Fair value of the warrants as of June 30, 2021, was $7,880.
|
|
June 30,
2021
|
|
Outstanding principal
|
|
$
|
55,000
|
|
Accrued interest
|
|
|
654
|
|
Interest expense
|
|
|
654
|
|
Original issue discount
|
|
|
3,490
|
|
Debt issuance costs recorded in interest expense
|
|
|
315
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
Net proceeds
|
|
$
|
51,510
|
|
|
(2)
|
On January 13, 2021, the Company
amended the NPA to permit the issuance of additional notes payable and issued $3,750 of notes payable to Birch Lake, receiving net proceeds
of $3,510, inclusive of a 6.50% original issue discount, and $225 of debt issuance costs paid directly by the lender. The additional
secured convertible notes payable issued to Birch Lake (“BL Notes”) accrue interest at 8% per annum. The BL Notes mature
on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control,
or (iv) the acceleration of the NPA obligations in the event of a default. Additionally, the BL Notes contain a liquidation premium that
ranges from 35% to 45% depending on the timing of settlement, with 50% of this premium convertible into equity. Birch Lake can demand
repayment of the BL Notes if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the
feature to settle the BL Notes at a premium upon the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently
exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value option for
this note payable (See Note 7. Fair Value of Financial Instruments).
|
On March 8, 2021,
the Company entered into a notes payable agreement under the NPA, as amended, with Birch Lake with a total principal of $5,600,
receiving net proceeds of $5,240, inclusive of a 6.50% original issue discount and $307 of debt issuance costs paid directly by the
lender. The notes payable matures on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, as
defined in the note agreement, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as
a default. The notes payable bear interest at 15.75% per annum. Additionally, the notes payable contain a liquidation premium that
ranges from 42% to 52% depending on timing of settlement, with 50% of this premium convertible into equity. Birch Lake can demand
repayment if an event of default, change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to
settle the notes payable at a premium upon the occurrence of a default, change in control,
or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation premium and represents an embedded derivative.
The Company has elected to measure the notes payable at fair value because the notes include features, such as a contingently exercisable
put option, which meet the definition of an embedded derivative.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
|
June 30,
2021
|
|
Outstanding principal
|
|
$
|
9,350
|
|
Accrued interest
|
|
|
—
|
|
Interest expense
|
|
|
177
|
|
Original issue discount
|
|
|
1,132
|
|
Debt issuance costs recorded in interest expense
|
|
|
1,502
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
177
|
|
Net proceeds
|
|
$
|
8,218
|
|
|
(3)
|
On January 13, 2021, the Company
entered into a notes payable agreement under the NPA, as amended, (“January 13 Notes”) with a US-based investment firm for
total principal of $11,250, receiving net proceeds of $10,350, inclusive of an 8% original issue discount and $480 of debt issuance costs
paid directly by the lender. The note payable is collateralized by a first lien on virtually all tangible and intangible assets of the
Company and bears interest at 0% per annum. The note payable matures on the earliest of (i) October 6, 2021, (ii) the consummation of
a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the occurrence of an acceleration event, such as an event
of default. In the event the Company consummates a Qualified SPAC Merger, an amount equal to 130% of all outstanding principal, accrued
and unpaid interest and accrued original issue discount under the notes through (but not including) the date of consummation of the Qualified
SPAC Merger will automatically convert into Common Stock of PSAC received by the Company’s Class A ordinary stockholders and the
notes and interest shall be deemed satisfied in full and terminated. The Company elected the fair value option for this note payable
because the inclusion of a conversion feature that allows the lenders to convert the notes payable into Preferred Stock.
|
On March 12, 2021, the
Company and the US-based investment firm entered into a notes payable agreement (“March 12 Notes”) for an aggregate principal
amount of $7,000, receiving net proceeds of $6,440, inclusive of an 8% original issue discount. The terms of this note payable are the
same as the note payable issued on January 13, 2021.
In conjunction with the issuance
of the notes on various dates during January 2021 and March 2021, the Company issued warrants to purchase 270,200 shares of the Company’s
Class A Ordinary Stock with an exercise price of $2.72 and 2,167,254 shares of the Company’s Class A Ordinary Stock with an exercise
price of $2.71. The warrants were issued with a term of seven years and are subject to certain down-round adjustments. The fair value
of the warrants was recorded in equity in accordance with the derivative accounting scope exception in ASC 815 for certain contracts involving
an entity’s own equity. The Company estimated the fair value of the warrants to be $1,988 using the Black-Scholes option-pricing
model (See Note 7. Fair Value of Financial Instruments.)
On June 9, 2021, the
Company amended the NPA to permit the issuance of two notes payable, each with a principal value of $20,000 (“June 2021 Notes”),
to a US-based investment firm. The June 2021 Notes are subordinate to the notes payable issued to Birch Lake on January 13 and March
8, 2021 (See (2) above) and the notes payable issued to Ares on March 1, 2021 (See (1) above) and senior in priority to the notes payable
issued under the NPA prior to September 9, 2020. The June 2021 Notes mature on December 9, 2022, and do not bear interest unless extended
beyond its maturity date by the US-based investment firm, in which case, the June 2021 Notes will bear interest at 10% per annum starting
upon their original maturity. Each of the June 2021 Notes are subject to an original issue discount of 8% and 13%, respectively. The
June 2021 Notes contain a liquidation premium that, upon a Qualified SPAC Merger, the then outstanding principal and accrued interest
of the notes playable plus a 30% premium will convert into Class A Ordinary Stock of the Company. The Company received net proceeds of
$35,603 as part of the June 2021 Notes.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
As part of the Amendment
to the NPA, on or prior to the 12-month anniversary of the Qualified SPAC Merger, the US-based investment firm has the option to purchase
additional notes for up to $40,000 (“Optional Notes”), subject to similar original issue discounts as the June 2021 Notes.
The June 2021 Notes and the Optional Notes, along with the notes previously issued to the same lender, are provided with an anti-dilution
protection. Subsequent to June 30, 2021, the US-based investment firm exercised its option to purchase $33,917 of Optional Notes. See
Note 15. Subsequent Events for additional information.
In connection with the issuance
of the June 2021 Notes, the Company issued warrants to the US-based investment firm to purchase up to 5,831,357 of the Company’s
Class A Ordinary Stock for $2.5723 per share exercise price on or before June 9, 2028. Upon the occurrence of a Fundamental Transaction,
the warrants shall be exercisable within 15 days and their exercise price shall be adjusted to equal the lower of (i) $2.5723 per share,
(ii) the pre-money valuation ascribed to the Company in connection with the Fundamental Transaction divided by the pro-forma fully diluted
capitalization of the Company and (iii) the lowest effective net price per share of Class A Ordinary Stock paid for by any third party
at the time of or in connection with the Fundamental Transaction, as defined in the warrant agreement. The Optional Notes are entitled
to warrants with the same terms as the June 2021 Notes once the Optional Notes are issued.
|
|
June 30,
2021
|
|
January 13 and March 12, 2021 Notes:
|
|
|
|
Outstanding principal
|
|
$
|
18,250
|
|
Accrued interest
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
Original issue discount
|
|
|
1,460
|
|
Debt issuance costs recorded in interest expense
|
|
|
480
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
Net proceeds
|
|
$
|
16,310
|
|
|
|
June 30,
2021
|
|
June 9, 2021 Note 1:
|
|
|
|
Outstanding principal
|
|
$
|
20,000
|
|
Accrued interest
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
Original issue discount
|
|
|
1,600
|
|
Debt issuance costs recorded in interest expense
|
|
|
197
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
Net proceeds
|
|
$
|
18,203
|
|
|
|
June 30,
2021
|
|
June 9, 2021 Note 2:
|
|
|
|
Outstanding principal
|
|
$
|
20,000
|
|
Accrued interest
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
Original issue discount
|
|
|
2,600
|
|
Debt issuance costs recorded in interest expense
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
Net proceeds
|
|
$
|
17,400
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
(4)
|
On
January 13, 2021, the Company amended the NPA to increase the principal amount of its $15,000 note payable with a US-based investment
firm by $667. The Company received no cash proceeds as the increase in principal was used to pay a consent fee to the US-based investment
firm. The Company recorded the consent fee in Interest Expense on the unaudited Condensed Consolidated Statements of Operations and Comprehensive
Loss for the six months ended June 30, 2021. The consent fee permitted the issuance of additional notes payable to the US-based investment
firm of $11,250 and $7,000, as described in (3) above.
|
|
(5)
|
On
January 13, 2021, the Company amended the NPA to issue an additional note to Birch Lake, with the same terms as its $15,000 note
payable to Birch Lake, in the amount of $666. The Company received no cash proceeds as the additional note was used to pay a consent
fee to Birch Lake. The Company recorded the consent fee in Interest Expense on the unaudited Condensed Consolidated Statements of Operations
and Comprehensive Loss for the six months ended June 30, 2021. The consent fee permitted the issuance of additional notes payable to
Birch Lake of $3,750 and $5,600, as described in (2) above.
|
|
(6)
|
On
January 15, 2021, the Company borrowed $102 from a Chinese lender. The unsecured note payable is payable on demand and does not
have a stated interest rate.
|
|
(7)
|
As
of June 30, 2021, the Company was in default on sixteen of its notes payable with an aggregate principal value of $40,935. The Company
is in compliance with all its covenants under the remaining notes payable agreements as of June 30, 2021.
|
Just prior to the close of
the Business Combination, the Company converted: (i) notes payable with principal amount of $56,000 into 37,335,421 shares of Class A-2
Preferred Stock; (ii) notes payable with an aggregate principal balance of $17,600 into 15,792,771 shares of Class A-1 Preferred Stock;
and (iii) a note payable with a principal balance of $1,500 into 1,281,976 shares of Class A-3 Preferred Stock. Notes payable with aggregate
principal amount of $116,518 were either converted into equity or repaid in cash as part of the close of the Business Combination. See
Note 15. Subsequent Events.
Fair Value of Notes Payable Not Carried at Fair Value
The estimated fair value of
the Company’s notes payable not carried at fair value, using inputs from Level 3 under the fair value hierarchy, was $105,863 and
$127,130 as of June 30, 2021 and December 31, 2020, respectively.
Schedule of Principal Maturities of Notes Payable
The future scheduled principal maturities of notes
payable as of June 30, 2021 are as follows:
Due on demand
|
|
$
|
50,037
|
|
2021
|
|
|
186,300
|
|
2022
|
|
|
64,835
|
|
|
|
$
|
301,172
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
10.
|
Vendor Payables in Trust
|
On April 29, 2019, the
Company established the Faraday Vendor Trust (“Vendor Trust”), with the intention to stabilize the Company’s supplier
base by providing suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the
trust interests is governed by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment
Agreement”). All interests in the Vendor Trust are collateralized by a first lien, with third payment priority, in agreement with
applicable intercreditor arrangements, on virtually all tangible and intangible assets of the Company. The applicable interest rate for
the vendor trust principal balance is 6.00%, calculated daily from the date of contribution and is non-compounding. The Company determined
that the economic substance of the obligations under the Vendor Trust is an in-substance financing.
A total of $109,565 and $111,574
of the Company’s trade payables have been included in the Vendor Trust as of June 30, 2021 and December 31, 2020, respectively.
Accrued interest related to the Vendor Trust aggregated $13,358 and $11,840 as of June 30, 2021 and December 31, 2020, respectively.
The Vendor Trust also includes approximately $8,380 and $25,000 of purchase orders as of June 30, 2021 and December 31, 2020, respectively,
related to goods and services yet to be received. These vendors did not contribute any receivables into the Vendor Trust related to these
purchase orders, as the goods and services are to be received at a future date. As such, the Company may cancel the vendor’s interest
in the Vendor Trust related to these purchase orders until such time that the vendors begin to fulfil the requested goods and services.
On October 30, 2020, the
agreement governing the Vendor Trust (the “Vendor Trust Agreement”) was modified to add a conversion feature to allow the
secured interests in the Vendor Trust to convert into a variable number of PSAC shares if a Qualified SPAC Merger (as defined in the Vendor
Trust Agreement) occurs. The Company accounted for this modification as an extinguishment because the conversion feature is considered
substantive, as the conversion feature is reasonably possible to be exercised. The conversion feature does not require bifurcation because
it is clearly and closely related to the host instrument, since the conversion does not involve a substantial premium or discount. Accretion
of the discount created from the gain recorded on extinguishment of $679 and $1,350 was recorded in Interest Expense in the unaudited
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021, respectively.
The Vendor Trust carrying value was $109,574 and $110,224, net of remaining discounts, as of June 30, 2021 and December 31,
2020, respectively.
On March 1, 2021, the maturity
date of the secured trust interests in the Vendor Trust was extended to the earliest of: (i) October 6, 2021; (ii) the closing of a Qualified
SPAC Merger; (iii) a change in control of the Company; or (iv) an acceleration of the obligations under certain of the Company’s
other secured financing arrangements. The Trade Receivables Repayment Agreement includes an event of default if a Qualified SPAC Merger
does not close by July 27, 2021.
The estimated fair value
of the Vendor Trust, using inputs from Level 3 under the fair value hierarchy, was $117,575 and $109,762 as of June 30, 2021 and
December 31, 2020, respectively.
Termination of Interests in the Vendor Trust
On June 4, 2021, the
Company entered into an agreement with a vendor with an interest in the Vendor Trust for future services. The Company and the vendor agreed
to forgive $14,166 relating to future work instead of converting these interests to equity upon the close of the Business Combination.
In addition, it was agreed to terminate and forgive $1,901 of the vendor’s interest for work performed, resulting in a gain of $1,731.
On June 7, 2021, the
Company entered into agreements with two vendors and settled in cash an interest in the Vendor Trust aggregating $5,367. The vendors’
remaining interests aggregating $17,457 is payable in cash only in the event the Qualified SPAC Merger closes by July 31, 2021, otherwise
the payables will remain in the Vendor Trust under the original terms.
On June 9, 2021, the
Company agreed to designate $10,000, to be paid at the election of certain of the interest holders in the Vendor Trust at the closing
of the Qualified SPAC Merger.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
Subsequent to June 30, 2021,
at the closing of the Business Combination, the Company settled the majority of the outstanding payables of the Vendor Trust as well as
any accrued interest and amounts for purchase orders related to goods and services yet to be received, by paying $28,355 in cash and issuing
10,456,642 shares of FFIE Class A Common Stock. See Note 15. Subsequent Events for more information related to the closing of the
Business Combination.
|
11.
|
Commitments and Contingencies
|
Legal Matters
The Company is, from time
to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of any
such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to
have a material adverse effect on the Company’s results of operations and cash flows.
As of June 30, 2021
and December 31, 2020, the Company had accrued contingent liabilities of $13,127 and $6,025, respectively, for potential financial
exposure related to ongoing legal matters primarily related to breach of contracts and employment matters. As of June 30, 2021, contingent
liabilities of $12,333 were recorded in Accounts Payable and $794 was recorded in Accrued Expenses and Other Liabilities on the Company’s
Condensed Consolidated Balance Sheets. Similarly, $5,025 was recorded in Accrued Expenses and Other Liabilities and $1,000 was recorded
in Other Liability, less current portion on the Company’s December 31, 2020, Condensed Consolidated Balance Sheets. These contingent
liabilities are related to four legal matters that have been determined to be both probable of loss and reasonably estimable.
The Company recorded the
incremental loss related to an outstanding legal matter in the amount of $6,309 as general and administrative expense in the Condensed
Consolidated Statements of Operations and Comprehensive Loss for the three and six months ending June 30, 2021. Subsequent to June 30,
2021, the Company settled an outstanding legal matter for $2,850 in cash and agreed to issue stock options to purchase 6,000,000 Class
A Ordinary Stock in the Company at an exercise price of $0.36 per share (“Settlement Options”). The Settlement Options vest
21 days after the Closing Date of the Business Combination. As part of the settlement agreement, no party admitted or acknowledged the
existence of any liability or wrongdoing and all claims, including those asking for damages, were voluntarily dismissed.
|
12.
|
Preferred and Ordinary Stock
|
The number of authorized,
issued and outstanding stock, liquidation value and carrying value as of June 30, 2021 and December 31, 2020, were as follows:
|
|
June 30, 2021
|
|
|
|
Authorized
Shares
|
|
|
Issued and
Outstanding
Shares
|
|
|
Liquidation
Value
|
|
|
Carrying
Value
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
|
$
|
800,000
|
|
|
$
|
724,823
|
|
Class A-1 Convertible Preferred Stock
|
|
|
87,617,555
|
|
|
|
57,513,413
|
|
|
|
96,048
|
|
|
|
96,048
|
|
Class A-2 Convertible Preferred Stock
|
|
|
158,479,868
|
|
|
|
19,546,600
|
|
|
|
38,311
|
|
|
|
38,311
|
|
Class A-3 Convertible Preferred Stock
|
|
|
1,475,147
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class B Convertible Preferred Stock
|
|
|
452,941,177
|
|
|
|
452,941,177
|
|
|
|
1,106,988
|
|
|
|
697,643
|
|
Class A Ordinary Stock
|
|
|
665,209,680
|
|
|
|
64,224,007
|
|
|
|
—
|
|
|
|
—
|
|
Class B Ordinary Stock
|
|
|
180,000,000
|
|
|
|
150,052,834
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
2,016,311,662
|
|
|
|
1,214,866,266
|
|
|
$
|
2,041,347
|
|
|
$
|
1,556,826
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
|
|
December 31, 2020
|
|
|
|
Authorized
Shares
|
|
|
Issued and
Outstanding
Shares
|
|
|
Liquidation
Value
|
|
|
Carrying
Value
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
|
$
|
800,000
|
|
|
$
|
724,823
|
|
Class B Convertible Preferred Stock
|
|
|
600,000,000
|
|
|
|
452,941,177
|
|
|
|
1,106,988
|
|
|
|
697,643
|
|
Class A Ordinary Stock
|
|
|
400,000,000
|
|
|
|
41,234,448
|
|
|
|
—
|
|
|
|
—
|
|
Class B Ordinary Stock
|
|
|
180,000,000
|
|
|
|
147,058,823
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
1,650,588,235
|
|
|
|
1,111,822,683
|
|
|
$
|
1,906,988
|
|
|
$
|
1,422,467
|
|
Upon the effectiveness of
the Seventh Amended and Restated Articles of Association of the Company on January 27, 2021, the number of shares of capital stock
that are authorized to be issued increased to 2,016,311,662, due to the Company authorizing additional shares of Class A Ordinary Stock
and the following new classes of Preferred Stock: 87,615,555 Class A-1 Convertible Preferred Stock with par value of $0.00001 per share;
158,479,868 Class A-2 Convertible Preferred Stock with par value of $0.00001 per share; 1,475,147 Class A-3 Convertible Preferred Stock
with par value of $0.00001 per share (collectively “Class A Preferred Stock”).
Conversion of Related Party Notes Payable
On May 13, 2021, related
party notes payable with aggregating principal amounts of $90,869 and accrued interest of $43,490 were converted into 57,513,413 shares
of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and 19,546,600 Shares of Class A-2 Convertible Preferred
Stock with a conversion price of $1.96 per share. The Class A-1 and A-2 Preferred Stock will convert into shares of FFIE Class A Common
Stock after the consummation of the Business Combination with a conversion ratio of 7.077.
The rights, privileges, and
preferences of the Company’s Class A Preferred Stock as set forth in the Company’s Seventh Amended and Restated Articles of
Association are as follows:
Voting
The holders of Class A Preferred
Stock are entitled to one vote for each share held by such holder.
Conversion
The Class A Preferred Stock
is convertible into Class A Ordinary Stock on a one-to-one basis at the option of holders of Class A Preferred Stock at any time upon
written notice to the Company. In connection with the Merger, the Class A Preferred Stock will be automatically converted into FFIE Class
A Ordinary Stock based on the Exchange Ratio.
Liquidation
In the event of any liquidation
or deemed liquidation event such as dissolution, winding up, or loss of control, either voluntary or involuntary, or in entering into
a SPAC transaction, after the Redeemable Preference Convertible Stock have been redeemed and paid in full, the holders of Class A Preferred
Stock are entitled to receive cash, pari passu with the holders of the Class B Convertible Preferred Stock and prior and in preference
to any payment or distribution and setting apart for payment or distribution of any of the assets or surplus funds of the Company to the
holders of any Ordinary Stock, in an amount equal to the greater of (a) $1.67, $1.96, and $1.715 per share for the Class A-1 Convertible
Preferred Stock, Class A-2 Convertible Preferred Stock, and Class A-3 Convertible Preferred Stock, respectively, plus any declared but
unpaid dividends on each such Class A Preferred Stock, or (b) the aggregate amount payable in a liquidation to the Class A Preferred Stock
assuming the Class A Preferred Stock had been converted into Ordinary Stock of the Company prior to such liquidation.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
Classification
The liquidation preference
rights the holders of Class A Preferred Stock are entitled to in the event of a deemed liquidation are considered contingent redemption
provisions that are not solely within the Company’s control. Accordingly, the Class A Preferred Stock have been presented outside
of permanent equity in the mezzanine section of the Condensed Consolidated Balance Sheets.
13. Stock-Based Compensation
As of June 30, 2021,
the Company had 13,875,574 shares of Class A Ordinary Stock available for future issuance under its Equity Incentive Plan (“EI Plan”)
and the Special Talent Incentive Plan (“STI Plan”).
EI Plan
On February 1, 2018,
the Board of Directors adopted the EI Plan, under which the Board of Directors authorized the grant of up to 300,000,000 incentive and
nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, and other stock-based awards for Class A Ordinary
Stock to employees, directors, and non-employees.
A summary of the Company’s stock option
activity under the EI Plan is as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as of December 31, 2020
|
|
|
215,769,994
|
|
|
$
|
0.35
|
|
|
|
8.75
|
|
|
$
|
885
|
|
Granted
|
|
|
26,831,376
|
|
|
|
0.58
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(18,871,140
|
)
|
|
|
0.32
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited
|
|
|
(3,452,693
|
)
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2021
|
|
|
220,277,537
|
|
|
$
|
0.38
|
|
|
|
8.46
|
|
|
$
|
263,084
|
|
The weighted-average assumptions
used in the Black-Scholes option pricing model for awards granted during the six months ended June 30, 2021 are as follows:
|
|
June 30,
2021
|
|
Risk-free interest rate:
|
|
|
0.22
|
%
|
Expected term (in years):
|
|
|
2.89
|
|
Expected volatility:
|
|
|
49.24
|
%
|
Dividend yield:
|
|
|
0.00
|
%
|
Grant date fair value per share:
|
|
$
|
0.58
|
|
As of June 30, 2021,
the total remaining stock-based compensation expense for unvested stock options was $13,100, which is expected to be recognized over a
weighted average period of 3.1 years.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
STI Plan
The STI Plan allows the Board
of Directors to grant up to 100,000,000 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share
units, and other stock-based awards for Class A Ordinary Stock to employees, directors, and non-employees.
The STI Plan does not specify
a limit on the number of stock options that can be issued under the plan. Per the terms of the STI Plan, the Company must reserve and
keep available a sufficient number of shares to satisfy the requirements of the STI Plan.
On January 27, 2021,
in conjunction with entering into a service agreement with its lessor of the facility located in Hanford, California, the Company issued
2,827,695 fully-vested options with an exercise price of $0.391 per share. In the event that the intrinsic value of the option is less
than the accrued outstanding rent payments of $947, the Company will pay the lessor the difference in a single cash payment, otherwise,
the accrued outstanding rent will be deemed paid.
A summary of the Company’s stock option
activity under the STI Plan is as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as of December 31, 2020
|
|
|
45,932,116
|
|
|
$
|
0.35
|
|
|
|
9.26
|
|
|
$
|
1,174
|
|
Granted
|
|
|
30,043,068
|
|
|
|
0.97
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
(4,377,118
|
)
|
|
|
0.36
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled/forfeited
|
|
|
(5,880,833
|
)
|
|
|
0.36
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding as of June 30, 2021
|
|
|
65,717,233
|
|
|
$
|
0.63
|
|
|
|
7.54
|
|
|
$
|
27,294
|
|
The company has elected to
use the contractual term of the non-employee options awarded under the STI Plan in accordance with GAAP. The weighted-average assumptions
used in the Black-Scholes option pricing model for awards granted during the six months ended June 30, 2021 are as follows:
|
|
June 30,
2021
|
|
Risk-free interest rate:
|
|
|
1.31
|
%
|
Expected term (in years):
|
|
|
10
|
|
Expected volatility:
|
|
|
40.22
|
%
|
Dividend yield:
|
|
|
0.00
|
%
|
Grant date fair value per share:
|
|
$
|
0.60
|
|
As of June 30, 2020,
the total remaining stock-based compensation expense for unvested stock options was approximately $4,937, which is expected to be recognized
over a weighted average period of approximately one year.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share
data)
(Unaudited)
The following table presents
stock-based compensation expense included in each respective expense category in the unaudited Condensed Consolidated Statements of Operations
and Other Comprehensive Loss for the three and six months ended June 30:
|
|
Three Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
1,070
|
|
|
$
|
495
|
|
Sales and marketing
|
|
|
306
|
|
|
|
193
|
|
General and administrative
|
|
|
(428
|
)
|
|
|
2,203
|
|
|
|
$
|
948
|
|
|
$
|
2,891
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
1,660
|
|
|
$
|
637
|
|
Sales and marketing
|
|
|
505
|
|
|
|
248
|
|
General and administrative
|
|
|
1,302
|
|
|
|
2,771
|
|
|
|
$
|
3,467
|
|
|
$
|
3,656
|
|
Net Loss Per Share Attributable to Ordinary Stockholders
The Company has four classes
of participating securities (Redeemable Preference Stock, Class B Convertible Preferred Stock, Class A-1 Convertible Preferred Stock,
and Class A-2 Convertible Preferred Stock) issued and outstanding as of June 30, 2021, and two classes of participating securities
(Redeemable Preference Stock and Class B Convertible Preferred Stock) issued and outstanding as of June 30, 2020. Losses are not attributed
to the participating securities as the stockholders of Redeemable Preference Stock, Class B Convertible Preferred Stock, and Class
A Preferred Stock are not contractually obligated to share in the Company’s losses. The Redeemable Preference Stock participation
rights are contingent in the event the stockholders of Redeemable Preference Stock consents to a dividend distribution, which no consent
has been provided through June 30, 2021. The Class A Preferred Stock and Class B Convertible Preferred Stock participation rights
are contingent on the redemption of the Redeemable Preference Stock, which has not been satisfied as of June 30, 2021.
Basic net loss attributable
to ordinary stockholders per share is calculated by dividing net loss attributable to ordinary stockholders by the weighted-average number
of outstanding shares of ordinary stock.
Diluted net loss per share
attributable to ordinary stockholders adjusts the basic net loss per share attributable to ordinary stockholders and the weighted-average
number of shares of ordinary stock outstanding for the potentially dilutive instruments.
The net loss per ordinary
share was the same for the Class A and Class B Ordinary Stock because they are entitled to the same liquidation and dividend rights and
are therefore, combined on the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six
months ended June 30, 2021 and 2020.
Because the Company reported
net losses for all periods presented, all potentially dilutive ordinary stock equivalents were determined to be antidilutive for those
periods and have been excluded from the calculation of net loss per share.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The following table presents
the number of anti-dilutive shares excluded from the calculation of diluted net loss per share as of the following dates:
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Stock-based compensation awards – employees
|
|
|
220,277,537
|
|
|
|
148,997,109
|
|
Stock-based compensation awards – non-employees
|
|
|
65,717,233
|
|
|
|
37,607,667
|
|
Warrants
|
|
|
10,198,958
|
|
|
|
—
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
Class A-1 Convertible Preferred Stock
|
|
|
57,513,413
|
|
|
|
—
|
|
Class A-2 Convertible Preferred Stock
|
|
|
19,546,600
|
|
|
|
—
|
|
Class B Convertible Preferred Stock
|
|
|
452,941,177
|
|
|
|
452,941,177
|
|
Convertible related party notes payable and convertible notes payable
|
|
|
168,913,222
|
|
|
|
—
|
|
Total
|
|
|
1,465,696,375
|
|
|
|
1,110,134,188
|
|
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to the date that the unaudited Condensed Consolidated Financial
Statements were available to be issued on August 16, 2021. Other than as described below, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the unaudited Condensed Consolidated Financial Statements.
Conversion of Related Party Notes Payable and Notes Payable
On July 21, 2021 the Company
converted: (i) related party notes payable with an aggregate principal balance of $130,479 and accrued interest of $29,958, notes payable
with principal balance of $56,000 and accrued interest of $17,177 into 119,191,029 shares of Class A-2 Preferred Stock; (ii) notes payable
with an aggregate principal balance of $17,600 and accrued interest of $5,399 into 15,792,771 shares of Class A-1 Preferred Stock; and
(iii) notes payable with a principal balance of $1,500 and accrued interest of $699 into 1,281,976 shares of Class A-3 Preferred Stock.
Closing of the Merger and Related Transactions
On July 21, 2021 (the “Closing
Date”), the Company consummated the previously announced Business Combination pursuant to the Merger Agreement, by and among PSAC,
Merger Sub and the Company. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into the Company, with the Company
surviving the merger as a wholly-owned subsidiary of PSAC. Upon the consummation of the Business Combination (the “Closing”),
PSAC changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent Electric Inc. (“FFIE”). Upon
closing the Business Combination, the Company raised $229,653 in proceeds from PSAC, net of redemptions of $206.
Concurrently with the Merger
Agreement, PSAC 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 PSAC agreed to issue and sell to
such Subscription Investors, an aggregate of 76,140,000 shares of FFIE Class A Common Stock for a purchase price of $10 per share, or
an aggregate of $761,400 in gross cash proceeds (the “Private Placement”). Pursuant to the Subscription Agreements, PSAC 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 Date.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
As part of the Closing, total
direct and incremental transaction costs aggregated $93,280, of which $24,610 was expensed as part of the Business Combination and the
remaining $68,670 was recorded to Additional Paid In Capital as equity issuance costs.
In conjunction with the Closing
and through the date that the unaudited Condensed Consolidated Financial Statements were available to be issued, the Company paid $144,924
in cash and issued 25,869,594 shares of FFIE Class A Common Stock to settle liabilities of the Company, including: (i) notes payable principal
amounts of $116,518 and accrued interest of $12,431; (ii) related party notes payable principal amounts of $60,104 and accrued interest
of $8,584; (iii) interest in the Vendor Trust of $130,671, including payables of $110,035 and purchase orders in the amount of $8,380
related to goods and services yet to be received, and accrued interest thereon of $14,506; (iv) $19,791 of amounts due to vendors; and
(v) $23,638 due to active and former employees. The Company concluded that the settlement of the related party notes payable and notes
payables with shares of FFIE Class A Common Stock is substantive and therefore was accounted as an extinguishment. Accordingly, the Company
will record a loss upon extinguishment of the notes payable and related party notes payable of $90,531 in the Condensed Consolidated Financial
Statements for the three and nine months ended September 30, 2021.
Pursuant to the terms of
the Merger Agreement, all of the issued and outstanding Class B Convertible Preferred Stock, held by FF Top Holding LLC (f/k/a FF Top
Holding Ltd.) (“FF Top”)), converted into 64,000,588 shares of FFIE Class B Common Stock following the Business Combination.
All other outstanding shares of the Company converted into 128,084,555 shares of FFIE Class A Ordinary Stock following the Business Combination.
Additionally, each of the Company’s options and warrants that were outstanding immediately prior to the closing of the Business
Combination remained outstanding and converted into the right to purchase FFIE Class A Common Stock equal to the number of the Company’s
Ordinary Stock, subject to such options or warrants, 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.
Holders of 20,600 shares
of PSAC common stock 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 per share, or $206. At Closing, each non-redeemed outstanding share of PSAC common stock was converted into one share
of Class A Common Stock of FFIE.
At the Closing Date, the
Company had 298,611,892 outstanding options under the EI Plan and the STI Plan in addition to 19,016,865 outstanding warrants, as adjusted
upon the Closing in accordance with an anti-dilution provision included in the warrant agreement with the US-based investment firm (see
Note 9. Notes Payable), which will remain outstanding and convert into the right to purchase 44,880,595 shares of FFIE Class A
Common Stock, as derived by multiplying the number of FF Ordinary Shares subject to such option or warrant by the Exchange Ratio. The
options and warrants shall be exercised at an exercise price per share equal to the current exercise price per share for such option or
warrant divided by the Exchange Ratio.
Following the Business Combination
PSAC’s warrants to purchase 23,652,119 shares of FFIE Class A Common Stock will remain outstanding, consisting of (i) 22,977,568
public warrants listed on the Nasdaq Stock Market and (ii) 674,551 private warrants, each with an exercise price of $11.50 per share.
While the legal acquirer
in the Merger Agreement was PSAC, for financial accounting and reporting purposes under GAAP, FF is the accounting acquirer and the Business
Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of
accounting, and the financial statements of the combined entity represent the continuation of the financial statements of FF in many respects.
Under this method of accounting, PSAC was treated as the “acquired” company. Accordingly, the consolidated assets, liabilities,
and results of operations of FF became the historical financial statements of FFIE, and PSAC’s assets, liabilities, and results
of operations was consolidated with FF’s on July 21, 2021. Operations prior to the Business Combination will be presented as
those of FF in future reports. The net assets of PSAC were recognized at historical cost (which is expected to be consistent with carrying
value), with no goodwill or other intangible assets recorded.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
In addition, the Company’s
existing shareholders, as of the Closing Date of the Business Combination until its fifth anniversary, would be entitled to contingent
consideration of up to 25,000,000 additional shares of FFIE Class A Common Stock in the aggregate in two equal tranches upon the occurrence
of each earnout triggering event (the “Earnout Shares”), as defined in the Merger Agreement:
|
●
|
The
minimum earnout of 12,500,000 additional shares is triggered if the FFIE’s Class A Common Stock volume weighted average price (“VWAP”),
as defined in the Merger Agreement, is greater than $13.50 per share for any period of twenty (20) trading days out of thirty (30) consecutive
trading days (the “Minimum Target Shares”);
|
|
●
|
The
maximum earnout of an additional 12,500,000 additional shares is triggered if the FFIE Class A Common Stock VWAP is greater than $15.50
for any period of twenty (20) trading days out of thirty (30) consecutive trading days, plus the Minimum Target Shares, if not previously
issued.
|
The Earnout Shares will be
recognized at fair value upon the closing of the Business Combination and classified in Stockholders’ Deficit. Because the Business
Combination is accounted for as a reverse recapitalization, the issuance of the Earnout Shares will be treated as a deemed dividend and
since the Company does not have retained earnings, the issuance will be recorded within APIC. The Company determined the fair value of
the Earnout Shares at the Closing Date to be $293,853 based on a valuation using a Monte Carlo simulation with key inputs and assumptions
such as stock price, term, dividend yield, risk-free rate, and volatility.
Issuance of Optional Notes
On August 10, 2021, in accordance
with the June 9 amendment of the NPA, as described in Note 9. Notes Payable, the US-based investment firm exercised its option
to purchase the Optional Notes with principal of $33,917. The Company received proceeds of $30,375, which is the total principal amount
of $33,917 net of 8% original issue discount and $828 of transaction costs. The Optional Notes do not bear interest unless the Company
fails to register shares issuable upon conversion of Optional Notes within 45 days of the Business Combination or causes the registration
of those shares to not be declared effective within 90 days of the Business Combination, in which case, the Optional Notes will bear interest
at 15% per annum. The Optional Notes are convertible at the option of the holder with a conversion price of $10 per share. The
Optional Notes contain a liquidation premium that the then outstanding principal and accrued interest of the notes payable plus a 30%
premium are convertible into shares of FFIE Class A Common Stock.
In conjunction with the issuance
of the Optional Notes, the Company issued the US-based investment firm warrants to purchase up to 1,187,083 shares of FFIE Class A Common
Stock with an exercise price per share equal to the lower of: (i) $10 per share, (ii) the pre-money valuation ascribed to the Company
in connection with the Fundamental Transaction divided by the pro-forma fully diluted capitalization of the Company, and (iii) the lowest
effective net price per share of the Company’s Class A Ordinary Stock paid for by any third party at the time of or in connection
with the Fundamental Transaction, as defined in the warrant agreement. The warrants shall be exercisable within seven years.
Issuance of Options Under the EI Plan and STI Plan
In July 2021, the Company awarded 4,845,901 options
under the EI Plan with a weighted average exercise price of $1.572 per share and 9,137,207 options under the STI Plan with a weighted
average exercise price of $1.572 per share.
Events Subsequent to the Original Issuance of Condensed Consolidated
Financial Statements
In connection with the reissuance of the Condensed
Consolidated Financial Statements, the Company has evaluated subsequent events through October 4, 2021, the date the Condensed
Consolidated Financial Statements were available to be reissued.
Issuance of Warrants and Additional Notes under the Amended
Notes Purchase Agreement
Pursuant to its commitment to issue warrants
to Ares following the closing of the Merger as described in Note 9 (1), Notes Payable, on August 5, 2021, the Company issued warrants
to Ares, which are exercisable at the election of Ares at any time within 6 years of the issuance date into 670,092 shares of the Company’s
Class A Common Stock.
On August 26, 2021, the Company drew an aggregated
principal amount of $30,000 from Ares, pursuant to the terms of the amended NPA, receiving net proceeds of $29,913, net of debt issuance
costs of $87.
The note payable is collateralized by a first
lien on virtually all tangible and intangible assets of the Company and bears interest at 14% per annum. The note payable matures on the
earliest of (i) March 1, 2022, (ii) the occurrence of a change in control, or (iii) the occurrence of an acceleration event, such as
a default. Additionally, upon closing of the Merger, the minimum cash provision, which requires the Company to maintain minimum cash
on hand at all times, increased from $5,000 to $25,000.
Purchase of License from Geely Holding
On September 7, 2021, the Company paid Geely
Holding, who is also a subscriber in the PIPE Financing, in accordance with the Intellectual Property License Agreement dated January
11, 2021, as supplemented on September 7, 2021, an amount of $50,000 for a non-exclusive, perpetual, irrevocable and sub-licensable license
to use a platform owned by Geely Holding in the production of the Company’s electric vehicle models.
Report of Independent Registered Public Accounting
Firm
To the Board of Directors and Stockholders of FF Intelligent Mobility
Global Holdings Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance
sheets of FF Intelligent Mobility Global Holdings Ltd. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019,
and the related consolidated statements of operations and comprehensive loss, of convertible preferred stock and stockholders’ deficit,
and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue
as a Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,
the Company has suffered recurring losses from operations and has cash outflows from operating activities that raise substantial doubt
about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial
statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 5, 2021
We have served as the Company’s auditor since 2018.
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Balance Sheets
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
1,124
|
|
|
$
|
2,221
|
|
Restricted cash
|
|
|
703
|
|
|
|
1,133
|
|
Deposits
|
|
|
6,412
|
|
|
|
5,164
|
|
Other current assets
|
|
|
6,200
|
|
|
|
10,515
|
|
Total current assets
|
|
|
14,439
|
|
|
|
19,033
|
|
Property and equipment, net
|
|
|
293,933
|
|
|
|
292,526
|
|
Other non-current assets
|
|
|
8,010
|
|
|
|
3,658
|
|
Total assets
|
|
$
|
316,382
|
|
|
$
|
315,217
|
|
Liabilities, Convertible Preferred Stock and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
86,601
|
|
|
$
|
68,648
|
|
Accrued expenses and other current liabilities
|
|
|
52,382
|
|
|
|
48,265
|
|
Related party accrued interest
|
|
|
78,583
|
|
|
|
42,352
|
|
Accrued interest
|
|
|
39,707
|
|
|
|
17,459
|
|
Related party notes payable
|
|
|
299,403
|
|
|
|
286,583
|
|
Notes payable, current portion
|
|
|
182,151
|
|
|
|
126,922
|
|
Vendor payables in trust
|
|
|
110,224
|
|
|
|
115,900
|
|
Total current liabilities
|
|
|
849,051
|
|
|
|
706,129
|
|
Capital leases, less current portion
|
|
|
36,501
|
|
|
|
41,162
|
|
Other liability, less current portion
|
|
|
1,000
|
|
|
|
7,475
|
|
Deferred rent, less current portion
|
|
|
—
|
|
|
|
113
|
|
Notes payable, less current portion
|
|
|
9,168
|
|
|
|
—
|
|
Total liabilities
|
|
|
895,720
|
|
|
|
754,879
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock, $0.00001 par value; 470,588,235 shares authorized, issued and outstanding as of December 31, 2020 and 2019; redemption amount of $800,000 as of December 31, 2020 and 2019
|
|
|
724,823
|
|
|
|
724,823
|
|
Class B convertible preferred stock, $0.00001 par value; 600,000,000 shares authorized; 452,941,177 and 600,000,000 shares issued and outstanding as of December 31, 2020 and 2019, respectively; redemption amount of $1,106,988 and $1,466,400 as of December 31, 2020 and 2019, respectively
|
|
|
697,643
|
|
|
|
924,149
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Class A ordinary stock, $0.00001 par value; 400,000,000 shares authorized; 41,234,448 and 40,879,124 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
—
|
|
|
|
—
|
|
Class B ordinary stock, $0.00001 par value; 180,000,000 and 100,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 147,058,823 and zero shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
1
|
|
|
|
—
|
|
Additional paid-in capital
|
|
|
395,308
|
|
|
|
158,704
|
|
Accumulated other comprehensive loss
|
|
|
(5,974
|
)
|
|
|
(3,284
|
)
|
Accumulated deficit
|
|
|
(2,391,139
|
)
|
|
|
(2,244,054
|
)
|
Total stockholders’ deficit
|
|
|
(2,001,804
|
)
|
|
|
(2,088,634
|
)
|
Total liabilities, convertible preferred stock, and stockholders’ deficit
|
|
$
|
316,382
|
|
|
$
|
315,217
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
2020
|
|
|
2019
|
|
Operating expenses
|
|
|
|
|
|
|
Research and development
|
|
$
|
20,186
|
|
|
$
|
28,278
|
|
Sales and marketing
|
|
|
3,672
|
|
|
|
5,297
|
|
General and administrative
|
|
|
41,071
|
|
|
|
71,167
|
|
Loss on disposal of asset held for sale
|
|
|
—
|
|
|
|
12,138
|
|
Gain on cancellation of land use rights
|
|
|
—
|
|
|
|
(11,467
|
)
|
Loss on disposal of property and equipment
|
|
|
10
|
|
|
|
4,843
|
|
Total operating expenses
|
|
|
64,939
|
|
|
|
110,256
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(64,939
|
)
|
|
|
(110,256
|
)
|
Gain on expiration of put option
|
|
|
—
|
|
|
|
43,239
|
|
Change in fair value measurement of related party notes payable and notes payable
|
|
|
(8,948
|
)
|
|
|
(15,183
|
)
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
3,872
|
|
|
|
—
|
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net
|
|
|
2,107
|
|
|
|
—
|
|
Other expense, net
|
|
|
(5,455
|
)
|
|
|
—
|
|
Related party interest expense
|
|
|
(38,995
|
)
|
|
|
(34,074
|
)
|
Interest expense
|
|
|
(34,724
|
)
|
|
|
(25,918
|
)
|
Loss before income taxes
|
|
|
(147,082
|
)
|
|
|
(142,192
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Net loss
|
|
|
(147,085
|
)
|
|
|
(142,195
|
)
|
Less: Net income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
997
|
|
Net loss attributable to FF Intelligent Mobility Global Holdings Ltd.
|
|
$
|
(147,085
|
)
|
|
$
|
(143,192
|
)
|
|
|
|
|
|
|
|
|
|
Per share information attributable to FF Intelligent Mobility Global Holdings Ltd.
|
|
|
|
|
|
|
|
|
Net loss per ordinary share – Class A and Class B – basic and diluted
|
|
$
|
(2.99
|
)
|
|
$
|
(3.52
|
)
|
Weighted average ordinary shares outstanding – Class A and Class B – basic and diluted
|
|
|
49,261,411
|
|
|
|
40,706,633
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(147,085
|
)
|
|
$
|
(142,195
|
)
|
Change in foreign currency translation adjustment
|
|
|
(2,690
|
)
|
|
|
(2,533
|
)
|
Total comprehensive loss
|
|
|
(149,775
|
)
|
|
|
(144,728
|
)
|
Less: total other comprehensive income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
997
|
|
Total other comprehensive loss attributable to FF Intelligent Mobility Global Holdings Ltd.
|
|
$
|
(149,775
|
)
|
|
$
|
(145,725
|
)
|
The accompanying notes are an integral part of
these consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Statements of Convertible Preferred Stock and Stockholders’ Deficit
Years Ended December 31, 2020 and 2019
|
|
Convertible Preferred Stock
|
|
|
Ordinary Stock
|
|
|
Additional
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preference
|
|
|
Class B
|
|
|
Class A
|
|
|
Class B
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholder’s
|
|
|
Noncontrolling
|
|
|
|
|
(in thousands, except share data)
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Deficit
|
|
|
interest
|
|
|
Total
|
|
Balance as of December 31, 2018
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,485,155
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
140,881
|
|
|
$
|
(751
|
)
|
|
$
|
(2,100,862
|
)
|
|
$
|
(1,960,732
|
)
|
|
$
|
4,556
|
|
|
$
|
(1,956,176
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,610
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,610
|
|
|
|
—
|
|
|
|
4,610
|
|
Contributions from Redeemable Preference Stockholder
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,598
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,598
|
|
|
|
—
|
|
|
|
7,598
|
|
Exercise of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
393,969
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62
|
|
|
|
—
|
|
|
|
62
|
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,533
|
)
|
|
|
—
|
|
|
|
(2,533
|
)
|
|
|
—
|
|
|
|
(2,533
|
)
|
Net (loss) income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(143,192
|
)
|
|
|
(143,192
|
)
|
|
|
997
|
|
|
|
(142,195
|
)
|
Distribution to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,602
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,602
|
|
|
|
(8,602
|
)
|
|
|
—
|
|
Extinguishment of noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,049
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,049
|
)
|
|
|
3,049
|
|
|
|
—
|
|
Balance as of
December 31, 2019
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
600,000,000
|
|
|
$
|
924,149
|
|
|
|
40,879,124
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
158,704
|
|
|
$
|
(3,284
|
)
|
|
$
|
(2,244,054
|
)
|
|
$
|
(2,088,634
|
)
|
|
$
|
—
|
|
|
$
|
(2,088,634
|
)
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,505
|
|
|
|
—
|
|
|
|
9,505
|
|
Conversion of
Class B convertible preferred stock for Class B ordinary stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(147,058,823
|
)
|
|
|
(226,506
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
147,058,823
|
|
|
|
1
|
|
|
|
226,505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
226,506
|
|
|
|
—
|
|
|
|
226,506
|
|
Exercise of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
383,994
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
115
|
|
|
|
—
|
|
|
|
—
|
|
|
|
115
|
|
|
|
—
|
|
|
|
115
|
|
Issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
490
|
|
|
|
|
|
|
|
490
|
|
Purchase of ordinary stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,670
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(11
|
)
|
Foreign currency translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,690
|
)
|
|
|
—
|
|
|
|
(2,690
|
)
|
|
|
—
|
|
|
|
(2,690
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(147,085
|
)
|
|
|
(147,085
|
)
|
|
|
—
|
|
|
|
(147,085
|
)
|
Balance as of December 31, 2020
|
|
|
470,588,235
|
|
|
$
|
724,823
|
|
|
|
452,941,177
|
|
|
$
|
697,643
|
|
|
|
41,234,448
|
|
|
$
|
—
|
|
|
|
147,058,823
|
|
|
$
|
1
|
|
|
$
|
395,308
|
|
|
$
|
(5,974
|
)
|
|
$
|
(2,391,139
|
)
|
|
$
|
(2,001,804
|
)
|
|
$
|
—
|
|
|
$
|
(2,001,804
|
)
|
The accompanying notes are an integral part of
these consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
(in thousands)
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(147,085
|
)
|
|
$
|
(142,195
|
)
|
Adjustments to reconcile net loss including noncontrolling interest to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
3,517
|
|
|
|
5,188
|
|
Stock-based compensation
|
|
|
9,505
|
|
|
|
4,610
|
|
Gain on expiration of put option
|
|
|
—
|
|
|
|
(43,239
|
)
|
Gain on cancellation of land use rights
|
|
|
—
|
|
|
|
(11,467
|
)
|
Loss on disposal of asset held for sale
|
|
|
—
|
|
|
|
12,138
|
|
Loss on disposal of property and equipment
|
|
|
10
|
|
|
|
4,843
|
|
Loss (gain) on foreign exchange
|
|
|
4,108
|
|
|
|
(11
|
)
|
Non-cash interest expense
|
|
|
66,020
|
|
|
|
50,807
|
|
Change in fair value measurement of related party notes payable and notes payable
|
|
|
8,948
|
|
|
|
15,183
|
|
Change in fair value measurement of The9 Conditional Obligation
|
|
|
(3,872
|
)
|
|
|
—
|
|
Amortization of related party notes payable and notes payable issuance costs
|
|
|
—
|
|
|
|
834
|
|
Gain on extinguishment of related party notes payable, notes payable and vendor payables in trust, net
|
|
|
(2,107
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(1,236
|
)
|
|
|
9,143
|
|
Other non-current assets
|
|
|
(1,986
|
)
|
|
|
(600
|
)
|
Transfer of payables to vendor trust
|
|
|
(174
|
)
|
|
|
(115,900
|
)
|
Accounts payable
|
|
|
11,500
|
|
|
|
48,229
|
|
Accrued expenses and other current liabilities
|
|
|
11,974
|
|
|
|
(25,156
|
)
|
Deferred rent
|
|
|
(287
|
)
|
|
|
(2,202
|
)
|
Net cash used in operating activities
|
|
$
|
(41,165
|
)
|
|
$
|
(189,795
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sale of land
|
|
|
—
|
|
|
|
16,900
|
|
Payments for equipment
|
|
|
(607
|
)
|
|
|
(2,256
|
)
|
Proceeds from cancellation of land use rights
|
|
|
—
|
|
|
|
15,902
|
|
Issuance of notes receivable
|
|
|
—
|
|
|
|
(4,260
|
)
|
Proceeds from payments on notes receivable
|
|
|
3,600
|
|
|
|
620
|
|
Net cash provided by investing activities
|
|
$
|
2,993
|
|
|
$
|
26,906
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Contributions of capital from Redeemable Preferred Stockholder
|
|
|
—
|
|
|
|
1,383
|
|
Proceeds from related party notes payable
|
|
|
10,256
|
|
|
|
30,622
|
|
Proceeds from notes payable
|
|
|
40,895
|
|
|
|
55,272
|
|
Payments of related party notes payable
|
|
|
(1,969
|
)
|
|
|
(1,500
|
)
|
Payments of notes payable
|
|
|
(1,652
|
)
|
|
|
(58,623
|
)
|
Proceeds from the issuance of The9 Conditional Obligation
|
|
|
—
|
|
|
|
5,000
|
|
Transfer of payables to vendor trust
|
|
|
174
|
|
|
|
115,900
|
|
Payments of payables in vendor trust
|
|
|
(4,500
|
)
|
|
|
—
|
|
Proceeds from failed sale-leaseback
|
|
|
—
|
|
|
|
29,000
|
|
Payments of capital lease obligations
|
|
|
(1,926
|
)
|
|
|
(1,435
|
)
|
Distribution to acquire noncontrolling interest
|
|
|
—
|
|
|
|
(8,602
|
)
|
Proceeds from exercise of stock options
|
|
|
115
|
|
|
|
62
|
|
Payments of notes payable issuance costs
|
|
|
(4,562
|
)
|
|
|
(4,462
|
)
|
Net cash provided by financing activities
|
|
$
|
36,831
|
|
|
$
|
162,617
|
|
Effect of exchange rate changes on cash and restricted cash
|
|
|
(186
|
)
|
|
|
(3,906
|
)
|
Net decrease in cash and restricted cash
|
|
$
|
(1,527
|
)
|
|
$
|
(4,178
|
)
|
Cash and restricted cash, beginning of period
|
|
|
3,354
|
|
|
|
7,532
|
|
Cash and restricted cash, end of period
|
|
$
|
1,827
|
|
|
$
|
3,354
|
|
FF Intelligent Mobility Global Holdings Ltd.
Consolidated Statements of Cash Flows — (Continued)
Years Ended December 31, 2020 and 2019
The following table provides a reconciliation of
cash and restricted cash reported within the consolidated balance sheets that aggregate to the total of the same such amounts shown in
the consolidated statements of cash flows:
|
|
2020
|
|
|
2019
|
|
Cash
|
|
$
|
2,221
|
|
|
$
|
5,664
|
|
Restricted cash
|
|
|
1,133
|
|
|
|
1,868
|
|
Total cash and restricted cash beginning of period
|
|
$
|
3,354
|
|
|
$
|
7,532
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
1,124
|
|
|
$
|
2,221
|
|
Restricted cash
|
|
|
703
|
|
|
|
1,133
|
|
Total cash and restricted cash
|
|
$
|
1,827
|
|
|
$
|
3,354
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash investing and financing activities
|
|
|
|
|
|
|
|
|
Property and equipment recorded in accounts payable and accrued expenses
|
|
$
|
3,817
|
|
|
$
|
10,027
|
|
Forgiveness of related party debt
|
|
|
—
|
|
|
|
6,215
|
|
Conversion of customer deposit to notes payable
|
|
|
11,635
|
|
|
|
—
|
|
Extinguishment of noncontrolling interest
|
|
|
—
|
|
|
|
3,049
|
|
Purchase of common stock
|
|
|
11
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
3,137
|
|
|
$
|
3,670
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
1.
|
Nature of Business and Organization
|
Nature of Business and Organization
FF Intelligent Mobility Global Holdings Ltd. (the
“Company”) is an exempted company formed under the laws of the Cayman Islands founded in 2014. Headquartered in Los Angeles,
California, the Company designs and engineers next-generation smart electric connected vehicles. The Company expects to manufacture vehicles
at the Company’s production facility in Hanford, California and has additional engineering, sales, and operations capabilities in
China. The Company has created innovations in technology, products, and a user centered business model that are being incorporated into
its planned electric vehicle platform.
The Company changed its name from Smart King Ltd.
to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020.
The Company’s operations are conducted through
its wholly-owned subsidiaries FF Inc. and FF Hong Kong Holding Ltd.
|
2.
|
Liquidity and Capital Resources and Going Concern
|
The Company has evaluated whether there are certain
conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going
concern within one year after the date that the consolidated financial statements are issued.
Since inception, the Company has incurred cumulative
losses from operations, negative cash flows from operating activities and has an accumulated deficit of $2,391,139 as of December 31,
2020. As of the date of this report, there were $19,196 in related party notes payable and notes payable in default. The Company has funded
its operations and capital needs primarily through the net proceeds received from capital contributions, the issuance of related party
notes payable and notes payable (Notes 8 and 9) and the sale of preferred and ordinary stock (Note 12). The vast majority of related party
notes payable and notes payable and equity have been funded by entities controlled or previously controlled by the Company’s founder
and former CEO. Since its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering,
design and development of its planned electric vehicle platform, development of initial electric vehicle models, and capital raising.
The achievement of the Company’s operating plans and maintenance of an adequate level of liquidity are subject to various risks
associated with the ability to continue to successfully close additional sources of funding, and/or refinance existing related party notes
payable and notes payable arrangements. The Company’s forecasts and projections of working capital reflect significant judgment
and estimates for which there are inherent risks and uncertainties. Management’s plans include the continued development of its
electric vehicle platform and bringing electric vehicle models to market. The Company expects to continue to generate significant operating
losses for the foreseeable future. The plans are dependent on the Company being able to continue to raise significant amounts of capital
through the issuance of additional notes payable and equity securities.
There can be no assurance that the Company will
be successful in achieving its strategic plans, that the Company’s future capital raises will be sufficient to support its ongoing
operations, or that any additional financing will be available in a timely manner or on acceptable terms, if at all. If the Company is
unable to raise sufficient financing or events or circumstances occur such that the Company does not meet its strategic plans, the Company
will be required to reduce certain discretionary spending, alter or scale back vehicle development programs, be unable to develop new
or enhanced production methods, or be unable to fund capital expenditures, which would have a material adverse effect on the Company’s
financial position, results of operations, cash flows, and ability to achieve its intended business objectives. Based on its recurring
losses from operations since inception, expectation of continued operating losses for the foreseeable future, and the need to raise additional
capital to finance its future operations, as of April 5, 2021, the date the consolidated financial statements for the year ended December
31, 2020, were available to be issued, the Company has concluded that there is substantial doubt about its ability to continue as a going
concern for a period of one year from the date that these consolidated financial statements are issued.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
2.
|
Liquidity and Capital Resources and Going Concern (cont.)
|
The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements
have been prepared on a basis that assumes the Company 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.
COVID-19 Pandemic
The World Health Organization declared a global
emergency on March 11, 2020 with respect to the outbreak of a novel strain of coronavirus, or COVID-19 pandemic. There are many uncertainties
regarding the current global COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its
business, including the impact on its employees, suppliers, vendors, and business partners.
The pandemic has resulted in government authorities
implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place
orders, and business shutdowns. For example, the Company’s employees based in California have been subject to stay-at-home orders
from state and local governments. These measures may adversely impact the Company’s employees and operations and the operations
of suppliers and business partners and could negatively impact the construction schedule of the Company’s manufacturing facility
and the production schedule of the FF 91 vehicle. In addition, various aspects of the Company’s business and manufacturing facility
cannot be conducted remotely. These measures by government authorities may remain in place for a significant period of time and could
adversely affect the Company’s construction and manufacturing plans, sales and marketing activities, and business operations.
The evolution of the virus is unpredictable. A COVID-19
vaccine is being administered, however, the speed and extent of vaccination is unpredictable and any resurgence may slow down the Company’s
ability to ramp-up its production program to satisfy investors and potential customers. Any delay to production will delay the Company’s
ability to launch the FF 91 vehicle and begin generating revenue. The COVID-19 pandemic could limit the ability of suppliers and business
partners to perform, including third party suppliers’ ability to provide components and materials used in the FF 91 vehicle. The
Company may also experience an increase in the cost of raw materials. At the time of this report, the Company does not anticipate any
material impairments as a result of COVID-19, however, the Company will continue to evaluate the impacts of COVID-19 on an ongoing basis.
As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and
future results of operations.
|
3.
|
Summary of Significant Accounting Policies
|
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements
have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries, LeSEE Automotive (Beijing) Co. Ltd. (“LeSEE”),
formerly a variable interest entity (“VIE”), and now a wholly-owned subsidiary and The9 joint venture for which the Company
is the primary beneficiary.
In accordance with the provisions of Accounting
Standards Codification (“ASC”) 810, Consolidation, the Company consolidates any VIE of which the Company is the primary
beneficiary. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an
entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve
controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct
the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the
VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant
to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when it is not considered the primary
beneficiary. The Company evaluates its relationships with its VIEs on an ongoing basis to ensure that the Company continues to be the
primary beneficiary.
All intercompany transactions and balances have
been eliminated upon consolidation.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Variable Interest Entity and Joint Venture
In November 2017, as part of a broader corporate
reorganization, and to facilitate third-party investment, the Company incorporated its top-level holding company, Smart King, Ltd., in
the Cayman Islands to enable effective control over the Company’s Chinese operating entity, FF Hong Kong Holding Ltd., and
its subsidiaries without direct equity ownership. The Company entered into a series of contractual arrangements (“VIE contractual
arrangements”) with LeSEE and LeSEE Zhile Technology Co., Ltd. (“LeSEE Zhile”), a related party of the Company, to enable
the Company to exercise effective control over LeSEE and its subsidiaries, to receive substantially all of the economic benefits of such
entities, and to have an exclusive option to purchase all or part of the equity interests in LeSEE.
LeSEE, an entity for which the Company was the primary
beneficiary, is in the early stages of developing and producing electric vehicles for the Chinese market. LeSEE consolidates an 80% owned
subsidiary, LeSEE Automotive (Zhejiang) Co., Ltd. (“LeSEE Zhejiang”), resulting in a 20% noncontrolling interest. LeSEE Zhejiang
held the land use rights in the city of Moganshan. See Note 6 Property and Equipment, Net.
On November 18, 2019, once the land use rights were
cancelled and reverted to the government of Zhejiang, the Company purchased the 20% noncontrolling interest from the noncontrolling interest
holder for $8,602 and the difference between the consideration paid and the related carrying value of the noncontrolling interest acquired
of $3,049 was recorded in additional-paid-in-capital upon extinguishment of the noncontrolling interest. The carrying value of LeSEE’s
assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheet as of December
31, 2019 are as follows:
|
|
2019
|
|
Cash
|
|
$
|
843
|
|
Restricted cash
|
|
|
493
|
|
Deposits
|
|
|
118
|
|
Other current assets
|
|
|
2,001
|
|
Property and equipment, net
|
|
|
2,713
|
|
Other non-current assets
|
|
|
23
|
|
Accounts payable
|
|
|
3,996
|
|
Accrued expenses and other current liabilities
|
|
|
16,504
|
|
Accrued interest
|
|
|
1,554
|
|
Related party notes payable
|
|
|
8,601
|
|
Notes payable
|
|
|
7,758
|
|
On August 5, 2020, an equity transfer agreement
(the “Equity Transfer Agreement”) was entered into between the Company and LeSEE Zhile, pursuant to which, LeSEE Zhile transferred
48% equity of LeSEE to the Company for no consideration. After the transfer, LeSEE Zhile owns 1% of LeSEE and the Company owns 99% of
LeSEE, making LeSEE a majority-owned subsidiary of the Company and no longer a VIE since LeSEE is consolidated through majority voting
and equity interests.
On March 24, 2019, the Company entered into
a Joint Venture Agreement (“JVA”) with The9 Limited (“The9”). Pursuant to the JVA, the Company and The9 agreed
to establish an equity joint venture in Hong Kong, which would in turn establish a wholly-owned subsidiary in China, intended to
engage in the business of manufacturing, marketing, selling and distributing the planned Faraday Future Icon V9 model electric vehicle
in China. The Company and The9 would each be 50% owners of the joint venture. The9 made a $5,000 non-refundable initial deposit (“The9
Conditional Obligation”) to the Company to participate in the joint venture. The9 has the right to convert the initial deposit into
various classes of stock in the Company. For accounting purposes, the deposit is a financial instrument that embodies a conditional obligation
that the issuer may settle by issuing a variable number of shares. The conditional obligation is measured at fair value and remeasured
at each reporting period and represents a Level 3 financial instrument under the fair value hierarchy. See
Note 4 Fair Value of Financial Instruments. The fair value of the conditional obligation was $1,128 and $5,000 as of December 31, 2020
and 2019, respectively, and was recorded in current liabilities on the consolidated balance sheets. Neither the Company nor The9 have
made contributions to the joint venture as of December 31, 2020. The joint venture has yet to commence business activities, and on November
22, 2020, the parties entered into an agreement to convert the initial deposit into Class B Ordinary Stock in the Company. The initial
deposit was converted on February 23, 2021.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
In September 2020, the Company entered into a non-binding
memorandum of understanding with a tier-1 city in China, affiliated entities of which are subscribers in the Private Placement, pursuant
to which the Company established a joint venture company (the “JV”) in China. This joint venture is managed and controlled
by the Company. The strategic partnership is subject to the condition that the Company will receive capital of no less than $500,000 through
the closing of the Merger Agreement (defined below) and related transactions and agreement by the parties by binding definitive agreement.
In December 2020, the JV was established as an entity wholly-owned by the Company, which will primarily engage in the activities contemplated
in the memorandum of understanding. There has been no activity related to or contributions of assets into the JV by either party during
the year ended December 31, 2020.
Foreign Currency
The Company determines the functional and reporting
currency of each of its international subsidiaries based on the primary currency in which they operate. The functional currency of the
Company’s foreign subsidiaries in China is their local currency, Chinese yuan. For foreign subsidiaries where the functional currency
is their local currency, assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date,
stockholders’ deficit is translated at the applicable historical exchange rate, and expenses are translated using the average exchange
rates during the period. The effect of exchange rate changes resulting from the translation of the foreign subsidiary financial statements
is accounted for as a component of accumulated other comprehensive loss on the consolidated balance sheets.
Use of Estimates
The preparation of the consolidated financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent liabilities, and the reported amounts of expenses during the reporting period. The Company bases these estimates
on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning
the carrying values of assets and liabilities that are not readily available from other sources.
On an ongoing basis, management evaluates its estimates,
including those related to the: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities;
(iii) recognition and disclosure of contingent liabilities, including litigation reserves; (iv) fair value of related party
notes payable and notes payable and (v) estimated useful lives of long-lived assets. These estimates are based on historical data
and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Such estimates often require the selection of appropriate valuation methodologies and models and may involve significant judgment in evaluating
ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs,
or circumstances. Given the global economic climate and unpredictable nature and unknown duration of the COVID-19 pandemic, estimates
are subject to additional volatility.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Revisions
In connection with the preparation of the Company’s
2020 year-end consolidated financial statements, errors primarily related to the extinguishment of a noncontrolling interest of $8,602,
a misclassification related to the payables in the Vendor Trust of $10,737, and a misclassification of cash flows related to accounts
payable and accrued expenses and other current liabilities of $8,877 within operating cash flows were identified. The errors resulted
in an increase to the distribution to noncontrolling interest of $8,602 and extinguishment of noncontrolling interest of $3,049, resulting
in a net impact to additional paid-in capital and an increase to vendor payables in trust and decrease to accounts payable of $10,737.
The Company has concluded that such errors were not material to the previously issued financial statements. However, the consolidated
balance sheet as of December 31, 2019 and the consolidated statements of operations and comprehensive loss, of convertible preferred stock
and stockholders’ deficit, and of cash flows for the year ended December 31, 2019 have been revised from previously reported amounts
to correct for these errors. These revisions resulted in the following changes to previously reported amounts as of and for the year ended
December 31, 2019:
|
|
As Previously Reported
|
|
|
Adjustments
|
|
|
As Revised
|
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
79,385
|
|
|
$
|
(10,737
|
)
|
|
$
|
68,648
|
|
Vendor payables in trust
|
|
|
105,163
|
|
|
|
10,737
|
|
|
|
115,900
|
|
Additional paid-in capital
|
|
|
153,151
|
|
|
|
5,553
|
|
|
|
158,704
|
|
Accumulated deficit
|
|
|
(2,235,452
|
)
|
|
|
(8,602
|
)
|
|
|
(2,244,054
|
)
|
Noncontrolling interest
|
|
|
(3,049
|
)
|
|
|
3,049
|
|
|
|
—
|
|
Total stockholders’ deficit
|
|
|
(2,085,585
|
)
|
|
|
(3,049
|
)
|
|
|
(2,088,634
|
)
|
Consolidated Statement of Convertible Preferred Stock and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
$
|
153,151
|
|
|
$
|
5,553
|
|
|
$
|
158,704
|
|
Accumulated deficit
|
|
|
(2,235,452
|
)
|
|
|
(8,602
|
)
|
|
|
(2,244,054
|
)
|
Noncontrolling interest
|
|
|
(3,049
|
)
|
|
|
3,049
|
|
|
|
—
|
|
Total stockholders’ deficit
|
|
|
(2,085,585
|
)
|
|
|
(3,049
|
)
|
|
|
(2,088,634
|
)
|
Consolidated Statement of Operations and Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to noncontrolling interest
|
|
$
|
(7,605
|
)
|
|
$
|
8,602
|
|
|
$
|
997
|
|
Net loss attributable to FF Intelligent Mobility Global Holdings Ltd.
|
|
|
(134,590
|
)
|
|
|
(8,602
|
)
|
|
|
(143,192
|
)
|
Per share information attributable to FF Intelligent Mobility Global Holdings Ltd. – Net loss per ordinary share basic and diluted
|
|
|
(3.31
|
)
|
|
|
(0.21
|
)
|
|
|
(3.52
|
)
|
Total other comprehensive (loss) income attributable to noncontrolling interest
|
|
|
(7,605
|
)
|
|
|
8,602
|
|
|
|
997
|
|
Total other comprehensive loss attributable to FF Intelligent Mobility Global Holdings Ltd.
|
|
|
(137,123
|
)
|
|
|
(8,602
|
)
|
|
|
(145,725
|
)
|
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of payables to Vendor Trust
|
|
$
|
(105,163
|
)
|
|
$
|
(10,737
|
)
|
|
$
|
(115,900
|
)
|
Accounts payable
|
|
|
42,031
|
|
|
|
6,198
|
|
|
|
48,229
|
|
Accrued expenses and other current liabilities.
|
|
|
(24,881
|
)
|
|
|
(275
|
)
|
|
|
(25,156
|
)
|
Cash flows used in operating activities
|
|
|
(184,981
|
)
|
|
|
(4,814
|
)
|
|
|
(189,795
|
)
|
Payments for equipment
|
|
|
(4,935
|
)
|
|
|
2,679
|
|
|
|
(2,256
|
)
|
Cash flows provided by investing activities
|
|
|
24,227
|
|
|
|
2,679
|
|
|
|
26,906
|
|
Distribution to acquire noncontrolling interest
|
|
|
—
|
|
|
|
(8,602
|
)
|
|
|
(8,602
|
)
|
Transfer of payables to Vendor Trust
|
|
|
105,163
|
|
|
|
10,737
|
|
|
|
115,900
|
|
Cash flows provided by financing activities
|
|
|
160,482
|
|
|
|
2,135
|
|
|
|
162,617
|
|
Supplemental disclosure of noncash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of noncontrolling interest
|
|
|
—
|
|
|
|
3,049
|
|
|
|
3,049
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Cash and restricted cash
Cash consists of cash on deposit with financial
institutions. Restricted cash consists of cash held in escrow related to rent and vendor payments.
Fair Value Measurements
The Company applies the provisions of ASC 820, Fair
Value Measurement, which defines a single authoritative definition of fair value, sets out a framework for measuring fair value and
expands on required disclosures about fair value measurements. The provisions of ASC 820 relate to financial assets and liabilities
as well as other assets and liabilities carried at fair value on a recurring and nonrecurring basis. The standard clarifies that fair
value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions
that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes
a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
|
Level 1
|
|
Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds.
|
|
|
|
|
|
|
|
Level 2
|
|
Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 instruments typically include U.S. government and agency debt securities, and corporate obligations. Valuations are usually obtained through market data of the investment itself as well as market transactions involving comparable assets, liabilities or funds.
|
|
|
|
|
|
|
|
Level 3
|
|
Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
|
ASC 825-10, Financial Instruments, allows
entities to voluntarily choose to measure certain financial assets and liabilities at fair value (“fair value option”). The
fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair
value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company has elected to apply the fair value option to certain related party notes payable and notes payable with conversion
features as discussed in Note 4 Fair Value of Financial Instruments.
Concentration of Credit Risk
Financial instruments, which subject the Company
to concentrations of credit risk, consist primarily of cash, restricted cash, notes receivable and deposits. Substantially all of the
Company’s cash and restricted cash is held at financial institutions located in the United States of America and in the People’s
Republic of China. The Company maintains its cash and restricted cash with major financial institutions. At times, cash and restricted
cash account balances with any one financial institution may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance
limits ($250 per depositor per institution) and China Deposit Insurance Regulations limits (RMB 500 per depositor per institution). Management
believes the financial institutions that hold the Company’s cash and restricted cash are financially sound and, accordingly, minimal
credit risk exists with respect to cash and restricted cash. Cash and restricted cash held by the Company’s non-U.S. subsidiaries
and LeSEE is subject to foreign currency fluctuations against the U.S. dollar. If, however, the U.S. dollar is devalued significantly
against the Chinese yuan, the Company’s cost to develop its business in China could exceed original estimates.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
The Company has notes receivable of $40 and $3,640
and deposits of $6,412 and $5,164 as of December 31, 2020 and 2019, respectively.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated
depreciation and amortization. Expenditures for major renewals and betterments are capitalized, while minor replacements, maintenance
and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related
accumulated depreciation or amortization is removed from the accounts, and any gain or loss is included in the consolidated statements
of operations and comprehensive loss.
Depreciation and amortization on property and equipment
is calculated using the straight-line method over the estimated useful lives of the assets as follows:
|
|
|
Useful Life
(in years)
|
|
Buildings
|
|
|
39
|
|
Building improvements
|
|
|
15
|
|
Computer hardware
|
|
|
5
|
|
Machinery and equipment
|
|
|
5
|
|
Vehicles
|
|
|
5
|
|
Computer software
|
|
|
3
|
|
Leasehold improvements
|
|
|
Shorter of 15 years or term of the lease
|
|
Construction in progress (“CIP”) consists
of the construction of manufacturing facilities and tooling and equipment built to serve the manufacturing of pre-production and production
vehicles. These assets are capitalized and depreciated once put in service. The amounts capitalized in CIP that are held at vendor sites
relate to the completed portion of work-in-progress relating to the manufacturing of the tooling and equipment which generally represent
longer term construction projects tailored specifically to the Company’s needs. The Company may incur storage fees or interest fees
related to CIP which are expensed as incurred. Construction in progress is presented within property and equipment on the consolidated
balance sheets.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, consisting
primarily of property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. The Company performs impairment testing at the asset group level that represents the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is determined
by comparing the forecasted undiscounted cash flows attributable to such assets including any cash flows upon their eventual disposition
to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written
down to their fair value. Assets classified as held for sale are also assessed for impairment and such amounts are determined at the lower
of the carrying amount or fair value, less costs to sell the asset. No impairment charges were recorded during the years ended December
31, 2020 and 2019.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss encompasses
all changes in equity other than those arising from transactions with stockholders. Elements of the Company’s accumulated other
comprehensive loss are reported in the accompanying consolidated statements of convertible preferred stock and stockholders’ deficit
and consists of equity-related foreign currency translation adjustments, which are presented in the accompanying consolidated statements
of operations and comprehensive loss.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Research and Development
Research and development (“R&D”)
costs are expensed as incurred and are primarily comprised of personnel-related costs (including salaries, bonuses, benefits, and stock-based
compensation) for employees focused on R&D activities, other related costs, and depreciation. The Company’s R&D efforts
are focused on design and development of the Company’s electric vehicles and continuing to prepare the Company’s prototype
electric vehicle to achieve industry standards. Advanced payments for future R&D activities have been classified as deposits on the
consolidated balance sheets.
Sales and Marketing
Sales and marketing expenses consist primarily of
personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees focused on sales and marketing,
and direct costs associated with sales and marketing activities. Marketing activities include expenses to introduce the brand and the
electric vehicle prototype to the market. The Company expenses its advertising costs as incurred. Advertising costs were immaterial for
the years ended December 31, 2020 and 2019.
Stock-Based Compensation
The Company’s stock-based compensation awards
consist of options granted to employees, directors and non-employees for the purchase of ordinary stock, restricted stock, unrestricted
stock and restricted stock units. The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718,
Compensation — Stock Compensation (“ASC 718”). ASC 718 requires the measurement and recognition of
compensation expense for all stock-based compensation awards based on the grant date fair values of the awards.
The Company estimates the fair value of stock options
using the Black-Scholes option-pricing model. The value of the award is recognized as expense over the requisite service period on a straight-line
basis.
Determining the grant date fair value of the awards
using the Black-Scholes option-pricing model requires management to make assumptions and judgments, including, but not limited
to the following:
Expected term — The estimate of the
expected term of awards was determined in accordance with the simplified method, which estimates the term based on an averaging of the
vesting period and contractual term of the option grant for employee awards and the contractual term of the stock option award agreement
for non-employees.
Expected volatility — Since the Company
is a private entity without sufficient historical data on the volatility of its ordinary stock, the expected volatility is based on the
volatility of similar entities (referred to as “guideline companies”) for a period consistent with the expected term of the
award. In evaluating similarity, the Company considered factors such as industry, stage of life cycle, and size.
Risk-free interest rate — The risk-free
interest rate used to value awards is based on the United States Treasury yield in effect at the time of grant for a period consistent
with the expected term of the award.
Dividend yield — The Company has never
declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future.
Forfeiture rate — The Company
estimates a forfeiture rate to calculate its stock-based compensation expense for its stock-based awards. The forfeiture rate is based
on an analysis of actual forfeitures. The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual
forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated forfeiture rate can have a significant
impact on the Company’s stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period
the estimated forfeiture rate is changed.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Fair value of ordinary stock — Because
there is no public market for the Company’s ordinary stock, the Company’s Board of Directors has determined the fair value
of the Company’s ordinary stock at the time of the grant of stock options by considering a number of objective and subjective factors.
The fair value of the underlying ordinary stock will be determined by the Company’s Board of Directors until such time as the Company’s
ordinary stock commences trading on an established stock exchange or national market system. The fair value has been determined in accordance
with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled Valuation
of Privately Held Company Equity Securities Issued as Compensation. The Company’s Board of Directors grant stock options with
exercise prices equal to the fair value of the Company’s ordinary stock on the date of grant.
Income Taxes
The Company accounts for its income taxes using
the asset and liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the basis
used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates in effect
at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more
likely than not that the Company will not realize those tax assets through future operations. The carrying value of deferred tax assets
reflects an amount that is more likely than not to be realized.
The Company utilizes the guidance in ASC 740-10,
Income Taxes, to account for uncertain tax positions. ASC 740-10 contains a two-step approach to recognizing and measuring
uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates it is more likely than not that the positions will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount which is more likely than not of being realized
and effectively settled. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may
require periodic adjustments and may not accurately forecast actual outcomes.
The Company recognizes interest and penalties on
unrecognized tax benefits as a component of income tax expense. There were no interest or penalties for the years ended December 31,
2020 and 2019.
Net Loss Per Share Attributable to Ordinary Stockholders
The Company has two classes of participating securities
(Redeemable Preference Stock and Class B Preferred Stock) issued and outstanding as of December 31, 2020 and 2019. Losses are not attributed
to the participating security as the Redeemable Preference Stock and Class B Convertible Preferred stockholders are not contractually
obligated to share in the Company’s losses. The Redeemable Preference Stock participation rights are contingent in the event the
Redeemable Preference Stock consents to a dividend distribution, which no consent has been provided through December 31, 2020. The Class
B Preferred Stock participation rights are contingent on the redemption of the Redeemable Preference Stock, which has not been satisfied
as of December 31, 2020.
Basic net loss attributable to ordinary stockholders
per share is calculated by dividing net loss attributable to ordinary stockholders by the weighted-average number of ordinary shares outstanding.
Diluted net loss per share attributable to ordinary
stockholders adjusts the basic net loss per share attributable to ordinary stockholders and the weighted-average number of shares of ordinary
stock outstanding for the potentially dilutive impact of stock options, using the treasury stock method.
The net loss per ordinary stock was the same for
the Class A and Class B ordinary shares because they are entitled to the same liquidation and dividend rights and are therefore combined
on the consolidated statements of operations and comprehensive loss.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Because the Company reported net losses for all
periods presented, all potentially dilutive ordinary stock equivalents are antidilutive for those periods and have been excluded from
the calculation of net loss per share.
The following table presents the number of anti-dilutive
shares excluded from the calculation of diluted net loss per share as of December 31:
|
|
2020
|
|
|
2019
|
|
Stock-based compensation awards – employees
|
|
|
215,769,994
|
|
|
|
151,330,989
|
|
Stock-based compensation awards – non-employees
|
|
|
45,932,116
|
|
|
|
7,485,000
|
|
Class A Ordinary Stock – warrant
|
|
|
1,930,147
|
|
|
|
—
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
Class B Convertible Preferred Stock
|
|
|
452,941,177
|
|
|
|
600,000,000
|
|
Total
|
|
|
1,187,161,669
|
|
|
|
1,229,404,224
|
|
During 2020, the Company identified an immaterial
error in the anti-dilutive shares excluded from the calculation of diluted net loss per share as of December 31, 2019 and adjusted the
prior year amounts for such error. This correction did not impact the current and previously reported consolidated balance sheet, consolidated
statement of operations and comprehensive loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated
statement of cash flows.
Segments
Operating segments are defined as components of
an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”)
in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive
Officer. The Company has determined that it operates in one operating segment and one reportable segment, as the CODM reviews financial
information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial
performance. Substantially all of the Company’s consolidated operating activities, including its long-lived assets, are located
within the United States of America. Given the Company’s pre-revenue operating stage, it currently has no concentration exposure
to products, services or customers.
Recently Adopted Accounting Pronouncements
In July 2017, the FASB issued ASU No. 2017-11, Earning
Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): (I) Accounting for Certain
Financial Instrument with Down Round Features, (II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”).
The amendments in Part I change the classification analysis of certain equity-linked financial instruments (or embedded features) with
down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments,
a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own
stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II recharacterize
the indefinite deferral of certain Topic 480, Distinguishing Liabilities from Equity, provisions that now are presented as pending
content in the Codification to a scope exception. Those amendments do not have an accounting effect. The amendments in Part I are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2017-11 on
January 1, 2020. The Company has evaluated the effect that ASU 2017-11 had on the Company’s consolidated financial statements and
has determined that the adoption did not have a material impact.
In August 2018, the FASB issued ASU 2018-13, Fair
Value Measurement (Topic 820) (“ASU 2018-13”), which modifies, removes and adds certain disclosure requirements on fair value
measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial
Statements. The ASU is effective for all entities for fiscal years beginning after December
15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs
used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively
for only the most recent annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively
to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The standard did not have a material
impact on the Company’s disclosures.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
3.
|
Summary of Significant Accounting Policies (cont.)
|
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842) (“ASU 2016-02”), which outlines a comprehensive lease accounting model that supersedes the
current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all
leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of
lease arrangements. In July 2018, the FASB issued ASU 2018-11, which provides the option of an additional transition method that
allows entities to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening
balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU No 2020-05 that delayed the effective date
of Topic 842 to fiscal years beginning after December 15, 2021 for private companies. The Company is expected to be an emerging growth
company and will delay adopting Topic 842 until such time the standard applies to private companies. The Company is currently evaluating
the impact the adoption of this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15,
Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”), which
aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements
for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use
software license). The amendments in this update are effective for fiscal periods beginning after December 15, 2020. Early adoption
is permitted. The Company evaluated the effect ASU 2018-15 would have on the Company’s consolidated financial statements and determined
that the adoption will not have a material impact.
In December 2019, the FASB issued ASU No. 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This amendment was issued
to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intraperiod allocation,
and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain areas, including recognizing
deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years,
and interim periods within those years, beginning after December 15, 2020. The Company is currently evaluating the impact the adoption
of this standard will have on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The ASU
simplifies the accounting for convertible instruments by removing certain separation models in ASC 470- 20, Debt — Debt with
Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that
are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial
premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The
convertible debt instruments will be accounted for as a single liability measured at amortized cost. Further, the ASU made amendments
to the earnings per share guidance in Topic 260 for convertible instruments, the most significant impact of which is requiring the use
of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions
to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative
accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is
effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. Adoption of the ASU can either
be on a modified retrospective or full retrospective basis. The Company is currently evaluating the impact the adoption of this standard
will have on its consolidated financial statements.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
4.
|
Fair Value of Financial Instruments
|
Related Party Notes Payable and Notes Payable at Fair Value
The Company entered into a Term Loan Agreement (“TLA”)
with BL Mobility Fundco, LLC as the lender, and Birch Lake Fund Management, LP as the agent and collateral agent and a Note Purchase Agreement
(“NPA”) with certain lenders identified therein, U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management,
LP as the collateral agent both dated as of April 29, 2019. See (7) of Note 9 Notes Payable. Additionally, the Company entered into a
Senior Convertible Promissory Note with a third-party lender, FF Ventures SPV IX LLC, on September 9, 2020 and a Secured Promissory Note
with BL FF Fundco, LLC as the lender on October 9, 2020. See (8) and (9) of Note 9 Notes Payable. The Company has elected to measure these
notes using the fair value option under ASC 825 because of the embedded liquidation premiums with conversion rights that represent embedded
derivatives and would require bifurcation and fair value measurement if this election was not made. The Company will record any changes
in fair value within change in fair value measurement of related party notes payable and notes payable on the consolidated statements
of operations and comprehensive loss. Fair value measurements associated with the related party notes payable and notes payable represent
Level 3 valuations under the fair value hierarchy. The Company employed the yield method to value the related party notes payable and
notes payable. This valuation method uses a discounted cash flow analysis, estimating the expected cash flows for the debt instrument
and then discounting them at the market yield. The market yield is determined using external market yield data, including yields exhibited
by publicly traded bonds by S&P credit rating as well as the borrowing rates of guideline public companies.
The Company recognized $105 and $3,410 due to the
change in fair value of related party notes payable for the years ended December 31, 2020 and 2019, respectively. The Company recognized
$8,842 and $11,773 due to the change in fair value of the notes payable for the years ended December 31, 2020 and 2019, respectively.
The amounts were recorded in change in fair value measurement of related party notes payable and notes payable on the consolidated statements
of operations and comprehensive loss.
The Company settled the TLA by paying the outstanding
principal of $15,000 and the liquidation premium of $6,668 during the year ended December 31, 2019.
Put Option
Pursuant to two put agreements entered into in 2015
(the “Put Agreements”), the Company may have been required to purchase up to 20,325,016 shares of Easy Go, Inc. (“Easy
Go”), a company that operates a ride share platform in China, from certain shareholders of Easy Go in exchange for aggregate consideration
ranging from approximately $232,700 to $290,900 depending on whether the put arrangements are settled for cash or shares of the Company.
As of January 2019, all Put Agreements expired unexercised, resulting in the final remeasurement and removal of the put option liabilities.
At the time of execution, Easy Go and other entities that held Easy Go shares subject to the Put Agreements were affiliated with the Company’s
founder and former CEO through common ownership interests and accordingly, the Put Agreements were related party transactions.
The Put Agreements constituted freestanding
written put options that were accounted for at fair value with changes in fair value recorded in gain on expiration of put option on
the consolidated statements of operations and comprehensive loss. Fair value measurements associated with the Put Agreements
represented Level 3 valuations under the fair value hierarchy. The Company utilized the probability weighted expected return
method to value the Put Agreements, based on the estimated potential liability under different scenarios, assumed probabilities of
exercise, and assumed probability of settlement in stock or cash. Because the Put Agreements effectively represented the exchange of
cash and share ownership of the Company for shares of Easy Go, the underlying fair value of the equity of the Company and Easy Go,
as well as the probabilities associated with likelihood of exercise most significantly impact the value of the Put Agreements. The
determination of fair value associated with the equity of both the Company and Easy Go are subject to a number of various
assumptions given such shares do not trade in active markets. However, the Company utilized recent third-party sales of the equity
securities of Easy Go in determining the inputs to the valuation model. The Company believes that such inputs represent objective
and reliable indications of value. Probabilities associated with the likelihood of exercise were determined based upon an evaluation
of the operating activities, growth, liquidity, achievement of milestones and other factors associated with Easy Go and the
Company.
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
4.
|
Fair
Value of Financial Instruments (cont.)
|
The
Put Agreements expired unexercised during 2019, therefore the Company is no longer subject to the rights and obligations as specified
by the Put Agreements.
The
change in fair value due to the expiration of the Put Agreements resulted in a gain of $43,239 recorded in gain on expiration of put
option on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
Recurring
Fair Value Measurements
Financial
assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement. The following tables present financial assets and liabilities remeasured on a recurring basis as of December 31, 2020
and 2019, by level within the fair value hierarchy:
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Related party notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,627
|
|
Notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
71,064
|
|
The9 Conditional Obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,128
|
|
|
|
December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Related party notes payable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,522
|
|
Notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
32,222
|
|
The9 Conditional Obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
5,000
|
|
The
carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, and accounts payable
approximate fair value because of their short-term nature or contractually defined value.
The
following table summarizes the activity of the Level 3 fair value measurements:
|
|
Related
Party Notes
Payable at
Fair Value
|
|
|
Notes
Payable at
Fair Value
|
|
|
Put
Option
|
|
|
The9
Conditional
Obligation
|
|
Balance as of December 31, 2018
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,239
|
|
|
$
|
—
|
|
Proceeds
|
|
|
18,112
|
|
|
|
42,117
|
|
|
|
—
|
|
|
|
5,000
|
|
Changes in fair value
|
|
|
3,410
|
|
|
|
11,773
|
|
|
|
—
|
|
|
|
—
|
|
Settlements/expiration
|
|
|
—
|
|
|
|
(21,668
|
)
|
|
|
(43,239
|
)
|
|
|
—
|
|
Balance as of December 31, 2019
|
|
|
21,522
|
|
|
|
32,222
|
|
|
|
—
|
|
|
|
5,000
|
|
Proceeds
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
Changes in fair value
|
|
|
105
|
|
|
|
8,843
|
|
|
|
—
|
|
|
|
(3,872
|
)
|
Balance as of December 31, 2020
|
|
$
|
21,627
|
|
|
$
|
71,065
|
|
|
$
|
—
|
|
|
$
|
1,128
|
|
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
5.
|
Deposits
and Other Current Assets
|
Deposits
and other current assets consists of the following as of December 31:
|
|
2020
|
|
|
2019
|
|
Deposits
|
|
|
|
|
|
|
|
|
Deposits for tooling and equipment
|
|
$
|
3,308
|
|
|
$
|
3,385
|
|
Other deposits
|
|
|
3,104
|
|
|
|
1,779
|
|
Total deposits
|
|
$
|
6,412
|
|
|
$
|
5,164
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
Notes receivable
|
|
$
|
40
|
|
|
$
|
3,640
|
|
Due from affiliate
|
|
|
2,034
|
|
|
|
2,715
|
|
Prepaid expenses
|
|
|
762
|
|
|
|
961
|
|
Other current assets
|
|
|
3,364
|
|
|
|
3,199
|
|
Total other current assets
|
|
$
|
6,200
|
|
|
$
|
10,515
|
|
|
6.
|
Property
and Equipment, Net
|
Property
and equipment, net, consists of the following as of December 31:
|
|
2020
|
|
|
2019
|
|
Land
|
|
$
|
13,043
|
|
|
$
|
13,043
|
|
Buildings
|
|
|
21,899
|
|
|
|
21,891
|
|
Building improvements
|
|
|
8,940
|
|
|
|
8,940
|
|
Computer hardware
|
|
|
4,058
|
|
|
|
4,058
|
|
Machinery and equipment
|
|
|
5,451
|
|
|
|
5,375
|
|
Vehicles
|
|
|
583
|
|
|
|
583
|
|
Computer software
|
|
|
7,095
|
|
|
|
7,095
|
|
Leasehold improvements
|
|
|
298
|
|
|
|
298
|
|
Construction in process
|
|
|
251,633
|
|
|
|
247,133
|
|
Less: Accumulated depreciation
|
|
|
(19,067
|
)
|
|
|
(15,890
|
)
|
Total property and equipment, net
|
|
$
|
293,933
|
|
|
$
|
292,526
|
|
The
Company’s construction in process is primarily related to the construction of tooling, machinery and equipment for the Company’s
production facility in Hanford, California. Tooling, machinery and equipment are either held at Company facilities, primarily the Hanford
plant, or at the vendor’s location until the tooling, machinery and equipment is completed. Of the $251,633 and $247,133 of CIP,
$42,734 and $40,309 is held at Company facilities and $208,899 and $206,824 is held at vendor locations as of December 31, 2020 and 2019,
respectively. The Company recorded $1,727 and $1,997 of interest expense related to CIP held at vendor locations during the years ended
December 31, 2020 and 2019, respectively, in interest expense on the consolidated statements of operations and comprehensive loss.
Depreciation
expense totaled $3,177 and $4,835 and amortization expense totaled $340 and $353 for the years ended December 31, 2020 and 2019, respectively.
For the years ended December 31, 2020 and 2019, depreciation and amortization expense of $1,193 and $311, respectively, is classified
within research and development expense and $2,324 and $4,877, respectively, is classified within general and administrative expense
on the consolidated statements of operations and comprehensive loss.
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
6.
|
Property
and Equipment, Net (cont.)
|
The
Company has capital leases in Hanford, California for its main production facility and Gardena, California for its headquarters. See
Note 9 Notes Payable. Capital leases of $43,882 and $43,874 have been capitalized within property and equipment as land, buildings, and
building improvements as of December 31, 2020 and 2019, respectively. Accumulated depreciation was $5,573 and $3,592 as of December 31,
2020 and 2019, respectively.
The
Company recognized $10 and $4,843 related to losses on the disposal of property and equipment in loss on disposal of property and equipment
on the consolidated statements of operations and comprehensive loss during the years ended December 31, 2020 and 2019, respectively.
Land and related improvements for property owned in Las Vegas, Nevada classified as held for sale of $29,038 was sold in 2019 for a total
of $16,900, which resulted in a $12,138 loss on disposal recognized in loss on disposal of asset held for sale on the consolidated statements
of operations and comprehensive loss. The Company originally purchased the 900-acre plot of land in Nevada in 2015 to build a manufacturing
facility. Subsequently, a strategic business decision was made to lease a pre-built factory, which would allow the Company to accelerate
the progression of its vehicle to market.
In
2017, land use rights were granted by the government of Zhejiang (China) for use of a parcel of land located in the city of Moganshan,
based on multiple conditions, including a minimum investment in the construction of a facility of $500,000 and the commencement of construction
before December 31, 2017. Based on the terms of the agreement, the Company could use this parcel of land for 50 years with a 10%
upfront payment of $6,440 that would be refunded to the Company if certain conditions were met. The land use rights were recorded as
an intangible asset at cost plus taxes for $66,332 and was expected to be amortized over a life of 50 years. The value of the land was
agreed with the government of Zhejiang and considered the values for similar size and use properties in the area. In addition, the Company
had recorded a corresponding liability of $57,960 related to the receipt of a government grant to develop the land equal to 90% of the
land cost which was expected to be amortized over 50 years. The Company recognized amortization expense of $735 in general and administrative
expense on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2019. Additionally, the
Company recognized amortization expense of the grant liability of $913 as a reduction of general and administrative expense on the consolidated
statements of operations and comprehensive loss during the year ended December 31, 2019.
During
the year ended December 31, 2019, the Company did not meet all requirements necessary to comply with the agreement; therefore, the land
use rights were cancelled and reverted to the government of Zhejiang. The Company derecognized the land use rights and the land use grant
liability of $58,485 and $51,103, respectively. As part of the cancellation, the Company received cash of $15,902 and incurred tax expense
of $2,947, resulting in a gain of $11,467 recorded in gain on cancellation of land use rights on the consolidated statements of operations
and comprehensive loss during the year ended December 31, 2019.
|
7.
|
Accrued
Expenses and Other Current Liabilities
|
Accrued
expenses and other current liabilities consist of the following as of December 31:
|
|
2020
|
|
|
2019
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
|
|
|
|
Accrued payroll and benefits
|
|
$
|
19,180
|
|
|
$
|
16,717
|
|
Accrued legal contingencies
|
|
|
5,025
|
|
|
|
3,305
|
|
Capital lease, current portion
|
|
|
4,396
|
|
|
|
1,661
|
|
Deferred rent, current portion
|
|
|
3
|
|
|
|
174
|
|
Tooling, machinery and equipment received not invoiced
|
|
|
509
|
|
|
|
1,389
|
|
Deposits from customers
|
|
|
3,523
|
|
|
|
14,923
|
|
Due to affiliates
|
|
|
5,123
|
|
|
|
467
|
|
Other current liabilities
|
|
|
14,623
|
|
|
|
9,629
|
|
|
|
$
|
52,382
|
|
|
$
|
48,265
|
|
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable
|
The
Company has been primarily funded by notes payable and capital contributions from related parties of the Company. As detailed below,
these related parties include employees as well as affiliates and other companies controlled or previously controlled by the Company’s
founder and former CEO.
Related
party notes payable consists of the following as of December 31, 2020 and 2019:
|
|
December 31, 2020
|
|
Note Name
|
|
Contractual
Maturity Date
|
|
Contractual
Interest Rates
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
0%
Coupon
Discount
|
|
|
Loss (Gain) on
Extinguishments
|
|
|
Net
Carrying
Value
|
|
Related party note(1)**
|
|
June 30, 2021
|
|
12.00%
|
|
$
|
240,543
|
|
|
$
|
—
|
|
|
$
|
(861
|
)
|
|
$
|
204
|
|
|
$
|
239,886
|
|
Related party note(2)
|
|
Due on Demand
|
|
15.00%*
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Related party notes – NPA tranche(3)
|
|
October 9, 2021
|
|
10.00%
|
|
|
18,112
|
|
|
|
3,515
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,627
|
|
Related party notes – China(4)
|
|
Due on Demand
|
|
18.00%*
|
|
|
9,196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,196
|
|
Related party notes – China various other(5)
|
|
Due on Demand
|
|
0% coupon, 10.00%
imputed
|
|
|
6,548
|
|
|
|
—
|
|
|
|
(190
|
)
|
|
|
(22
|
)
|
|
|
6,336
|
|
Related party notes – China various other(5)
|
|
Due on Demand
|
|
8.99%
|
|
|
1,410
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
1,407
|
|
Related party notes – Other(6)
|
|
Due on Demand
|
|
0.00%
|
|
|
424
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
424
|
|
Related party notes – Other(6)
|
|
June 30, 2021
|
|
6.99%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
|
|
4,110
|
|
Related party notes – Other(6)
|
|
June 30, 2021
|
|
8.00%
|
|
|
6,452
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
6,417
|
|
|
|
|
|
|
|
$
|
296,845
|
|
|
$
|
3,515
|
|
|
$
|
(1,051
|
)
|
|
$
|
94
|
|
|
$
|
299,403
|
|
|
|
December 31, 2019
|
|
Note Name
|
|
Contractual
Maturity Date
|
|
Contractual Interest
Rates
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
0%
Coupon Discount
|
|
|
Net
Carrying Value
|
|
Related party note(1)**
|
|
December 31, 2020
|
|
12.00%
|
|
$
|
215,940
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215,940
|
|
Related party note(1)**
|
|
Due on Demand
|
|
0% coupon, 10.00% imputed
|
|
|
24,399
|
|
|
|
—
|
|
|
|
(3,557
|
)
|
|
|
20,842
|
|
Related party note(2)
|
|
Due on Demand
|
|
15.00%*
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Related party notes – NPA tranche(3)
|
|
May 31, 2020
|
|
10.00%
|
|
|
18,112
|
|
|
|
3,410
|
|
|
|
—
|
|
|
|
21,522
|
|
Related party notes – China(4)
|
|
Due on Demand
|
|
18.00%*
|
|
|
8,601
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,601
|
|
Related party notes – China various other(5)
|
|
Due on Demand
|
|
0% coupon, 10.00%
imputed
|
|
|
6,125
|
|
|
|
—
|
|
|
|
(607
|
)
|
|
|
5,518
|
|
Related party notes – Other(6)
|
|
December 31, 2020
|
|
6.99%
|
|
|
4,160
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,160
|
|
|
|
|
|
|
|
$
|
287,337
|
|
|
$
|
3,410
|
|
|
$
|
(4,164
|
)
|
|
$
|
286,583
|
|
*
|
Rate
as of December 31, 2020 and 2019, see footnotes for further discussion.
|
|
|
**
|
During
2020, these related party notes payable were restructured into one related party note payable.
|
|
(1)
|
During
2016, Faraday & Future (HK) Limited (“F&F HK”) and Leview Mobile (HK) Ltd. (“Leview”) provided
the Company with cash contributions for a total of $278,866. F&F HK was previously controlled by the Company’s founder and
former CEO and Leview is controlled by the Company’s founder and former CEO. On March 30, 2018, the cash funding was restructured
via an agreement in the form of notes payable bearing an annual interest rate of 12.00% and maturing on December 31, 2020. The notes
payable are unsecured and there are no covenants associated with these notes payable.
|
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
Faraday &
Future (HK) Limited
F&F
HK provided an aggregate principal loan in the total sum of $212,007 to the Company as part of the agreement on March 30, 2018. On June
27, 2019, the Company entered into a note payable cancellation agreement for a portion of the note payable with F&F HK effective
January 1, 2019 and simultaneously the note payable was assumed by a third-party lender. The agreement cancelled $48,374 of principle
and $5,805 of unpaid interest due to F&F HK. There was no loss or gain on the extinguishment of note payable due to the net carrying
amount of the note payable extinguished being equivalent to the reacquisition price of the new note payable. See Note 9 Notes Payable
(1).
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
149,081
|
|
Accrued interest
|
|
|
—
|
|
|
|
19,657
|
|
Interest expense
|
|
|
11,959
|
|
|
|
17,889
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
Leview
Mobile (HK) Ltd
Leview
provided an aggregate principal loan in the total sum of $66,859 to the Company as part of the agreement on March 30, 2018.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
66,859
|
|
Accrued interest
|
|
|
—
|
|
|
|
16,046
|
|
Interest expense
|
|
|
5,363
|
|
|
|
8,023
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
Beijing
Bairui Culture Media, Co. Ltd
Between
December 2017 and July 2018, the Company executed several notes payable agreements with Beijing Bairui Culture Media Co., Ltd.
(“Bairui”) for total principal of $27,329. Bairui was previously controlled by the Company’s founder and former CEO.
Each note payable originally matured one year after its issuance. The notes payable originally bore interest of 0% per annum. The notes
payable are unsecured and there are no covenants associated with these notes payable. During the year ended December 31, 2019, Bairui
forgave $2,487 of the outstanding notes payable.
Due
to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting
in a notes payable discount and a capital contribution due to the related party nature of the arrangements. During the year ended December
31, 2019, the Company recognized interest expense of $3,476 related to the accretion of the discount. As of December 31, 2019, the unamortized
discount was $3,557.
On
January 1, 2020, the Company executed an amendment to consolidate the notes payable into one note for the same amount, extend the maturity
date of this note payable to December 31, 2020, and increased the interest rate from 0% to 12%. Since the cash flows of the modified
note payable exceeded the cash flows of the original notes payable by more than 10%, the modification has been accounted for as an extinguishment
with a loss on extinguishment of $314 recorded in gain
on extinguishment of related party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of
operations and comprehensive loss during the year ended December 31, 2020. The net carrying value of the original note payable of $20,842
was replaced with a note payable with a fair value of $21,156. Additionally, accretion of $2,586 was recorded in interest expense during
the year ended December 31, 2020 related to the unamortized discount.
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
24,399
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
4,073
|
|
|
|
3,476
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
443
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
CYM
Tech Holdings LLC
On
August 28, 2020, the related party notes payable with F&F HK, Leview, and Bairui were restructured to consolidate the lenders and
extend the maturity date through June 30, 2021, transferring both the principal and accrued interest to the new lender, CYM Tech Holdings
LLC, wholly-owned subsidiary of F&F HK.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
240,543
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
64,827
|
|
|
|
—
|
|
Interest expense
|
|
|
10,134
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
The
related party notes payable that were restructured were the following:
Before
Restructuring
Lender
|
|
Principal
|
|
Faraday & Future (HK) Limited
|
|
$
|
149,081
|
|
Leview Mobile (HK) Ltd
|
|
|
66,859
|
|
Beijing Bairui Culture Media, Co. Ltd
|
|
|
24,603
|
|
Total
|
|
$
|
240,543
|
|
After
Restructuring
Lender
|
|
Principal
|
|
CYM Tech Holdings LLC
|
|
$
|
240,543
|
|
The
restructuring has been accounted for as a troubled debt restructuring because the Company has been experiencing financial difficulty
and the conversion mechanism results in the effective borrowing rate decreasing after the restructuring which was determined to be a
concession. Since the future undiscounted cash flows of the restructured note payable exceed the net carrying value of the original notes
payable due to the maturity date extension, the restructuring is accounted for prospectively
with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion
features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain contracts involving an
entity’s own equity.
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
|
(2)
|
On
January 28, 2019 and February 1, 2019, the Company borrowed $7,000 and $3,000, respectively from Evergrande Health Industry
Group Limited (“China Evergrande”). China Evergrande is an affiliate of a significant shareholder of the Company. The notes
payable matured on June 30, 2019 and were in default as of December 31, 2020 and 2019. The notes payable bear interest at an annual rate
of 10.00% if repaid through June 30, 2019 and increased to 15.00% per annum thereafter. The notes payable are unsecured and there
are no covenants associated with these notes payable.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
Accrued interest
|
|
|
2,839
|
|
|
|
1,228
|
|
Interest expense
|
|
|
1,611
|
|
|
|
1,228
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
10,000
|
|
|
(3)
|
The
Company issued 10% interest notes with various related parties through the Note Purchase Agreements (“NPA”).
|
|
●
|
In
November 2018, the Company entered into a note payable with an employee for total principal of $1,650. The note payable had an original
maturity of November 30, 2019 and bore interest at 8.99% per annum. This note was subsequently cancelled and the outstanding principal
and accrued interest totaling $1,650 was contributed to the NPA executed on April 29, 2019. During the year ended December 31, 2019,
the note payable was extinguished and no loss or gain was recognized as the net carrying amount of the note payable equaled the reacquisition
price.
|
In
May 2019, the Company executed a joinder agreement to the NPA with an employee for a convertible note payable with total principal
of $1,650. The note payable matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the NPA. Upon both
a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable
may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00% premium into shares of preferred
stock of the Company issued in a preferred stock offering. The Company elected the fair value option for this note payable. See Note
4 Fair Value of Financial Instruments. The fair value of the note payable was $1,970 and $1,961 as of December 31, 2020 and 2019, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
1,650
|
|
|
$
|
1,650
|
|
Accrued interest
|
|
|
134
|
|
|
|
30
|
|
Interest expense
|
|
|
166
|
|
|
|
30
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
62
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
On
April 29, 2019, the Company executed the NPA with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP
as the collateral agent. The aggregate principal amount that may be issued under the NPA is $200,000.
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
All
obligations due under the NPA bear interest of 10% per annum and are collateralized by a first lien, with second payment priority, on
virtually all tangible and intangible assets of the Company. The NPA contains non-financial covenants and, as of December 31, 2020, the
Company was in compliance with all covenants. See Note 9 Notes Payable (2).
|
●
|
In
July 2019, the Company executed a joinder agreement to the NPA with a company owned by an employee for a convertible note payable
with total principal of $16,462. The note payable originally matured on May 31, 2020 and the interest rate, collateral, and covenants
are the same as the NPA. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the note payable,
the holder of the note payable may elect to convert all of the outstanding principal and accrued interest of the note payable plus a
20.00% premium into shares of preferred stock of the Company issued in a preferred stock offering. The Company elected the fair value
option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $19,657 and $19,561
as of December 31, 2020 and 2019, respectively.
|
|
|
As
of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding
principal
|
|
$
|
16,462
|
|
|
$
|
16,462
|
|
Accrued
interest
|
|
|
2,501
|
|
|
|
828
|
|
Interest
expense
|
|
|
1,674
|
|
|
|
828
|
|
Unrealized
foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized
foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal
payments
|
|
|
—
|
|
|
|
—
|
|
Interest
payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
16,462
|
|
On
October 9, 2020, the Company entered into the Second Amended Restated NPA (“Second A&R NPA”) with Birch Lake and the
lenders which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified
Special Purpose Acquisition Company Merger (“Qualified SPAC Merger”), (iii) the occurrence of a change in control, or (iv)
the acceleration of the NPA obligations pursuant to an event of default, as defined in the NPA, as amended.
|
(4)
|
In
April 2017, the Company executed two separate note payable agreements with Chongqing Leshi Small Loan Co., Ltd. (“Chongqing”),
for total principal of $8,742. Chongqing was previously controlled by the Company’s founder and former CEO and is a small banking
institution. The notes payable matured on April 16, 2018, have no covenants, and are unsecured. The notes bore interest during the
note term at 12.00% per annum. As the notes are in default as of December 31, 2020 and 2019, the outstanding balance is subject
to an 18.00% interest rate per annum.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
9,196
|
|
|
$
|
8,601
|
|
Accrued interest
|
|
|
7,646
|
|
|
|
4,542
|
|
Interest expense
|
|
|
2,641
|
|
|
|
2,201
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
595
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
463
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
(5)
|
The
Company issued the following notes with various related parties.
|
|
●
|
In
April 2017, the Company entered into a $728 note payable with an employee. The note originally matured on October 2, 2017 and
bears interest at 0% per year. The note has no covenants and is unsecured.
|
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
Due
to the note payable having an interest rate below market rates, the Company imputed interest upon executing the note payable resulting
in a note payable discount and a capital contribution due to the related party nature of the arrangement. During the years ended December
31, 2020 and 2019, the Company recognized interest expense of $72 and $65, respectively, related to the accretion of the discount. As
of December 31, 2020 and 2019, the unamortized discount was $33 and $105, respectively.
On
September 25, 2020, the note payable was modified to extend the maturity to June 30, 2021 and add a conversion feature to allow conversion
of the note payable into a variable number of SPAC shares if a Qualified SPAC Merger occurs. Since the conversion feature is substantive
as it is reasonably possible to be exercised, this modification has been accounted for as an extinguishment. The conversion feature does
not require bifurcation because it is clearly and closely related to the debt host since the conversion does not involve a substantial
premium or discount. The modification agreement and the accounting conclusions are collectively referred to as the September 2020 Modification.
The Company recorded a gain on extinguishment of $35 in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $13 was recorded related to the discount created from the gain on extinguishment in interest expense in the consolidated
statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
766
|
|
|
$
|
717
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
72
|
|
|
|
65
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
49
|
|
|
|
11
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
In
2018, the Company entered into a $700 note payable with an employee. The note is payable on demand and bears interest at 0% per year.
The note has no covenants and is unsecured. The note payable was in default as of December 31, 2020.
|
Due
to the note payable having an interest rate below market rates, the Company imputed interest upon entering into the note payable resulting
in a debt discount and a capital contribution due to the related party nature of the arrangement. During the years ended December 31,
2020 and 2019, the Company recognized interest expense of $34 and $31, respectively, related to the accretion of the debt discount. As
of December 31, 2020 and 2019, the unamortized debt discount was $16 and $50, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
737
|
|
|
$
|
689
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
34
|
|
|
|
31
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
48
|
|
|
|
11
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
The
Company has various other unsecured related party borrowings totaling $4,797. These borrowings do not have stated terms or a stated maturity
date. The Company was in default on these notes payable as of December 31, 2020.
|
FF
Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related
Party Notes Payable (cont.)
|
Due
to the notes payable having below market interest rates, the Company imputed interest upon entering into the notes payable resulting
in a debt discount and a capital contribution due to the related party nature of the arrangements. During the years ended December 31,
2020 and 2019, the Company recognized interest expense of $310 and $282, respectively, related to the accretion of the debt discount.
As of December 31, 2020 and 2019, the unamortized debt discount was $141 and $452, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
5,045
|
|
|
$
|
4,719
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
310
|
|
|
|
282
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
326
|
|
|
|
77
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
In
February 2020, the Company borrowed $1,410 through a note payable from an employee. The note originally matured on August 14, 2020, bears
interest at 8.99% per annum, has no covenants and is unsecured.
|
As
a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $5 in gain on extinguishment of related
party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive
loss during the year ended December 31, 2020. Additionally, accretion of $2 was recorded during the year ended December 31, 2020 related
to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive
loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
1,410
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
69
|
|
|
|
—
|
|
Interest expense
|
|
|
111
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
42
|
|
|
|
—
|
|
Proceeds
|
|
|
1,410
|
|
|
|
—
|
|
|
(6)
|
The
Company issued the following notes payable with various related parties.
|
|
●
|
In
November 2019 and December 2019, the Company executed three notes payable with an affiliated company for total principal of
$4,160. The notes payable originally matured on December 31, 2020 and bear interest at 6.99%.
|
As
a result of the September 2020 Modification, the Company recorded a gain on extinguishment of $77 in gain on extinguishment of related
party notes payable, notes payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive
loss during the year ended December 31, 2020. Additionally, accretion of $27 was recorded during the year ended December 31, 2020 related
to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations and comprehensive
loss during the year ended December 31, 2020.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related Party Notes Payable (cont.)
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
4,160
|
|
|
$
|
4,160
|
|
Accrued interest
|
|
|
313
|
|
|
|
20
|
|
Interest expense
|
|
|
293
|
|
|
|
20
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
4,160
|
|
|
●
|
Between January 2020 and August 2020, the Company executed
nine notes payable with an affiliated company for a total of $8,422. The notes payable matured on December 31, 2020 and bear interest
at 8%, besides one note for $500 which matured on June 30, 2020 and bears interest at 8%. The notes have no covenants and are unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $53 in gain on extinguishment of related party notes payable, notes payable, and vendor payables
in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $18 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment
in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
6,452
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
435
|
|
|
|
—
|
|
Interest expense
|
|
|
435
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
1,970
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
8,422
|
|
|
|
—
|
|
|
●
|
In December 2020, the Company entered into two notes payable
for a total of $424. The notes payable do not have a stated maturity or bear interest. The notes have no covenants and are unsecured.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
424
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
424
|
|
|
|
—
|
|
|
●
|
In December 2018, two employees provided the Company
with temporary cash advances $1,500. These borrowings did not have stated terms, no stated interest rate, or stated maturity date. Both
loans were repaid on February 6, 2019.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
8.
|
Related Party Notes Payable (cont.)
|
Fair Value of Related Party Notes Payable Not Carried at
Fair Value
The estimated fair value, using inputs from Level 3 under
the fair value hierarchy, of the Company’s related party notes payable not carried at fair value is $265,663 and $270,690 as of
December 31, 2020 and 2019, respectively.
Schedule of Principal Maturities of Related Party Notes
Payable
The future scheduled principal maturities of related party
notes payable as of December 31, 2020 were as follows:
Years ended December 31,
|
|
|
|
|
Due on demand
|
|
|
$
|
27,578
|
|
2021
|
|
|
|
269,267
|
|
|
|
|
$
|
296,845
|
|
Notes payable consists of the following as of December 31,
2020 and 2019:
|
|
December 31, 2020
|
|
Note Name
|
|
Contractual
Maturity Date
|
|
Contractual Interest Rates
|
|
|
Unpaid Balance
|
|
|
Fair Value Measurement Adjustments
|
|
|
Gain on Extinguishments
|
|
|
Net Carrying Value
|
|
Note payable(1)
|
|
Repayment in 10% increments contingent on a specified fundraising event
|
|
|
12.00
|
%
|
|
$
|
57,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,293
|
|
Notes payable – NPA tranche(2)
|
|
October 6, 2021
|
|
|
10.00
|
%
|
|
|
27,118
|
|
|
|
5,263
|
|
|
|
—
|
|
|
|
32,381
|
|
Notes payable(3)
|
|
June 30, 2021
|
|
|
12.00
|
%
|
|
|
19,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,100
|
|
Notes payable(4)
|
|
June 30, 2021
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
(102
|
)
|
|
|
4,298
|
|
Notes payable(4)
|
|
June 30, 2021
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
2,235
|
|
Notes payable(4)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
300
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
299
|
|
Notes payable – China various other(5)
|
|
Various Dates 2021
|
|
|
6.00
|
%
|
|
|
4,869
|
|
|
|
—
|
|
|
|
(62
|
)
|
|
|
4,807
|
|
Notes payable – China various other(5)
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,677
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
3,659
|
|
Notes payable – China various other(5)
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
4,597
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,597
|
|
Notes payable – various other notes(6)
|
|
June 30, 2021
|
|
|
6.99
|
%
|
|
|
1,380
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
1,370
|
|
Notes payable – various other notes(6)
|
|
Due on Demand
|
|
|
8.99
|
%
|
|
|
380
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
379
|
|
Notes payable – various other notes(7)
|
|
June 30, 2021
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
(29
|
)
|
|
|
1,471
|
|
Note payable(8)
|
|
March 9, 2021
|
|
|
0.00
|
%
|
|
|
15,000
|
|
|
|
2,712
|
|
|
|
—
|
|
|
|
17,712
|
|
Note payable(9)
|
|
October 6, 2021
|
|
|
12.75
|
%
|
|
|
15,000
|
|
|
|
5,972
|
|
|
|
—
|
|
|
|
20,972
|
|
Notes payable(10)
|
|
June 30, 2021
|
|
|
8.00
|
%
|
|
|
11,635
|
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
11,578
|
|
Notes payable(11)
|
|
April 17, 2022
|
|
|
1.00
|
%
|
|
|
9,168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,168
|
|
|
|
|
|
|
|
|
|
$
|
177,657
|
|
|
$
|
13,947
|
|
|
$
|
(285
|
)
|
|
$
|
191,319
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
December 31, 2019
|
|
Note Name
|
|
Contractual
Maturity Date
|
|
Contractual
Interest
Rates
|
|
|
Unpaid
Balance
|
|
|
Fair Value
Measurement
Adjustments
|
|
|
Net
Carrying
Value
|
|
Note payable(1)
|
|
Repayment in 10% increments contingent on a specified fundraising event
|
|
|
12.00
|
%
|
|
$
|
53,185
|
|
|
$
|
—
|
|
|
$
|
53,185
|
|
Notes payable – NPA tranche(2)
|
|
May 31 2020
|
|
|
10.00
|
%
|
|
|
26,218
|
|
|
|
4,935
|
|
|
|
31,153
|
|
Notes payable – NPA tranche(2)
|
|
March 6, 2020
|
|
|
10.00
|
%
|
|
|
900
|
|
|
|
169
|
|
|
|
1,069
|
|
Notes payable(3)
|
|
December 31, 2019
|
|
|
12.00
|
%
|
|
|
12,100
|
|
|
|
—
|
|
|
|
12,100
|
|
Notes payable(3)
|
|
Due on Demand
|
|
|
12.00
|
%
|
|
|
7,000
|
|
|
|
—
|
|
|
|
7,000
|
|
Notes payable(4)
|
|
December 31, 2019
|
|
|
1.52
|
%
|
|
|
4,400
|
|
|
|
—
|
|
|
|
4,400
|
|
Notes payable(4)
|
|
July 1, 2020
|
|
|
8.99
|
%
|
|
|
2,240
|
|
|
|
—
|
|
|
|
2,240
|
|
Notes payable – China various other(5)
|
|
Due on Demand
|
|
|
9.00
|
%
|
|
|
3,440
|
|
|
|
—
|
|
|
|
3,440
|
|
Notes payable – China various other(5)
|
|
Various Dates 2020
|
|
|
6.00
|
%
|
|
|
3,155
|
|
|
|
—
|
|
|
|
3,155
|
|
Notes payable – China various other(5)
|
|
Due on Demand
|
|
|
0.00
|
%
|
|
|
4,300
|
|
|
|
—
|
|
|
|
4,300
|
|
Notes payable – various other notes(6)
|
|
Repayment upon new equity or debt financing in an aggregate amount exceeding $50,000
|
|
|
8.99
|
%
|
|
|
500
|
|
|
|
—
|
|
|
|
500
|
|
Notes payable – various other notes(6)
|
|
Due on Demand
|
|
|
6.99
|
%
|
|
|
180
|
|
|
|
—
|
|
|
|
180
|
|
Notes payable – various other notes(6)
|
|
June 3, 2020
|
|
|
6.99
|
%
|
|
|
2,700
|
|
|
|
—
|
|
|
|
2,700
|
|
Notes payable – various other notes(7)
|
|
December 31, 2019
|
|
|
2.86
|
%
|
|
|
1,500
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
$
|
121,818
|
|
|
$
|
5,104
|
|
|
$
|
126,922
|
|
|
(1)
|
In January 2019, upon extinguishment of a portion of
the Faraday and Future (HK) Limited related party notes payable, the Company borrowed $54,179 through notes payable from a Chinese lender.
The notes payable originally matured on December 31, 2020, bear interest of 12.00% per annum, have no covenants, and are unsecured.
|
On December 31, 2020, the notes payable were modified to extend
the maturity date to June 30, 2021 and add a conversion feature. The conversion feature, which is contingent upon the closing of a Qualified
SPAC Merger, requires the Company to issue Class A ordinary shares to the lender based on a fixed conversion ratios immediately prior
to the closing of the Qualified SPAC Merger to settle the outstanding note payable before being exchanged for Qualified SPAC Merger shares
upon the Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt
restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing
rate decreasing after the restructuring. Since the future undiscounted cash flows of the restructured notes payable exceed the net carrying
value of the original note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain
or loss recorded in the consolidated statements of operations and comprehensive
loss. The Company concluded that the conversion feature does not require bifurcation based on the derivative accounting scope exception
in ASC 815 for certain contracts involving an entity’s own equity.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
57,293
|
|
|
$
|
53,185
|
|
Accrued interest
|
|
|
13,769
|
|
|
|
6,382
|
|
Interest expense
|
|
|
7,387
|
|
|
|
6,382
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
4,108
|
|
|
|
(994
|
)
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
(2)
|
The Company issued 10% interest notes with various third
parties through the NPA:
|
|
●
|
Between November and December 2018, the Company borrowed
$11,100 through notes payable from a U.S. based investment firm. The notes originally matured on December 31, 2019 and bore interest
of 8.99% per annum. In April 2019, these notes payable were cancelled, and the outstanding principal and accrued interest of $8,100
and $481, respectively, was contributed to the NPA executed on April 29, 2019. No loss or gain was recognized during the year ended
December 31, 2019, on contribution as the net carrying amount of the notes payable equaled the reacquisition price.
|
In April 2019, the Company executed a joinder agreement
to the NPA with a U.S. based investment firm for a convertible note payable with total principal of $8,581. The convertible note payable
originally matured on May 31, 2020. The interest rate, collateral, and covenants are the same as the NPA. Upon both a preferred stock
offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the note payable may elect to convert
all of the outstanding principal and accrued interest of the note payable plus a 20% premium into shares of preferred stock of the Company
issued in a preferred stock offering. The Company elected the fair value option for these notes payable. See Note 4 Fair Value of Financial
Instruments. The note payable is collateralized by virtually all tangible and intangible assets of the Company. The NPA contains non-financial
covenants and as of December 31, 2020, the Company was in compliance with all covenants.
The Company elected the fair value option for the notes payable
through the NPA. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $10,246 and $10,198 as of December
31, 2020 and 2019, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
8,581
|
|
|
$
|
8,581
|
|
Accrued interest
|
|
|
1,418
|
|
|
|
557
|
|
Interest expense
|
|
|
861
|
|
|
|
557
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
3,000
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
Between June and August 2019, the Company borrowed $17,637
through notes payable under the NPA. The notes originally matured on May 31, 2020 and bear interest of 10% per annum.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
The fair value of the notes payable were $21,059 and $20,956
as of December 31, 2020 and 2019, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
17,637
|
|
|
$
|
17,637
|
|
Accrued interest
|
|
|
2,637
|
|
|
|
879
|
|
Interest expense
|
|
|
1,768
|
|
|
|
879
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
17,637
|
|
|
●
|
In May 2019, the Company borrowed $900 through a note
payable from a U.S. based investment firm under the NPA. The note payable originally matured on March 6, 2020 and bore interest of 10%
per annum.
|
The fair value of the note payable was $1,075 and $1,069 as
of December 31, 2020 and 2019, respectively.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
900
|
|
|
$
|
900
|
|
Accrued interest
|
|
|
143
|
|
|
|
42
|
|
Interest expense
|
|
|
90
|
|
|
|
42
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
900
|
|
On October 9, 2020, the Company entered into the Second A&R
NPA with Birch Lake and the lender, which extended the maturity dates of all NPA notes to the earliest of (i) October 6, 2021, (ii) the
consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations
pursuant to an event of default, as defined in the NPA, as amended.
|
(3)
|
The Company issued the following notes with an interest rate
of 12.00% per annum.
|
|
●
|
In December 2016, the Company borrowed $10,000 through notes
payable issued by a U.S. based investment firm. The notes originally matured on December 31, 2019, have no covenants and are unsecured.
During the year ended December 31, 2019, the Company converted $600 of accrued interest into the principal balance of the notes payable.
|
On November 24, 2020, the note payable was modified to extend
the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger,
requires the Company to issue Class A ordinary Stock to the lender based on a fixed conversion ratio immediately prior to the closing
of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the
Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled
debt restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective
borrowing rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows
of the restructured notes payable exceed the net carrying value of the original
note payable due to the maturity date extension, the modification has been accounted for prospectively with no gain or loss recorded in
the consolidated statements of operations and comprehensive loss. The Company concluded that the conversion features do not require bifurcation
based on the derivative accounting scope exception in ASC 815 for certain contracts involving an entity’s own equity.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
10,600
|
|
|
$
|
10,600
|
|
Accrued interest
|
|
|
2,547
|
|
|
|
1,272
|
|
Interest expense
|
|
|
1,275
|
|
|
|
1,272
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
600
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
During 2020, the Company identified an immaterial error in
the disclosure of accrued interest as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not
impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement
of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
|
●
|
In December 2016, the Company borrowed $1,500 through
a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, has no covenants and is unsecured.
|
On September 25, 2020, the note payable was modified to extend
the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger,
requires the Company to issue Class A ordinary stock to the lender based on a fixed conversion ratio immediately prior to the closing
of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the
Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt
restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing
rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured
notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been
accounted for prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company
concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain
contracts involving an entity’s own equity.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
Accrued interest
|
|
|
587
|
|
|
|
204
|
|
Interest expense
|
|
|
203
|
|
|
|
204
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
●
|
In June 2016, the Company borrowed $20,000 through a
note payable from a U.S. based investment firm. The note originally matured on October 15, 2019, has no covenants and is unsecured. The
Company made principal payments of $13,000 in 2018.
|
On November 24, 2020, the note payable was modified to extend
the maturity date to June 30, 2021 and add a conversion feature. This feature, contingent upon the closing of a Qualified SPAC Merger,
requires the Company to issue Class A ordinary stock to the lender based on a fixed conversion ratio immediately prior to the closing
of the Qualified SPAC Merger to settle the outstanding notes payable before being exchanged for Qualified SPAC Merger shares upon the
Qualified SPAC Merger closing date.
The modification has been accounted for as a troubled debt
restructuring because the Company is experiencing financial difficulty and the conversion mechanism results in the effective borrowing
rate decreasing after the restructuring which was determined to be a concession. Since the future undiscounted cash flows of the restructured
notes payable exceed the net carrying value of the original note payable due to the maturity date extension, the modification has been
accounted for prospectively with no gain or loss recorded in the consolidated statements of operations and comprehensive loss. The Company
concluded that the conversion features do not require bifurcation based on the derivative accounting scope exception in ASC 815 for certain
contracts involving an entity’s own equity.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
Accrued interest
|
|
|
1,682
|
|
|
|
840
|
|
Interest expense
|
|
|
842
|
|
|
|
840
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
During 2020, the Company identified an immaterial error in
the disclosure of accrued interest as of December 31, 2019 and adjusted the prior year amounts for such error. This correction did not
impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive loss, statement
of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
|
(4)
|
The Company issued the following notes with a third party.
|
|
●
|
In July 2017, the Company borrowed $22,400 through a
note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, bears interest at 1.52% per annum,
has no covenants and is unsecured. During 2017 and 2018, there were a total of $18,000 of principal payments.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $157 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $55 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment
in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
4,400
|
|
|
$
|
4,400
|
|
Accrued interest
|
|
|
314
|
|
|
|
230
|
|
Interest expense
|
|
|
84
|
|
|
|
50
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
In December 2019, the Company borrowed an additional
$2,240 through a note payable from this U.S. based investment firm. The note originally matured on July 1, 2020, bears interest at 8.99%
per annum, has no covenants and is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $7 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables
in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $2 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
2,240
|
|
|
$
|
2,240
|
|
Accrued interest
|
|
|
202
|
|
|
|
17
|
|
Interest expense
|
|
|
185
|
|
|
|
17
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
2,240
|
|
|
●
|
In January 2020, the Company borrowed an additional $300
through a note payable from this U.S. based investment firm. The note originally matured on June 30, 2020, bears interest at 8% per annum,
has no covenants and is unsecured.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $2 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables
in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $1 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
300
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
23
|
|
|
|
—
|
|
Interest expense
|
|
|
23
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
300
|
|
|
|
—
|
|
|
(5)
|
The Company issued notes with various third parties through
its operations in China.
|
|
●
|
In April 2017, the Company borrowed $3,496 through a note
payable from a Chinese lender. The note originally matured on October 20, 2017, bears interest at 9.00% per annum, has no covenants and
is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $27 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $9 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
3,677
|
|
|
$
|
3,440
|
|
Accrued interest
|
|
|
2,314
|
|
|
|
1,535
|
|
Interest expense
|
|
|
637
|
|
|
|
635
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
237
|
|
|
|
(56
|
)
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
142
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
Between January 2019 and December 2019, the Company
borrowed $11,515 through notes payable from a Chinese lender. The notes payable mature on January 16, 2020 and December 6, 2020, bear
interest at 6% per annum, have no covenants and are unsecured. During the year ended December 31, 2019, the Company made principal payments
of $8,155 resulting in a realized foreign currency gain of $205.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
4,140
|
|
|
$
|
3,155
|
|
Accrued interest
|
|
|
569
|
|
|
|
299
|
|
Interest expense
|
|
|
235
|
|
|
|
303
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
219
|
|
|
|
(1
|
)
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
35
|
|
|
|
—
|
|
Realized foreign exchange (gain) on principal
|
|
|
—
|
|
|
|
(205
|
)
|
Principal Payments
|
|
|
—
|
|
|
|
8,155
|
|
Interest Payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
766
|
|
|
|
11,515
|
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $84 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $29 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment.
|
●
|
In 2017 and 2018, Company borrowed $4,371 through notes payable
from various Chinese lenders. The notes payable are payable on demand by the lenders, do not have a stated interest rate, have no covenants
and are unsecured. As of December 31, 2020, these notes payable were in default.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
4,597
|
|
|
$
|
4,300
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
297
|
|
|
|
(71
|
)
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
●
|
Between June and September 2020, the Company borrowed $761
through notes payable from a Chinese lender. The notes payable are payable on demand by the lender, bear interest at 6% per annum, have
no covenants, and are unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $13 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $4 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
729
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
19
|
|
|
|
—
|
|
Interest expense
|
|
|
19
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
32
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
761
|
|
|
|
—
|
|
|
(6)
|
The Company issued the following notes with a third party.
|
|
●
|
In March 2019, the Company borrowed $1,500 through a
note payable from a U.S. based investment firm. The note originally matured on March 6, 2020, bears interest at 8.99% per annum, has
no covenants and is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $1 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables
in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
380
|
|
|
$
|
500
|
|
Accrued interest
|
|
|
99
|
|
|
|
54
|
|
Interest expense
|
|
|
45
|
|
|
|
54
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
120
|
|
|
|
1,000
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
1,500
|
|
|
●
|
In June 2019, the Company borrowed $3,600 through a
note payable from a U.S. based investment firm. The note matured on July 5, 2019, bears interest at 2.99% per annum, has no covenants
and is unsecured.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
4
|
|
|
|
4
|
|
Interest expense
|
|
|
—
|
|
|
|
4
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
3,600
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
3,600
|
|
|
●
|
In September 2019, the Company borrowed $180 through
a note payable from a U.S. based investment firm. The note originally matured December 1, 2019, bears interest at 6.99% per annum, has
no covenants and is unsecured.
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
9. Notes Payable (cont.)
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $2 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor payables
in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $1 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
180
|
|
|
$
|
180
|
|
Accrued interest
|
|
|
10
|
|
|
|
4
|
|
Interest expense
|
|
|
6
|
|
|
|
4
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
180
|
|
|
●
|
In November 2019, the Company borrowed $2,700 through
a note payable from a U.S. based investment firm. The note originally matured on June 3, 2020, bears interest at 6.99% per annum, has
no covenants and is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $14 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $5 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment in
interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
1,200
|
|
|
$
|
2,700
|
|
Accrued interest
|
|
|
192
|
|
|
|
26
|
|
Interest expense
|
|
|
171
|
|
|
|
26
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
1,500
|
|
|
|
—
|
|
Interest payments
|
|
|
5
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
2,700
|
|
|
(7)
|
In October 2018, the Company borrowed $1,500 through
a note payable from a U.S. based investment firm. The note originally matured on December 31, 2019, bears interest at 2.86% per annum,
has no covenants and is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $45 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $16 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment
in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
Accrued interest
|
|
|
95
|
|
|
|
52
|
|
Interest expense
|
|
|
43
|
|
|
|
43
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
The following notes payable were paid in full during the year
ended December 31, 2019:
|
●
|
In May 2018, the Company borrowed $17,000 through a note
payable from a U.S. based private commercial real estate lender. The note payable matured on May 22, 2019 and bore interest at 9.75%
per annum. The Company’s headquarters property (“HQ”) in Gardena, California was pledged as collateral for this loan.
On February 4, 2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the Company’s HQ with
Atlas Capital Investors V, LP (“Atlas”) for a sale price of $29,000. The Company used the proceeds from the sale to
settle the principal of $17,000 and accrued interest of $565.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
565
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
17,000
|
|
Interest payments
|
|
|
—
|
|
|
|
565
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
In March 2019, the Company leased the HQ back from Atlas
for a term of three years, with an option to repurchase the HQ at any time prior to the expiration of the lease for a purchase price equal
to the greater of $44,029 or the fair market value of the HQ, as determined in accordance with the lease. This transaction qualified as
a failed sale leaseback given the Company’s option within the PSA to repurchase the HQ. The Company recognized a $29,000 financing
obligation recorded in capital leases on the consolidated balance sheets. No gain or loss was record on the failed sale-leaseback. The
Company has continued to capitalize and depreciate the HQ long-lived asset. The ongoing lease payments to Atlas are recorded as reductions
to the financing obligation and associated interest expense. The Company recorded interest expense of $1,760 and $1,435 during the years
ended December 31, 2020 and 2019.
|
●
|
On April 29, 2019, the Company borrowed $15,000 through a
TLA with BL Mobility Fundco, LLC as the lender, and Birch Lake Fund Management, LP as the agent and collateral agent. The TLA
matured on September 30, 2019. The obligations due under the TLA are collateralized by a first lien on virtually all tangible and intangible
assets of the Company. The interest rate on the loan is 15.50%, 21.50% when in default, and the loan is subject to a liquidation preference
premium of up to 63.50% of the original principal amount, of which the borrowers have the right to allow conversion of 30% into equity
interests of the Company. The Company determined that this liquidation premium with conversion right represents an embedded derivative
to be accounted for at fair value. See Note 4 Fair Value of Financial Instruments.
|
In October 2019, the Company paid the outstanding principal
of $15,000 and $6,668 in loan exit costs to the lender upon extinguishment of the TLA. The Company recorded interest expense for the year
ended December 31, 2019 of $213. The Company incurred $3,145 of issuance costs which were expensed in interest expense during the year
ended December 31, 2019.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
213
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
21,668
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
15,000
|
|
|
●
|
In November 2018, the Company borrowed $4,200 through a note
payable from a U.S. based lender. The note matured on November 8, 2019, bore interest at 13.00% per annum, had no covenants and the Company’s
property in Las Vegas was pledged as collateral for this loan. The Company settled the note by paying $4,200 of principal and $420 of
interest during the year ended December 31, 2019.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
208
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
4,200
|
|
Interest payments
|
|
|
—
|
|
|
|
420
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
(8)
|
On September 9, 2020, the Company issued $15,000 of secured convertible
promissory notes to a US-based investment firm through entering into a Joinder to the NPA, receiving net proceeds of $13,800, inclusive
of an 8% original issue discount. The senior convertible promissory notes bear interest at 0%. The NPA notes mature on the earliest of
(i) March 9, 2022, (ii) the Vendor Trust maturity date (See Note 10 Vendor Payables in Trust), as amended, (iii) the maturity of any
First Out NPA Notes, which include the notes with Birch Lake and FF Ventures (“First Out Notes”), or (iv) the acceleration
of the NPA notes payable pursuant to an event of default.
|
In the event the Company consummates a Qualified SPAC Merger,
an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued original issue discount through the date
of consummation of the Qualified SPAC Merger will automatically convert into Class A ordinary stock of the SPAC in connection with the
Qualified SPAC Merger, and the notes payable and interest thereon shall no longer be outstanding and shall be deemed satisfied in full
and terminated. The Company determined that the feature to settle the notes payable with shares upon the occurrence of a Qualified SPAC
Merger is a contingent share-settled redemption option and represents an embedded derivative. Additionally, the feature to redeem the
notes payable upon a default event is a contingently exercisable put option and represents an embedded derivative. The Company elected
the fair value option for this note payable. See Note 4 Fair Value of Financial Instruments. The fair value of the note payable was $17,712
as of December 31, 2020.
In addition, the notes payable included a warrant to purchase
ordinary stock. The holder of the warrant has the ability to exercise their right to acquire up to 1,930,147 shares of Class A Ordinary
Stock of the Company for a period of up to 7 years, or September 9, 2027. The exercise price of the warrant is $2.72, subject to certain
down-round adjustments. The warrants are accounted for in equity at fair value based on the derivative accounting scope exception in ASC
815 for certain contracts involving an entity’s own equity. The Company estimates the fair value of the warrants to be $490 using
the Black-Scholes option-pricing model. Determining the fair value of these warrants under this model requires subjective assumptions, including the fair value of the underlying
ordinary stock of $0.38, risk-free interest rate of 0.47%, the expected volatility of the price of the Company’s ordinary stock
of 35.81%, and the expected dividend yield of the Company’s ordinary stock of 0%. These estimates involve inherent uncertainties
and the application of management’s judgment.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
15,000
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
15,000
|
|
|
|
—
|
|
|
(9)
|
On October 9, 2020, the Company entered into a Second A&R
NPA with Birch Lake borrowing $15,000 in secured convertible notes payable (“BL Notes”). The BL Notes accrue interest at
12.75% per annum through January 31, 2021 and at 15.75% per annum thereafter. The BL Notes mature on the earliest of (i) October 6, 2021,
(ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control, or (iv) the acceleration of the NPA obligations
pursuant to an event of default. Additionally, the BL Notes contain a liquidation premium that ranges from 35% to 45% depending on the
timing of settlement with 50% of this premium convertible into equity and the lender is able to demand repayment if an event of default,
change in control, or a Qualified SPAC Merger occurs. The Company determined that the feature to settle the BL Notes at a premium upon
the occurrence of a default, change in control, or a Qualified SPAC Merger is a contingently exercisable put option with a liquidation
premium and represents an embedded derivative. The Company elected the fair value option for this note payable. See Note 4 Fair Value
of Financial Instruments. The fair value of the note payable was $20,972 as of December 31, 2020.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
15,000
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
366
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
366
|
|
|
|
—
|
|
Proceeds
|
|
|
15,000
|
|
|
|
—
|
|
|
(10)
|
During 2019, a U.S. corporation made deposits of $11,635 with
the Company as an advance to purchase FF 91 vehicles. On February 1, 2020, due to production delays the Company entered into a deposit
conversion agreement with this corporation to convert the deposit amounts previously paid into a note payable. Upon conversion, the Company
reclassified the deposit recorded in other current liabilities as of December 31, 2019 to notes payable as of December 31, 2020. The
note matured on December 31, 2020, bears interest at 8.0% per annum, has no covenants and is unsecured.
|
As a result of the September 2020 Modification, the Company
recorded a gain on extinguishment of $87 recorded in gain on extinguishment of related party notes payable, notes payable, and vendor
payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020. Additionally,
accretion of $30 was recorded during the year ended December 31, 2020 related to the discount created from the gain on extinguishment
in interest expense in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2020.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
11,635
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
1,177
|
|
|
|
—
|
|
Interest expense
|
|
|
933
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
—
|
|
|
|
—
|
|
|
(11)
|
On April 17, 2020, the Company received loan proceeds from East
West Bank of $9,168 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief
and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses. The loans and accrued interest are
forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent, and utilities, as
described in the CARES Act. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries.
The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the later
of the first six months or when the amount of the loan forgiveness is determined. The Company used the proceeds for purposes consistent
with the PPP requirements. The Company is still in the process of applying for forgiveness and no amounts have been forgiven as of December
31, 2020. The note matures April 17, 2022, has no covenants, and is unsecured.
|
|
|
As of and for the Year Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Outstanding principal
|
|
$
|
9,168
|
|
|
$
|
—
|
|
Accrued interest
|
|
|
65
|
|
|
|
—
|
|
Interest expense
|
|
|
65
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on principal
|
|
|
—
|
|
|
|
—
|
|
Unrealized foreign exchange (gain) loss on accrued interest
|
|
|
—
|
|
|
|
—
|
|
Principal payments
|
|
|
—
|
|
|
|
—
|
|
Interest payments
|
|
|
—
|
|
|
|
—
|
|
Proceeds
|
|
|
9,168
|
|
|
|
—
|
|
Fair Value of Notes Payable Not Carried at Fair Value
The estimated fair value, using inputs from Level
3 under the fair value hierarchy, of the Company’s outstanding notes payable not carried at fair value are $127,130 and $94,590
as of December 31, 2020 and 2019, respectively.
Schedule of Principal Maturities of Notes Payable
The future scheduled principal maturities of third-party
debt as of December 31, 2020 are as follows:
Years ended December 31,
|
|
|
|
Due on demand
|
|
$
|
65,949
|
|
2021
|
|
|
102,541
|
|
2022
|
|
|
9,168
|
|
|
|
$
|
177,658
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
10.
|
Vendor Payables in Trust
|
On April 29, 2019, the Company established
the Faraday Vendor Trust (“Vendor Trust”), which is intended to stabilize the Company’s supplier base by providing suppliers
with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the trust interests is governed
by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment Agreement”). All interests
in the Vendor Trust are collateralized by a first lien, with third payment priority, pursuant to applicable intercreditor arrangements,
on virtually all tangible and intangible assets of the Company. The applicable interest rate for the vendor trust principal balance is
6.00%. The secured trust interests bear daily non-compounding interest from the date of contribution. The Company determined that the
economic substance of the obligations under the Vendor Trust is an in-substance financing. As a result, the Company reported an operating
cash outflow and financing cash inflow of $174 and $115,900 on the consolidated statements of cash flows during the years ended December
31, 2020 and 2019.
A total of $111,574 and $115,900 of the Company’s
trade payables have been contributed to the Vendor Trust with accrued interest of $11,840 and $4,638 as of December 31, 2020 and 2019,
respectively, which is recorded within accrued interest on the Company’s consolidated balance sheets. During the year ended December
31, 2020, the Company made aggregate payments of $4,500 on the Vendor Trust. The Vendor Trust also includes approximately $25.0 million
of purchase orders related to goods and services to be provided by certain vendors. These vendors did not contribute any receivables into
the Vendor Trust related to these purchase orders as the services are to be provided at a future date. As such, the Company may cancel
the vendor’s interest in the Vendor Trust related to these purchase orders until such time that the vendors begin to fulfil the
requested goods and services.
On October 30, 2020, the agreement governing the
Vendor Trust (the “Vendor Trust Agreement”) was modified to add a conversion feature to allow the conversion of the secured
interests in the Vendor Trust into a variable number of SPAC shares if a Qualified SPAC Merger (as defined in the Vendor Trust Agreement)
occurs. Since the conversion feature is substantive as it is reasonably possible to be exercised, this modification will be accounted
for as an extinguishment with a gain on extinguishment of $1,812 recorded in gain on extinguishment of related party notes payable, notes
payable, and vendor payables in trust, net in the consolidated statements of operations and comprehensive loss during the year ended December
31, 2020. The conversion feature does not require bifurcation because it is clearly and closely related to the host instrument since the
conversion does not involve a substantial premium or discount. Additionally, accretion of $462 was recorded during the year ended December
31, 2020 related to the discount created from the gain on extinguishment in interest expense in the consolidated statements of operations
and comprehensive loss during the year ended December 31, 2020. These adjustments resulted in the Vendor Trust having a net carrying value
of $110,224 as of December 31, 2020.
The estimated fair value, using inputs from Level
3 under the fair value hierarchy, of the Vendor Trust is $109,762 and $112,488 as of December 31, 2020 and 2019, respectively.
During 2020, the Company identified an immaterial
error in the disclosure of the fair value of the Vendor Trust as of December 31, 2019 and adjusted the prior year amounts for such error.
This correction did not impact the current and previously reported consolidated statement of operations and comprehensive loss and statement
of convertible preferred stock and stockholders’ deficit.
Subsequent to December 31, 2020, on March 1, 2021,
the maturity date of the secured trust interests in the Vendor Trust was extended to the earliest to occur of October 6, 2021, the closing
of a Qualified SPAC Merger, a change in control of FF, or an acceleration of the obligations under certain of FF’s other secured
financing arrangements. It is an event of default under the Trade Receivables Repayment Agreement if a Qualified SPAC Merger does not
close by July 27, 2021.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
11.
|
Commitments and Contingencies
|
Facility Leases
The Company’s lease agreements include leasehold
improvement incentives as well as escalation clauses. The Company records rent expense on a straight-line basis over the lease term.
The Company has several noncancelable operating
leases, primarily for office space, with various expiration dates through December 2021. These leases generally contain renewal options
for periods ranging from three to five years and require the Company to pay all executory costs such as maintenance and insurance.
The Company recorded rent expense of $2,452 and
$4,282 for the years ended December 31, 2020 and 2019, respectively.
The minimum aggregate future obligations under noncancelable
operating leases as of December 31, 2020 were as follows:
Year ended December 31,
|
|
|
|
2021
|
|
$
|
525
|
|
|
|
$
|
525
|
|
The Company has four capital leases, one in Hanford,
California for its main production facility, one in Gardena, California for its headquarters and two equipment leases.
The minimum aggregate future minimum lease payments
under capital leases as of December 31, 2020 were as follows:
Years ended December 31,
|
|
|
|
2021
|
|
$
|
4,395
|
|
2022
|
|
|
3,041
|
|
2023
|
|
|
2,166
|
|
2024
|
|
|
1,757
|
|
2025
|
|
|
1,792
|
|
Thereafter
|
|
|
3,692
|
|
|
|
$
|
16,843
|
|
Legal Matters
The Company is, from time to time, subject to claims
and disputes arising in the normal course of business. In the opinion of management, while the outcome of any such claims and disputes
cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse
effect on the Company’s results of operations.
As of December 31, 2020 and 2019, the Company accrued
contingent liabilities of approximately $ 6,025 and $10,780, respectively, for potential financial exposure related to ongoing legal matters
primarily related to breach of contracts and employment matters. As of December 31, 2020 and 2019, contingent liabilities of $5,025 and
$3,305, respectively, were recorded in accrued expenses and other liabilities on the Company’s consolidated balance sheets. As of
December 31, 2020 and 2019, non-current contingent liabilities of $1,000 and $7,475, respectively, were recorded in other liabilities
on the Company’s consolidated balance sheets. These contingent liabilities are related to four and six legal matters as of December
31, 2020, and 2019, respectively, that have been determined to be both probable of loss and reasonably estimable.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
11.
|
Commitments and Contingencies (cont.)
|
During the year ended December 31, 2020, $2,500
of legal claims were settled in cash for amounts consistent with the amount accrued as of December 31, 2019. In addition, during the year
ended December 31, 2020, a legal matter associated with a United States Department of Labor investigation was resolved without any additional
fines or penalties, resulting in the reversal of accrued expense in the amount of $2,255, which was recorded in general and administrative
expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.
During the year ended December 31, 2020, the Company
received a judicial decision relating to a dispute for unpaid vendor payments. The judicial decision obligated the Company to pay $6,082
to certain vendors. This amount was not previously accrued in 2019 as the settlement was not considered probable as of December 31, 2019.
The Company recorded $6,082 in general and administrative expense in the consolidated statements of operations and comprehensive loss
for the year ended December 31, 2020 and recorded in accrued expenses and other liabilities on the consolidated balance sheets as of December
31, 2020.
During 2019, the Company resolved two separate breach
of contract claims related to land in Las Vegas previously owned by the Company. One matter related to a dispute with a vendor was settled
for $4,500 and was placed in the Vendor Trust. A second matter with a vendor was settled in cash for $890 during 2019. The Company reversed
$12,960 of contingent liabilities associated with the final settlement of these legal matters and recorded the reversal in general and
administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019.
Additionally, during 2019 the Company resolved a
wrongful termination claim which was settled for $550 during 2019. The Company reversed $1,725 of contingent liabilities associated with
the final settlement of this legal matter and recorded the reversal in general and administrative expense in the consolidated statements
of operations and comprehensive loss for the year ended December 31, 2019.
|
12.
|
Preferred and Ordinary Stock
|
The number of authorized, issued and outstanding
stock, liquidation value and carrying value as of December 31, 2020 and 2019 were as follows:
|
|
December 31, 2020
|
|
|
|
Authorized
Shares
|
|
|
Issued and
Outstanding
Shares
|
|
|
Liquidation
Value
|
|
|
Carrying
Value
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
|
$
|
800,000
|
|
|
$
|
724,823
|
|
Class B Preferred Stock
|
|
|
600,000,000
|
|
|
|
452,941,177
|
|
|
|
1,106,988
|
|
|
|
697,643
|
|
Class A Ordinary Stock
|
|
|
400,000,000
|
|
|
|
41,234,448
|
|
|
|
—
|
|
|
|
—
|
|
Class B Ordinary Stock
|
|
|
180,000,000
|
|
|
|
147,058,823
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
1,650,588,235
|
|
|
|
1,111,822,683
|
|
|
$
|
1,906,988
|
|
|
$
|
1,422,467
|
|
|
|
December 31, 2019
|
|
|
|
Authorized
Shares
|
|
|
Issued and
Outstanding
Shares
|
|
|
Liquidation
Value
|
|
|
Carrying
Value
|
|
Redeemable Preference Stock
|
|
|
470,588,235
|
|
|
|
470,588,235
|
|
|
$
|
800,000
|
|
|
$
|
724,823
|
|
Class B Preferred Stock
|
|
|
600,000,000
|
|
|
|
600,000,000
|
|
|
|
1,466,400
|
|
|
|
924,149
|
|
Class A Ordinary Stock
|
|
|
400,000,000
|
|
|
|
40,879,124
|
|
|
|
—
|
|
|
|
—
|
|
Class B Ordinary Stock
|
|
|
100,000,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Class C Preferred Stock
|
|
|
1,715,186
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,572,303,421
|
|
|
|
1,111,467,359
|
|
|
$
|
2,266,400
|
|
|
$
|
1,648,972
|
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
12.
|
Preferred and Ordinary Stock (cont.)
|
Amended and Restated Articles of Association
Upon the effectiveness of the Sixth Amended and
Restated Articles of Association of the Company on February 13, 2020, the number of shares of capital stock that are authorized to be
issued increased to 1,650,588,235, due to an increase of 80,000,000 shares of Class B Ordinary Stock and decrease of 1,715,186 shares
of Class C Preferred Stock due to the Company no longer authorized to issue Class C Preferred Stock. No Class C Preferred Stock was ever
issued by the Company.
The rights, privileges, and preferences of the Company’s
Redeemable Preference Stock, Class B Preferred Stock, (collectively, “Preferred Stock”) and Class A Ordinary Stock and Class
B Ordinary Stock, (collectively, “Ordinary Stock”) as set forth in the Company’s Sixth Amended and Restated Articles
of Association are as follows:
Voting
The holders of Preferred Stock and Ordinary Stock
vote together and not as separate classes. Each holder of Class B Ordinary Stock is entitled to one vote for each share held by such
holder. Each holder of Redeemable Preference Stock is entitled to 0.5625 votes for each share held by such holder. Each holder of Class B
Preferred Stock is entitled to ten votes for each share held by such holder. The Class A Ordinary Stock does not have any voting
rights. Approval of a majority of the Redeemable Preference Stock is required for certain Reserved Matters as defined in the Company’s
Sixth Amended and Restated Articles of Association. Such Reserved Matters include: entering into any transaction with a related party
not at arm’s length; amending the Company’s Sixth Amended and Restated Articles of Association which alter the terms of the
Redeemable Preference Stock in an adverse manner; issuing Redeemable Preference Stock to any other party; issuing equity securities of
the Company at a price below a minimum valuation price or ranking senior to the Redeemable Preference Stock on distribution or liquidation;
issuing equity securities of any subsidiary other than to certain parties on specified terms; and reducing the Company’s additional
paid-in capital or use thereof.
Dividends
The Board is under no obligation to declare dividends;
and no rights accrue to the holders of Preferred Stock if dividends are not declared. Any dividends declared are noncumulative, and no
dividends on Preferred Stock or Ordinary Stock have been declared by the Board of Directors through December 31, 2020. Unless approved
by the holders of the Redeemable Preference Stock, the Company may not declare, pay or set aside any dividends unless all the Redeemable
Preference Stock have been redeemed and paid in full. Once the Redeemable Preference Stock have been redeemed and paid in full, when and
if dividends are declared by the Board of Directors, such dividends are payable to the holders of Class B Preferred Stock pro rata
with the issued and outstanding Ordinary Stock.
Redemption
The Redeemable Preference Stock are callable at
the option of the Company at any time within the five-year period after December 31, 2018 upon issuance of a redemption notice. The
Redeemable Preference Stock are not redeemable at the option of the holder except in certain circumstances. Mandatory redemption occurs
upon a deemed liquidation event, which is upon wind-up, dissolution, liquidation, insolvency, declaration of bankruptcy, or change in
control. The contingent redemption upon a deemed liquidation event results in mezzanine equity classification on the Company’s consolidated
balance sheets. The redemption price per share is determined by a calculation of the following amounts divided by the number of Redeemable
Preference Stock issued as of December 31, 2020: $600,000 if redemption occurs prior to December 31, 2019; $700,000 if redemption
occurs on or after December 31, 2019, but prior to December 31, 2020; $800,000 if redemption occurs on or after December 31,
2020, but prior to December 31, 2021; $920,000 if redemption occurs on or after December 31, 2021, but prior to December 31,
2022; and $1,050,000 if redemption occurs on or after December 31, 2022.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
12.
|
Preferred and Ordinary Stock (cont.)
|
The Class B Preferred Stock are contingently
redeemable upon a deemed liquidation event. As such, the Company has presented the Class B Preferred Stock in mezzanine equity on
the consolidated balance sheets.
Conversion
Each holder of Redeemable Preference Stock may elect
to convert its Redeemable Preference Stock to such class of Stock to be held by public stockholders (“Public Shares”) immediately
prior to any initial public offering and, on a conversion, each Redeemable Preference Stock will be converted into such number of Public
Shares that would give it the same percentage of the share capital of the Company (on a fully diluted basis) that each such Redeemable
Preference Stock comprises immediately prior to the conversion.
Class B Preferred Stock are automatically converted
to Class B Ordinary Stock on a one for one basis if transferred to another party, which is limited to certain permitted circumstances.
Such permitted circumstances include: if the proceeds are used by the founder to exercise his call option to purchase Redeemable Preference
Stock; transfer for the purpose of discharging contingent liabilities of the founder and his affiliates; or after an initial public offering
and transfer of at least 313,725,490 shares of Redeemable Preference Stock to another party.
Liquidation
In the event of any liquidation or deemed liquidation
event such as dissolution, winding up, or loss of control, either voluntary or involuntary, the holders of Preferred Stock are entitled
to receive, prior and in preference to any distribution to the holders of Ordinary Stock, first to the redemption in full of the Redeemable
Preference Stock. Second to the Class B Preferred Stock. The Class B Preferred Stock are entitled to an amount per share held
by them equal to the greater of (a) $2.444 per share plus any declared but unpaid dividends on each Preferred Stock, or (b) the aggregate
amount payable in a liquidation to the Preferred Stock assuming the Preferred Stock are paid pro rata along with the Ordinary Stock of
the Company. The liquidation preference for the Class B Preferred Stock is $1,106,988 and $1,466,400 as of December 31, 2020
and 2019, respectively. The liquidation preference for the Redeemable Preference Stock is $800,000 and $800,000 as of December 31,
2020 and 2019, respectively.
The Class B Preferred Stockholders are entitled
to receive such amounts after the Redeemable Preference Stockholders are redeemed and paid in full. If amounts are not sufficient to pay
the foregoing amounts to Class B Preferred Stockholders, then the amounts will be distributed among the holders of Class B Preferred
Stock pro rata, in proportion to the full amounts they would otherwise be entitled to receive.
If the holders of Redeemable Preference Stock and
Class B Preferred Stock are paid in full, the remaining assets of the Company will be distributed pro rata to the holders of Ordinary
Stock in proportion to the number of Ordinary Stock held by them.
Conversion of Class B Preferred Stock
During 2020, 147,058,823 shares of the Company’s
Class B Preferred Stock automatically converted into 147,058,823 shares of the Company’s Class B Ordinary Stock at a conversion
rate of one for one. Automatic conversion was triggered due to the transfer of the Class B Preferred Stock to another party under the
permitted circumstances described above. The conversion was recorded as a transfer from mezzanine equity to additional-paid-in-capital
with no impact on accumulated deficit.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
13.
|
Stock-Based Compensation
|
2018 Stock Incentive Plan
On February 1, 2018, the Board of Directors
adopted the Equity Incentive Plan (“Equity Incentive Plan”), under which the Board of Directors authorized the grant of up
to 300,000,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units, and other stock-based
awards for ordinary stock to employees, directors and non-employees.
Options are to be granted at an exercise price not
less than fair value of the underlying stock on the date of grant. For individuals holding more than 10% of the voting rights of all classes
of stock, the per share exercise price will not be less than 110% of fair value per share on the date of grant. The stock options vest
based on the passage of time. The stock option vesting period and vesting rate are determined by the Board of Directors. The Board of
Directors has granted options with vesting terms of one to four years and contractual terms of ten years.
As of December 31, 2020 and 2019, the Company had
43,327,415 and 107,789,887 shares of Class A ordinary stock available for future issuance under the Equity Incentive Plan, respectively.
A summary of the Company’s stock option activity
under the Equity Incentive Plan is as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as of December 31, 2019
|
|
|
151,330,989
|
|
|
$
|
0.35
|
|
|
|
8.86
|
|
|
$
|
2,197
|
|
Granted
|
|
|
96,012,077
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(383,994
|
)
|
|
|
0.34
|
|
|
|
|
|
|
|
13
|
|
Expired/forfeited
|
|
|
(31,189,078
|
)
|
|
|
0.32
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2020
|
|
|
215,769,994
|
|
|
$
|
0.35
|
|
|
|
8.75
|
|
|
$
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of December 31, 2020
|
|
|
67,772,996
|
|
|
$
|
0.35
|
|
|
|
7.88
|
|
|
$
|
796
|
|
Vested and expected to vest as of December 31, 2020
|
|
|
167,962,999
|
|
|
$
|
0.35
|
|
|
|
8.59
|
|
|
$
|
944
|
|
The weighted-average assumptions used in the Black-Scholes
option pricing model are as follows:
|
|
2020
|
|
|
2019
|
|
Risk-free interest rate:
|
|
|
0.45
|
%
|
|
|
2.10
|
%
|
Expected term (in years):
|
|
|
6.13
|
|
|
|
5.90
|
|
Expected volatility:
|
|
|
37.25
|
%
|
|
|
31.30
|
%
|
Dividend yield:
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Grant date fair value per share:
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
The total grant date fair value of options vested
during the years ended December 31, 2020 and 2019 was $4,953 and $ 2,903, respectively.
As of December 31, 2020, the total remaining stock-based
compensation expense for unvested stock options was $11,861 which is expected to be recognized over a weighted average period of 3.1 years.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
13.
|
Stock-Based Compensation (cont.)
|
2019 Special Talent Incentive Plan
On May 2, 2019, the Company adopted its Special
Talent Incentive Plan (“STI Plan”) under which the Board of Directors may grant up to 100,000,000 incentive and nonqualified
stock options, restricted shares, unrestricted shares, restricted share units and other stock-based awards for ordinary stock to employees,
directors and non-employees.
The STI Plan does not specify a limit on the number
of stock options that can be issued under the plan. Per the terms of the STI Plan the Company shall at all times reserve and keep available
such number of shares as shall be sufficient to satisfy the requirements of the STI Plan. As of December 31, 2020, the Company the Company
had 45,932,116 shares of Class A ordinary stock available for issuance under the STI Plan.
A summary of the Company’s stock option activity
under the STI Plan is as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as of December 31, 2019
|
|
|
7,485,000
|
|
|
$
|
0.36
|
|
|
|
9.46
|
|
|
|
—
|
|
Granted
|
|
|
38,447,116
|
|
|
$
|
0.35
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired/Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding as of December 31, 2020
|
|
|
45,932,116
|
|
|
$
|
0.35
|
|
|
|
9.26
|
|
|
$
|
1,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of December 31, 2020
|
|
|
35,932,116
|
|
|
$
|
0.35
|
|
|
|
9.26
|
|
|
$
|
910
|
|
Vested and expected to vest as of December 31, 2020
|
|
|
45,013,474
|
|
|
$
|
0.35
|
|
|
|
9.26
|
|
|
$
|
1,168
|
|
The weighted-average assumptions used in the Black-Scholes
option pricing model are as follows:
|
|
2020
|
|
|
2019
|
|
Risk-free interest rate:
|
|
|
0.59
|
%
|
|
|
2.20
|
%
|
Expected term (in years):
|
|
|
10
|
|
|
|
10
|
|
Expected volatility:
|
|
|
38.42
|
%
|
|
|
36.00
|
%
|
Dividend yield:
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Grant date fair value per share:
|
|
$
|
0.15
|
|
|
$
|
0.18
|
|
The total grant date fair value of options vested
during the years ended December 31, 2020 and 2019 was $6,860 and $1,302, respectively.
As of December 31, 2020, the total remaining stock-based
compensation expense for unvested stock options was $1,109, which is expected to be recognized over a weighted average period of approximately
one year.
Common Units of FF Global Partners LLC
During 2020 and 2019, certain executives and employees
of the Company were granted the opportunity to subscribe to 24.0 million and 79.8 million common units, respectively, of FF Global Partners
LLC (“FF Global Partners”), a significant shareholder of the Company. The subscription price of $0.50 per common unit, payable
by the executives and employees of the Company, was financed through non-recourse loans issued by FF Global Partners payable in equal annual installments over ten years. The common
units to be purchased with a non-recourse loan are required to be treated for accounting purposes as stock options granted by FF Global
Partners to executives and employees of the Company. The awards were valued using the Black-Scholes option pricing model. The grant date
fair value of the units purchased through non-recourse loans was immaterial for the years ended December 31, 2020 and 2019.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
13.
|
Stock-Based Compensation (cont.)
|
The following table presents stock-based compensation
expense included in each respective expense category in the consolidated statements of operations and other comprehensive loss for the
years ended December 31:
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
941
|
|
|
$
|
818
|
|
Sales and marketing
|
|
|
387
|
|
|
|
311
|
|
General and administrative
|
|
|
8,177
|
|
|
|
3,481
|
|
|
|
$
|
9,505
|
|
|
$
|
4,610
|
|
As a result of losses incurred, the Company had
immaterial current income tax expense for the years ended December 31, 2020 and 2019. The recorded provision for income taxes differs
from the expected provision for income taxes based on the federal statutory tax rate of 21% primarily due to the valuation allowance against
deferred tax assets.
The provision for income tax consisted of the following:
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
3
|
|
|
|
3
|
|
Foreign
|
|
|
—
|
|
|
|
—
|
|
Total current
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(11,456
|
)
|
|
|
(19,855
|
)
|
State
|
|
|
—
|
|
|
|
—
|
|
Foreign
|
|
|
(2,044
|
)
|
|
|
(1,418
|
)
|
Valuation allowance
|
|
|
13,500
|
|
|
|
21,273
|
|
Total deferred
|
|
|
—
|
|
|
|
—
|
|
Total provision
|
|
$
|
3
|
|
|
$
|
3
|
|
The components of losses before income taxes, by
taxing jurisdiction, were as follows for the years ended December 31:
|
|
2020
|
|
|
2019
|
|
U.S.
|
|
$
|
(79,605
|
)
|
|
$
|
(112,197
|
)
|
Foreign
|
|
|
(67,480
|
)
|
|
|
(29,998
|
)
|
Total
|
|
$
|
(147,085
|
)
|
|
$
|
(142,195
|
)
|
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
The provision for income taxes for the years ended
December 31, differs from the amount computed by applying the statutory federal corporate income tax rate of 21% to earnings before income
taxes as a result of the following:
|
|
2020
|
|
|
2019
|
|
Federal income tax expense
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
State income taxes (net of federal benefit)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Permanent differences
|
|
|
(4.6
|
)%
|
|
|
(2.8
|
)%
|
Foreign tax rate difference
|
|
|
(6.7
|
)%
|
|
|
(2.1
|
)%
|
Return-to-provision adjustment
|
|
|
0.4
|
%
|
|
|
(1.1
|
)%
|
Expiration of tax attributes
|
|
|
(1.0
|
)%
|
|
|
—
|
|
Valuation allowance
|
|
|
(9.1
|
)%
|
|
|
(15.0
|
)%
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The main changes in permanent differences related
to fair value adjustments on convertible related party notes payable and notes payable and disallowed interest expense due to equity feature.
The main changes in foreign tax rate difference and valuation allowance related to higher foreign loss incurred in 2020.
The tax effects of temporary differences for the
years ended December 31, that give rise to significant portions of the deferred tax assets and deferred tax liabilities are provided below:
|
|
2020
|
|
|
2019
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
Net operating losses (“NOL”)
|
|
$
|
123,633
|
|
|
$
|
114,990
|
|
Research and development credits
|
|
|
7,921
|
|
|
|
7,921
|
|
Accrued liabilities
|
|
|
7,564
|
|
|
|
5,164
|
|
Construction in progress
|
|
|
3,061
|
|
|
|
3,061
|
|
Excess interest expense under section 163(j)
|
|
|
3,670
|
|
|
|
2,295
|
|
Capital loss
|
|
|
2,407
|
|
|
|
2,407
|
|
Stock-based compensation
|
|
|
428
|
|
|
|
—
|
|
Other
|
|
|
296
|
|
|
|
174
|
|
Gross deferred tax assets
|
|
|
148,980
|
|
|
|
136,012
|
|
Valuation allowance
|
|
|
(148,546
|
)
|
|
|
(135,046
|
)
|
Deferred tax assets, net of valuation allowance
|
|
|
434
|
|
|
|
966
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
454
|
|
|
|
(79
|
)
|
State taxes
|
|
|
(888
|
)
|
|
|
(887
|
)
|
Total deferred tax liabilities
|
|
|
(434
|
)
|
|
|
(966
|
)
|
Total net deferred tax assets (liabilities)
|
|
$
|
—
|
|
|
$
|
—
|
|
During 2020, the Company identified an immaterial
error in the deferred tax assets and valuation allowance as of December 31, 2019 and adjusted the prior year amounts for such error. This
correction did not impact the current and previously reported consolidated balance sheet, consolidated statement of operations and comprehensive
loss, statement of convertible preferred stock and stockholders’ deficit, and consolidated statement of cash flows.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
The Company has recognized a full valuation allowance
as of December 31, 2020 and 2019 since, in the judgment of management given the Company’s history of losses, the realization
of these assets was not considered more likely than not. The valuation allowance was $148,546 and $135,046 as of December 31, 2020
and 2019, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this assessment. During 2020 and 2019, management evaluated the
realizability of its net deferred tax assets based on available positive and negative evidence. Management concluded that the likelihood
of realization of the benefits associated with its net deferred tax assets does not reach the level of more likely than not due to the
Company’s history of cumulative pre-tax losses and risks associated with the generation of future income given the current stage
of the Company’s business.
As of December 31, 2020, the Company has U.S.
federal and foreign net operating loss carryforwards of $428,681 and $134,437, respectively, which will begin to expire in 2034 and 2021,
respectively. The U.S. federal net operating loss carryforwards of $348,153 generated post the Tax Cuts and Jobs Act may be carried forward
indefinitely, subject to the 80% taxable income limitation on the utilization of the carryforwards. The U.S. federal net operating loss
carryforwards of $80,528 generated prior to December 31, 2017 may be carried forward for twenty years.
The Company has an U.S. federal R&D tax credit
carryforward of $3,666 and a state R&D tax credit carryforward of $4,230 as of December 31, 2020. The U.S. federal R&D tax
credits will begin to expire in 2035, and the state tax credits do not expire and can be carried forward indefinitely.
In accordance with Internal Revenue Code Section 382
(“Section 382”) and Section 383 (“Section 383”), a corporation that undergoes an “ownership
change” (generally defined as a cumulative change (by value) of more than 50% in the equity ownership of certain stockholders over
a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset
post-change taxable income and post-change tax liabilities, respectively. The Company’s existing NOLs and R&D credits may be
subject to limitations arising from previous ownership changes, and the ability to utilize NOLs could be further limited by Section 382
and Section 383 of the Code. In addition, future changes in the Company’s stock ownership, some of which may be outside of
the Company’s control, could result in an ownership change under Section 382 and Section 383 of the Code. The timing and
amount of such limitations, if any, has not been determined.
The Company’s intention is to indefinitely
reinvest earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would
be subject to withholding taxes payable to various foreign countries. As of December 31, 2020 and 2019, there was no material cumulative
earnings outside the United States due to net operating losses and the Company has no earnings and profits in any jurisdiction, that if
distributed, would give rise to a material unrecorded liability.
The Company is subject to taxation and files income
tax returns with the U.S. federal government, California, Oregon and China. As of December 31, 2020, the 2017 and 2018 federal returns
and 2016 through 2018 state returns are open to exam. The Company’s 2017 and 2018 federal returns are currently under audit by the
Internal Revenue Service (“IRS”). The Company is not under any tax audits on its China tax returns. All of the prior year
tax returns, from 2015 through 2020, are open under China tax law.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
Uncertain Income Tax Position
The aggregate change in the balance of unrecognized
tax benefits for the years ended December 31, is as follows:
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
2,598
|
|
|
$
|
—
|
|
Increase related to current year tax positions
|
|
|
68
|
|
|
|
2,598
|
|
Ending balance
|
|
$
|
2,666
|
|
|
$
|
2,598
|
|
In accordance with ASC 740-10, Income Taxes
— Overall, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount
that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be
recognized if it has less than a 50% likelihood of being sustained. No interest and penalties related to the Company’s unrecognized
tax benefits was accrued as of December 31, 2020 and 2019, as the uncertain tax benefit only reduced the net operating losses. The Company
does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next
twelve months. As of December 31, 2020 and 2019, the realization of uncertain tax positions were not expected to impact the effective
rate due to a full valuation allowance on federal and state deferred taxes.
The Company maintains a 401(k) savings plan for
the benefit of its employees. Employees can defer up to approximately $19 of their compensation, if under 50 for the years ended December
31, 2020 and 2019. Employees 50 or over can defer up to approximately $25 and $26 of their compensation for the years ended December 31,
2020 and 2019, respectively. The Company currently does not make matching contributions to the 401(k) savings plan. All current employees
are eligible to participate in the 401(k) savings plan.
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the consolidated financial statements were available to be issued on April
5, 2021. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the consolidated financial statements.
Potential Partnership with Geely Holding
In December 2020, the Company entered into a non-binding
memorandum of understanding with Zhejiang Geely Holding Group Co., Ltd. (“Geely Holding”), who is also a subscriber in the
Private Placement, pursuant to which the parties contemplate a strategic cooperation in various areas including engineering, technology,
supply chain, and contract manufacturing.
In January 2021, FF, the JV, a subsidiary of FF,
and Geely Holding entered into a cooperation framework agreement and a license agreement that set forth the major commercial understanding
of the proposed cooperation among the parties in the areas of potential investment into the JV, engineering, technology and contract manufacturing
support. The foregoing framework agreement and the license agreement may be terminated if the parties fail to enter into the joint venture
definitive agreement or to close the Merger Agreement (defined below) and related transactions.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
16.
|
Subsequent Events (cont.)
|
First Amendment to the Second Amended
and Restated Note Agreement
On January 13, 2021, the
Company entered into the First Amendment to the Second Amended and Restated Note Agreement which permitted, among other things, (x)
the issuance of First Out Notes to Birch Lake and the lender in an aggregate principal amount of $1,333 and (y) First Out
Subordinated Promissory Notes (collectively, the “First Out Subordinated Note”) to Birch Lake and the lenders in an
aggregate principal amount of up to $15,000. The additional First Out Notes issued to Birch Lake and the lenders are on the same
terms as the original First Out Notes issued to Birch Lake and the lenders, respectively, except that the First Out Subordinated
Notes are senior to the Last Out Notes but junior to the First Out Notes. The First Out Subordinated Notes accrue interest at the
same rate of interest as the Senior Convertible Promissory Notes (with respect to First Out Subordinated Notes issued to the lender)
and the BL Notes (with respect to First Out Subordinated Notes issued to Birch Lake).
Second Amendment to the Second Amended and Restated Note Agreement
On March 1, 2021, the Company entered into the Second
Amendment to the Second A&R Note Agreement which permitted, among other things, the issuance of Priority Last Out Notes to Ares Capital
Corporation, Ares Centre Street Partnership, L.P., Ares Credit Strategies Insurance Dedicated Fund Series Interests of the SALI Multi-Series
Fund, L.P., and Ares Direct Finance I LP (collectively, the “Ares Entities”) in an aggregate principal amount of up to $85,000.
The Priority Last Out Notes issued to the Ares Entities rank junior to the First Out Notes issued to Birch Lake and the Investment Noteholders,
respectively, and senior in priority to the Last Out Notes. The Priority Last Out Notes accrue interest at 14% per annum, with no cash
payments of interest until the maturity date. In connection with the issuance of the Priority Last Out Notes, the Ares Entities will be
issued a six-year warrant to purchase 20bps of New FF’s Class A common stock for $10 per share in agreed form no later than August
11, 2021 or, if earlier, 15 days after consummation of the Business Combination.
Merger Agreement
On January 27, 2021, Property Solutions Acquisition
Corp., a Delaware corporation (“PSAC”), entered into an Agreement and Plan of Merger (“Merger Agreement”) by and
among PSAC, PSAC Merger Sub, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned
subsidiary of PSAC (“Merger Sub”), and the Company.
Pursuant to the Merger Agreement, Merger Sub will
merge with and into the Company, with the Company surviving the merger (the “Merger” and, together with the other transactions
contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, the Company will become a wholly-owned
subsidiary of PSAC, with the stockholders of the Company becoming stockholders of PSAC, which will be renamed Faraday Future Intelligent
Electric, Inc. (“New FF”).
Under the Merger Agreement, the outstanding shares
of the Company and the outstanding convertible debt will be converted into a number of shares of new Class A common stock of PSAC following
the Transactions and, for FF Top Holding LLC (“FF Top”), shares of new Class B common stock of PSAC (referred to herein after
the Transaction as “New FF common stock”) following the Transactions based on an exchange ratio (the “Exchange Ratio”),
the numerator of which is equal to (i) (A) the number of shares of PSAC common stock equal to $2,716 (plus net cash of the Company, less
debt of the Company, plus debt of the Company that will be converted into shares of PSAC common stock, plus any additional bridge loan
in an amount not to exceed $100,000), (B) divided by ten dollars, minus (ii) an additional 25,000,000 shares which may be issuable to
the Company stockholders as additional consideration upon certain price thresholds, and the denominator of which is equal to the number
of outstanding shares of the Company, including shares issuable upon exercise of vested options and vested warrants at the Company (in
each case assuming cashless exercise) and upon conversion of outstanding convertible notes.
FF Intelligent Mobility Global Holdings Ltd.
Notes to Consolidated Financial Statements
December 31, 2020 and 2019
(in thousands, except share and per share data)
|
16.
|
Subsequent Events (cont.)
|
Additionally, each option or warrant at the Company
that is outstanding immediately prior to the closing of the Merger (and by its terms will not terminate upon the closing of the Merger)
will remain outstanding and convert into the right to purchase a number of shares of PSAC Class A common stock equal to the number of
ordinary stock of the Company 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.
Concurrently with the execution of the Merger Agreement,
the Company entered into separate subscription agreements with a number of investors (the “PIPE Investors”); pursuant to which
the PIPE investors have agreed to purchase an aggregate of 79,500,000 shares of common stock, for a purchase price of ten dollars per
share and at an aggregate purchase prices of $795,000, in a private placement (the “PIPE Financing”).
Note Purchase Agreement
On March 1, 2021, pursuant to the Note Purchase
Agreement, the Company entered into a promissory note in favor of certain affiliates of Ares Capital Corporation for an aggregate principal
of $55,000. Additionally, the Note Purchase Agreement contains a clause that the Company will issue warrants with an aggregate value of
$3,993 to the lender at the earlier of 15 days after the completion of a Qualified SPAC Merger or on or before August 11, 2021. The maturity
date for this promissory note is the earliest of (i) March 1, 2022, (ii) if the Qualified SPAC Merger contemplated in the Merger Agreement
has not been consummated by July 27, 2021, October 6, 2021, (iii) the occurrence of a change in control, or (iv) the occurrence of an
acceleration event, such as a default. The notes bear interest at 14% per annum.
On March 8, 2021, pursuant to the Note Purchase
Agreement, the Company executed a promissory note in favor of Birch Lake for a total principal of $5,600. The promissory note matures
on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control,
or (iv) the occurrence of an acceleration event, such as a default. The note bears interest at 15.75% per annum. Additionally, the promissory
note contains a liquidation premium that ranges from 42% to 52% depending on timing of settlement with 50% of this premium convertible
into equity.
On March 12, 2021, pursuant to the Note Purchase
Agreement, the Company executed a promissory note in favor of FF Ventures SPV XI LLC, a third-party investment firm, for an aggregate
principal amount of $7,000, receiving net proceeds of $6,440, inclusive of an 8% original issue discount. The promissory note matures
on the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence of a change in control,
or (iv) the occurrence of an acceleration event, such as a default. The note bears interest at 0% per annum. In the event the Company
consummates a Qualified SPAC Merger, then an amount equal to 130% of all outstanding principal, accrued and unpaid interest and accrued
original issue discount under the notes through (but not including) the date of consummation of the Qualified SPAC Merger will automatically
convert into ordinary stock of the SPAC received by Class A ordinary stockholders of the Company and the notes and interest thereon shall
no longer be outstanding and shall be deemed satisfied in full and terminated.
Amendment to Trade Receivables Repayment Agreement and Vendor Trust
On March 1, 2021, the Company entered into Amendment
No. 6 related to the Trade Receivables Repayment Agreement. See Note 10 Vendor Payables in Trust. The maturity date of the interests in
the Vendor Trust was extended to the earliest of (i) October 6, 2021, (ii) the consummation of a Qualified SPAC Merger, (iii) the occurrence
of a change of control, and (iv) the occurrence of an acceleration event under certain of the Company’s other secured financing
arrangements. The Company will be in default under the Trade Receivables Repayment Agreement if a Qualified SPAC Merger agreement has
not been consummated on or before July 27, 2021.
Amendment to Lease Agreement
On January 27, 2021, the Company extended one of
its four capital leases, located in Hanford, California. This agreement extends the lease to January 31, 2028 and authorizes Industrial
Realty Group, LLC (“IRG”) to perform certain financial and management advisory services for the Company including an option
agreement to purchase shares in the Company. The option is granted to CH Capital Lending, LLC, an affiliate of IRG (“CH Capital”)
for an aggregate amount of 2,827,695 Class A Ordinary Stock under the Special Talent Incentive Plan. See Note 13 Stock-Based Compensation.
Should the option be exercised, the accrued outstanding rent payments as of December 31, 2020 of $995 shall be deemed paid. In the event
that the value of the option is less than the amount of accrued outstanding rent payments owed, the Company will pay IRG the difference
in a single cash payment. The base rent will remain at $130 per month subject to a 2% annual increase.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
CONDENSED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
17,873
|
|
|
$
|
549,395
|
|
Prepaid expenses and other current assets
|
|
|
107,034
|
|
|
|
128,561
|
|
Total Current Assets
|
|
|
124,907
|
|
|
|
677,956
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
229,788,742
|
|
|
|
229,884,479
|
|
TOTAL ASSETS
|
|
$
|
229,913,649
|
|
|
$
|
230,562,435
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
1,981,461
|
|
|
$
|
2,041,838
|
|
Promissory note – related party
|
|
|
500,000
|
|
|
|
—
|
|
Total Current Liabilities
|
|
|
2,481,461
|
|
|
|
2,041,838
|
|
|
|
|
|
|
|
|
|
|
Convertible note – related party
|
|
|
480,400
|
|
|
|
—
|
|
Warrant liability
|
|
|
6,605,462
|
|
|
|
630,224
|
|
Total Liabilities
|
|
|
9,567,323
|
|
|
|
2,672,062
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption, 22,977,568 and 22,289,037 shares at redemption value as of June 30, 2021 and December 31, 2020, respectively
|
|
|
229,775,680
|
|
|
|
222,890,370
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.0001 par value; 50,000,000 shares authorized; 6,538,943 and 7,227,474 shares issued and outstanding (excluding 22,977,568 and 22,289,037 shares subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively
|
|
|
654
|
|
|
|
723
|
|
Additional paid-in capital
|
|
|
5,816,446
|
|
|
|
7,584,657
|
|
Accumulated deficit
|
|
|
(15,246,454
|
)
|
|
|
(2,585,377
|
)
|
Total Stockholders’ Deficit (Equity)
|
|
|
(9,429,354
|
)
|
|
|
5,000,003
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
229,913,649
|
|
|
$
|
230,562,435
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and formation costs
|
|
$
|
442,736
|
|
|
$
|
—
|
|
|
$
|
1,327,335
|
|
|
$
|
1,000
|
|
Loss from operations
|
|
|
(442,736
|
)
|
|
|
—
|
|
|
|
(1,327,335
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
8,213
|
|
|
|
—
|
|
|
|
38,926
|
|
|
|
—
|
|
Change in fair value of convertible note
|
|
|
(280,400
|
)
|
|
|
—
|
|
|
|
(280,400
|
)
|
|
|
—
|
|
Change in fair value of warrant liability
|
|
|
(5,012,065
|
)
|
|
|
—
|
|
|
|
(5,975,238
|
)
|
|
|
—
|
|
Other expense, net
|
|
|
(5,284,252
|
)
|
|
|
—
|
|
|
|
(6,216,712
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(5,726,988
|
)
|
|
|
—
|
|
|
|
(7,544,047
|
)
|
|
|
(1,000
|
)
|
Benefit (provision) for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
Net loss
|
|
$
|
(5,726,988
|
)
|
|
$
|
—
|
|
|
$
|
(7,544,047
|
)
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
22,103,036
|
|
|
|
—
|
|
|
|
22,195,523
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, Common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
$
|
—
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
(Unaudited)
THREE AND SIX MONTHS ENDED JUNE 30, 2021
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – December 31, 2020
|
|
|
7,227,474
|
|
|
$
|
723
|
|
|
$
|
7,584,657
|
|
|
$
|
(2,585,377
|
)
|
|
$
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
186,001
|
|
|
|
18
|
|
|
|
1,817,042
|
|
|
|
—
|
|
|
|
1,817,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,817,059
|
)
|
|
|
(1,817,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2021
|
|
|
7,413,475
|
|
|
$
|
741
|
|
|
$
|
9,401,699
|
|
|
$
|
(4,402,436
|
)
|
|
$
|
5,000,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
(874,532
|
)
|
|
|
(87
|
)
|
|
|
(3,585,253
|
)
|
|
|
(5,117,030
|
)
|
|
|
(8,702,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,726,988
|
)
|
|
|
(5,726,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – June 30, 2021
|
|
|
6,538,943
|
|
|
$
|
654
|
|
|
$
|
5,816,446
|
|
|
$
|
(15,246,454
|
)
|
|
$
|
(9,429,354
|
)
|
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND
FOR THE PERIOD FROM FEBRUARY 11, 2020 (INCEPTION) THROUGH JUNE 30, 2020
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholder’s
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – February 11, 2020 (Inception)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Founder Shares to Sponsor (1)
|
|
|
5,950,000
|
|
|
|
595
|
|
|
|
25,225
|
|
|
|
—
|
|
|
|
25,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2020
|
|
|
5,950,000
|
|
|
$
|
595
|
|
|
$
|
25,225
|
|
|
$
|
(1,000
|
)
|
|
$
|
24,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – June 30, 2020
|
|
|
5,950,000
|
|
|
$
|
595
|
|
|
$
|
25,225
|
|
|
$
|
(1,000
|
)
|
|
$
|
24,820
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
Six Months
Ended
June 30,
2021
|
|
|
For the
Period from
February 11,
2020
(Inception)
Through
June 30,
2020
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,544,047
|
)
|
|
$
|
—
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liability
|
|
|
5,975,238
|
|
|
|
—
|
|
Change in fair value of convertible note
|
|
|
280,400
|
|
|
|
—
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(38,926
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
21,527
|
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
(60,377
|
)
|
|
|
—
|
|
Net cash used in operating activities
|
|
|
(1,366,185
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Cash withdrawn from Trust Account to pay franchise and income taxes
|
|
|
134,663
|
|
|
|
—
|
|
Net cash provided by investing activities
|
|
|
134,663
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from promissory note—related party
|
|
|
500,000
|
|
|
|
—
|
|
Proceeds from convertible promissory note - related party
|
|
|
200,000
|
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
700,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(531,522
|
)
|
|
|
—
|
|
Cash – Beginning
|
|
|
549,395
|
|
|
|
—
|
|
Cash – Ending
|
|
$
|
17,873
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Change in value of Class A common stock subject to possible redemption
|
|
$
|
6,885,310
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of
the unaudited 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 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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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).
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
|
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
|
|
FARADAY FUTURE INTELLIGENT ELECTRIC INC.
(f/k/a PROPERTY SOLUTIONS ACQUISITION CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
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.
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.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of
Property Solutions Acquisition Corp.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheet of Property Solutions Acquisition Corp. (the “Company”) as of December 31, 2020,
the related statements of operations, changes in stockholder’s equity and cash flows for the period from February 11, 2020 (inception)
through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and
the results of its operations and its cash flows for the period from February 11, 2020 (inception) through December 31, 2020, in conformity
with accounting principles generally accepted in the United States of America.
Explanatory
Paragraph — Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described
in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and
the Company’s cash and working capital as of December 31, 2020 are not sufficient to complete its planned activities. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. Management’s
plans in regard to these matters are also described in Notes 1 and 10. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Restatement
of the 2020 Financial Statements
As
discussed in Note 2 to the financial statements, the accompanying financial statements as of December 31, 2020 and for the period from
February 11, 2020 (inception) through December 31, 2020 have been restated.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/s/
Marcum LLP
Marcum LLP
We
have served as the Company’s auditor since 2020.
Fort
Lauderdale, FL
March 31, 2021, except for the effects of the restatement discussed in Note 2 as to which the date is May 26, 2021
PROPERTY
SOLUTIONS ACQUISITION CORP.
BALANCE SHEET
DECEMBER 31, 2020 (RESTATED)
ASSETS
|
|
|
|
Current Assets
|
|
|
|
Cash
|
|
$
|
549,395
|
|
Prepaid expenses and other current assets
|
|
|
128,561
|
|
Total Current Assets
|
|
|
677,956
|
|
Cash and marketable securities held in Trust Account
|
|
|
229,884,479
|
|
TOTAL ASSETS
|
|
$
|
230,562,435
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
Current liabilities – accrued expenses
|
|
$
|
2,041,838
|
|
Warrant liability
|
|
|
630,224
|
|
TOTAL LIABILITIES
|
|
$
|
2,672,062
|
|
Commitments
|
|
|
|
|
Common stock subject to possible redemption 22,289,037 shares at redemption value
|
|
|
222,890,370
|
|
Stockholders’ Equity
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding
|
|
|
—
|
|
Common stock, $0.0001 par value; 50,000,000 shares authorized; 7,227,474 issued and outstanding (excluding 22,289,037 shares subject to possible redemption)
|
|
|
723
|
|
Additional paid-in capital
|
|
|
7,584,657
|
|
Accumulated deficit
|
|
|
(2,585,377
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,003
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
230,562,435
|
|
The
accompanying notes are an integral part of these financial statements.
PROPERTY
SOLUTIONS ACQUISITION CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 11, 2020 (INCEPTION) THROUGH
DECEMBER 31, 2020 (RESTATED)
Formation and operational costs
|
|
$
|
2,218,182
|
|
Loss from operations
|
|
|
(2,218,182
|
)
|
|
|
|
|
|
Other expense:
|
|
|
|
|
Change in fair value of warrants
|
|
|
(475,641
|
)
|
Transaction costs incurred in connection with the IPO
|
|
|
(353
|
)
|
Interest earned on marketable securities held in Trust Account
|
|
|
99,990
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
8,809
|
|
Other expense (net):
|
|
|
(367,195
|
)
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(2,585,377
|
)
|
Net loss
|
|
$
|
(2,585,377
|
)
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
21,779,604
|
|
|
|
|
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
$
|
0.00
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
6,452,794
|
|
|
|
|
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
$
|
(0.40
|
)
|
The
accompanying notes are an integral part of these financial statements.
PROPERTY
SOLUTIONS ACQUISITION CORP.
STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
FOR THE PERIOD FROM FEBRUARY 11, 2020 (INCEPTION) THROUGH
DECEMBER 31, 2020 (RESTATED)
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total Stockholder’s
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – February 11, 2020 (Inception)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Founder Shares to Sponsor
|
|
|
5,750,000
|
|
|
|
575
|
|
|
|
24,425
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Representative Shares
|
|
|
200,000
|
|
|
|
20
|
|
|
|
800
|
|
|
|
—
|
|
|
|
820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 22,977,568 Units, net of underwriting discount and offering expenses
|
|
|
22,977,568
|
|
|
|
2,298
|
|
|
|
224,656,352
|
|
|
|
—
|
|
|
|
224,658,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 594,551 Private Placement Units, net of warrant liability
|
|
|
594,551
|
|
|
|
60
|
|
|
|
5,791,220
|
|
|
|
—
|
|
|
|
5,791,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of Founder Shares
|
|
|
(5,608
|
)
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock subject to possible redemption
|
|
|
(22,289,037
|
)
|
|
|
(2,229
|
)
|
|
|
(222,888,141
|
)
|
|
|
—
|
|
|
|
(222,890,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,585,377
|
)
|
|
|
(2,585,377
|
)
|
Balance – December 31, 2020
|
|
|
7,227,474
|
|
|
$
|
723
|
|
|
$
|
7,584,657
|
|
|
$
|
(2,585,377
|
)
|
|
$
|
5,000,003
|
|
The
accompanying notes are an integral part of these financial statements.
PROPERTY
SOLUTIONS ACQUISITION CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 11, 2020 (INCEPTION) THROUGH
DECEMBER 31, 2020 (RESTATED)
Cash Flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(2,585,377
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(99,990
|
)
|
Change in fair value of warrant liability
|
|
|
475,641
|
|
Transaction costs incurred in connection with IPO
|
|
|
353
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
(8,809
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
(128,541
|
)
|
Accrued expenses
|
|
|
2,041,838
|
|
Net cash used in operating activities
|
|
|
(304,885
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
Investment in Trust Account
|
|
|
(229,775,680
|
)
|
Net cash used in investing activities
|
|
|
(229,775,680
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
225,180,170
|
|
Proceeds from sale of Private Placement Units
|
|
|
5,945,510
|
|
Advances from related party
|
|
|
75,000
|
|
Repayment of advances from related party
|
|
|
(75,000
|
)
|
Proceeds from promissory note – related party
|
|
|
133,000
|
|
Repayment of promissory note – related party
|
|
|
(133,000
|
)
|
Payment of offering costs
|
|
|
(495,720
|
)
|
Net cash provided by financing activities
|
|
|
230,629,960
|
|
Net Change in Cash
|
|
|
549,395
|
|
Cash – Beginning of period
|
|
|
—
|
|
Cash – End of period
|
|
$
|
549,395
|
|
Non-Cash investing and financing activities:
|
|
|
|
|
Initial classification of common stock subject to possible redemption
|
|
$
|
219,345,620
|
|
Change in value of common stock subject to possible redemption
|
|
$
|
3,544,750
|
|
Offering costs paid directly by Sponsor from proceeds from issuance of common stock
|
|
$
|
25,000
|
|
Issuance of Representative Shares
|
|
$
|
820
|
|
Forfeiture of Founder Shares
|
|
$
|
(1
|
)
|
The
accompanying notes are an integral part of these financial statements.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Property
Solutions Acquisition Corp. (the “Company”) was incorporated in Delaware on February 11, 2020. The Company is 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 (the “Business Combination”).
Although
the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company
intends to focus on businesses that service the real estate industry. The Company is an early stage and emerging growth company and,
as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The
Company has 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”) (see Note 12).
As
of December 31, 2020, the Company had not commenced any operations. All activity for the period from February 11, 2020 (inception) through
December 31, 2020 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which
is described below, identifying a target company for a Business Combination, and activities in connection with the proposed acquisition
of FF Intelligent Mobility Global Holdings Ltd., an exempted company with limited liability incorporated under the laws of the Cayman
Islands (“FF”) (see Note 12). The Company will not generate any operating revenues until after the completion of a Business
Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived
from the Initial Public Offering.
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 4.
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 5.
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 2,977,568 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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding
taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The
Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act.
The
Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem
all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will
seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account
(initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not
previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants.
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 immediately prior to or
upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information
as would be included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company
seeks stockholder approval in connection with a Business Combination, the Sponsor and EarlyBirdCapital have agreed to vote their Founder
Shares (as defined in Note 6), Representative Shares (as defined in Note 8), Private Shares (as defined in Note 5) and any Public Shares
purchased during or after the Initial Public Offering (a) in favor of approving a Business Combination and (b) not to convert
any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer
in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the Initial transaction or don’t vote at all.
The
Sponsor and EarlyBirdCapital have agreed (a) to waive their redemption rights with respect to their Founder Shares, Private Shares
and Public Shares held by them in connection with the completion of a Business Combination, (b) to waive their rights to liquidating
distributions from the Trust Account with respect to the Founder Shares, Representative Shares and Private Shares if the Company fails
to consummate a Business Combination, and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation
that would affect a public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination
or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete
a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction
with any such amendment.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (cont.)
The
Company will have until April 24, 2022 to complete a Business Combination (the “Combination Period”). If the Company is unable
to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on
the funds held in the Trust Account and not previously released to the Company to pay taxes, divided by the number of then outstanding
Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve
and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s
warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.00 per Public Share, except as to
any claims by a third party who executed a valid and enforceable agreement with the Company waiving any right, title, interest or claim
of any kind they may have in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity
of the underwriters of Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third
party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce
the possibility that Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors,
service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity
and Going Concern
As
of December 31, 2020, the Company had $549,395 in its operating bank accounts, $229,884,479 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 $1,222,111, which excludes $141,771 of franchise taxes payable. As of December 31, 2020, $108,799 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 (See Note 11).
The
Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors,
or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time
to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital
needs. Accordingly, the Company may not be able 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 April 24, 2022, the date that the Company will be required to cease
all operations, except for the purpose of winding up, if a Business Combination is not consummated. 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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The
Company previously accounted for its outstanding Private Placement Warrants (as defined in Note 5) issued in connection with its Initial
Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Private Placement Warrants
includes a provision that provides for potential changes to the settlement amounts of the Private Placement Warrants which are dependent
upon the characteristics of the holder of the warrant.
On
April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange
Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition
companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement
terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in
the warrant agreement (the “Warrant Agreement”).
In
further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards
Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity
versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may
be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under
ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment
to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s
evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement
Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40-15 because the holder
of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.
As
a result of the above, the Company should have classified the Private Placement Warrants as derivative liabilities in its previously
issued financial statements. Under this accounting treatment, the Company is required to measure the fair value of the Private Placement
Warrants at the end of each reporting period as well as re-evaluate the treatment of the warrants (including on July 24, 2020, September
30, 2020 and December 31, 2020) and recognize changes in the fair value from the prior period in the Company’s operating results
for the current period.
The
Company’s accounting for the Private Placement Warrants as a component of equity instead of as derivative liabilities did not have
any effect on the Company’s previously reported investments held in trust, operating expenses or cash.
|
|
As
Previously
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
Balance Sheet as of:
|
|
|
|
|
|
|
|
|
|
July 24, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
—
|
|
|
$
|
154,583
|
|
|
$
|
154,583
|
|
Total Liabilities
|
|
|
—
|
|
|
|
154,583
|
|
|
|
154,583
|
|
Common Stock Subject to Possible Redemption
|
|
|
225,628,970
|
|
|
|
(154,583
|
)
|
|
|
225,474,387
|
|
Common Stock
|
|
|
696
|
|
|
|
1
|
|
|
|
697
|
|
Additional Paid-in Capital
|
|
|
5,000,314
|
|
|
|
352
|
|
|
|
5,000,666
|
|
Accumulated deficit
|
|
|
(1,000
|
)
|
|
|
(353
|
)
|
|
|
(1,353
|
)
|
Total Shareholders’ Equity
|
|
|
5,000,010
|
|
|
|
—
|
|
|
|
5,000,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemptions
|
|
|
22,562,897
|
|
|
|
(15,458
|
)
|
|
|
22,547,439
|
|
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (cont.)
|
|
As
Previously
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
—
|
|
|
$
|
219,984
|
|
|
$
|
219,984
|
|
Total Liabilities
|
|
|
51,267
|
|
|
|
219,984
|
|
|
|
271,251
|
|
Common Stock Subject to Possible Redemption
|
|
|
225,527,000
|
|
|
|
(219,984
|
)
|
|
|
225,307,016
|
|
Common Stock
|
|
|
696
|
|
|
|
2
|
|
|
|
698
|
|
Additional Paid-in Capital
|
|
|
5,102,284
|
|
|
|
65,752
|
|
|
|
5,168,036
|
|
Accumulated deficit
|
|
|
(102,977
|
)
|
|
|
(65,754
|
)
|
|
|
(168,731
|
)
|
Total Shareholders’ Equity
|
|
|
5,000,003
|
|
|
|
—
|
|
|
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemptions
|
|
|
22,552,700
|
|
|
|
(21,998
|
)
|
|
|
22,530,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
—
|
|
|
$
|
630,224
|
|
|
$
|
630,224
|
|
Total Liabilities
|
|
|
2,041,838
|
|
|
|
630,224
|
|
|
|
2,672,062
|
|
Common Stock Subject to Possible Redemption
|
|
|
223,520,590
|
|
|
|
(630,220
|
)
|
|
|
222,890,370
|
|
Common Stock
|
|
|
716
|
|
|
|
7
|
|
|
|
723
|
|
Additional Paid-in Capital
|
|
|
7,108,674
|
|
|
|
475,983
|
|
|
|
7,584,657
|
|
Accumulated deficit
|
|
|
(2,109,383
|
)
|
|
|
(475,994
|
)
|
|
|
(2,585,377
|
)
|
Total Shareholders’ Equity
|
|
|
5,000,007
|
|
|
|
(4
|
)
|
|
|
5,000,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemptions
|
|
|
22,352,059
|
|
|
|
(63,022
|
)
|
|
|
22,289,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations for the:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(101,977
|
)
|
|
$
|
(65,754
|
)
|
|
$
|
(167,731
|
)
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
22,552,700
|
|
|
|
—
|
|
|
|
22,552,700
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
6,496,149
|
|
|
|
|
|
|
|
6,496,149
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from February 11, 2020 (inception) to September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of initial public offering costs
|
|
$
|
—
|
|
|
$
|
(353
|
)
|
|
$
|
(353
|
)
|
Change in fair value of warrant liability
|
|
|
—
|
|
|
|
(65,401
|
)
|
|
|
(65,401
|
)
|
Net loss
|
|
|
(102,977
|
)
|
|
|
(65,754
|
)
|
|
|
(168,731
|
)
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
—
|
|
|
|
22,552,700
|
|
|
|
22,552,700
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
|
—
|
|
|
|
0.00
|
|
|
|
0.00
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
5,713,990
|
|
|
|
—
|
|
|
|
5,713,990
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (cont.)
|
|
As
Previously
Reported
|
|
|
Adjustments
|
|
|
As
Restated
|
|
Period from February 11, 2020 (inception) to December 31, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of initial public offering costs
|
|
$
|
—
|
|
|
$
|
(353
|
)
|
|
$
|
(353
|
)
|
Change in fair value of warrant liability
|
|
|
—
|
|
|
|
(475,641
|
)
|
|
|
(475,641
|
)
|
Net loss
|
|
|
(2,109,383
|
)
|
|
|
(475,994
|
)
|
|
|
(2,585,377
|
)
|
Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption
|
|
|
22,557,034
|
|
|
|
(777,430
|
)
|
|
|
21,779,604
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
|
—
|
|
|
|
0.00
|
|
|
|
0.00
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
6,068,878
|
|
|
|
383,916
|
|
|
|
6,452,794
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
|
(0.35
|
)
|
|
|
(0.05
|
)
|
|
|
(0.40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Changes in Stockholder’s Equity for the:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 594,551 Private Units
|
|
$
|
5,945,510
|
|
|
$
|
(154,230
|
)
|
|
$
|
5,791,280
|
|
Common stock subject to possible redemption
|
|
|
(225,527,000
|
)
|
|
|
219,990
|
|
|
|
(225,307,010
|
)
|
Net loss
|
|
|
(101,977
|
)
|
|
|
(65,754
|
)
|
|
|
(167,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from February 11, 2020 (inception) to September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 594,551 Private Units
|
|
$
|
5,945,510
|
|
|
$
|
(154,230
|
)
|
|
$
|
5,791,280
|
|
Common stock subject to possible redemption
|
|
|
(225,527,000
|
)
|
|
|
219,990
|
|
|
|
(225,307,010
|
)
|
Net loss
|
|
|
(102,977
|
)
|
|
|
(65,754
|
)
|
|
|
(168,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from February 11, 2020 (inception) to December 31, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 594,551 Private Units
|
|
$
|
5,945,510
|
|
|
$
|
(154,230
|
)
|
|
$
|
5,791,280
|
|
Common stock subject to possible redemption
|
|
|
(223,520,590
|
)
|
|
|
630,220
|
|
|
|
(222,890,370
|
)
|
Net loss
|
|
|
(2,109,383
|
)
|
|
|
(475,994
|
)
|
|
|
(2,585,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows for the:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from February 11, 2020 (inception) to September 30, 2020 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(102,977
|
)
|
|
$
|
(65,754
|
)
|
|
$
|
(168,731
|
)
|
Change in fair value of warrant liability
|
|
|
—
|
|
|
|
65,401
|
|
|
|
65,401
|
|
Transaction costs incurred in connection with IPO
|
|
|
—
|
|
|
|
353
|
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from February 11, 2020 (inception) to December 31, 2020 (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,109,383
|
)
|
|
$
|
(475,994
|
)
|
|
$
|
(2,585,377
|
)
|
Change in fair value of warrant liability
|
|
|
—
|
|
|
|
475,641
|
|
|
|
475,641
|
|
Transaction costs incurred in connection with IPO
|
|
|
—
|
|
|
|
353
|
|
|
|
353
|
|
The
restatement to the previously issued financial statements did not have any impact on the cashflows from operating, investing, or financing
activities on the Statement of Cash Flows for the periods from February 11, 2020 (inception) to September 30, 2020 or from February 11,
2020 (inception) to December 31, 2020.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED)
Basis
of Presentation
The
accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
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 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.
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 December 31, 2020.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (cont.)
Cash
and Marketable Securities Held in Trust Account
At
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. At December 31, 2020, substantially
all of the assets held in the Trust Account were held in U.S. Treasury Bills.
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 balance sheet.
Warrant
Liability
The
Company accounts for the Private Warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F under which the Private
Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private
Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This warrant liability
is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement
of operations. The Private Warrants for periods where no observable traded price was available are valued using a lattice model and Monte
Carlo simulation.
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 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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (cont.)
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
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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (cont.)
The
following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
For the
Period from
February 11, 2020
(Inception) Through December 31,
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
|
|
$
|
97,270
|
|
Unrealized gain on marketable securities held in Trust Account
|
|
|
8,569
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(105,839
|
)
|
Less: interest available to be withdrawn for working capital
|
|
|
—
|
|
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
|
|
|
21,779,604
|
|
Basic and diluted net income per share, Common stock subject to possible redemption
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
Numerator: Net Loss minus Net Earnings
|
|
|
|
|
Net loss
|
|
$
|
(2,585,377
|
)
|
Less: Net income allocable to Common stock subject to possible redemption
|
|
|
—
|
|
Non-Redeemable Net Loss
|
|
$
|
(2,585,377
|
)
|
Denominator: Weighted Average Non-redeemable common stock
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-redeemable common stock
|
|
|
6,452,794
|
|
Basic and diluted net loss per share, Non-redeemable common stock
|
|
$
|
(0.40
|
)
|
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 Deposit Insurance Corporation 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 balance sheet, primarily due to their short-term
nature.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (RESTATED) (cont.)
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
●
|
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
●
|
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each
reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
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 financial statements.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
NOTE
4. 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 9).
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
5. 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
6. 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.
Administrative
Services Agreement
The
Company entered into an agreement whereby, commencing on 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 period from February 11, 2020 (inception) through December 31, 2020, the Company
incurred and paid $50,000 in fees for these services.
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.
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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
6. RELATED PARTY TRANSACTIONS (cont.)
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.
NOTE
7. 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.
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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
8. STOCKHOLDERS’ EQUITY (RESTATED)
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 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
December 31, 2020, there were 7,227,474 shares of common stock issued and outstanding, excluding 22,289,037 shares of common stock subject
to possible redemption.
NOTE
9. WARRANTS
Warrants —
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.
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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
9. WARRANTS (cont.)
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.
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.
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.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
10. INCOME TAX (RESTATED)
The
Company’s net deferred tax assets are as follows:
|
|
December 31,
2020
|
|
Deferred tax assets (liabilities)
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
129,221
|
|
Startup and organizational expenses
|
|
|
436,047
|
|
Unrealized gain on marketable securities
|
|
|
(22,848
|
)
|
Total deferred tax assets
|
|
|
542,420
|
|
Valuation Allowance
|
|
|
(542,420
|
)
|
Deferred tax assets, net valuation allowance
|
|
$
|
—
|
|
The
income tax provision consists of the following:
|
|
For the
period from
February 11,
2020
(inception)
through
December 31,
2020
|
|
Federal
|
|
|
|
|
Current
|
|
$
|
—
|
|
Deferred
|
|
|
(542,420
|
)
|
|
|
|
|
|
State and Local
|
|
|
|
|
Current
|
|
|
—
|
|
Deferred
|
|
|
—
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
542,420
|
|
Income tax provision
|
|
$
|
—
|
|
As
of December 31, 2020, the Company had $139,342 of U.S. federal net operating loss carryovers available to offset future taxable income.
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. After consideration of all of the information available, management believes that significant uncertainty
exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the
period from February 11, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $442,461.
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
10. INCOME TAX (RESTATED) (cont.)
A
reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:
|
|
December 31,
2020
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
Valuation allowance
|
|
|
(21.0
|
)%
|
Income tax provision
|
|
|
0.0
|
%
|
The
Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. The
Company’s tax returns since inception remain open to examination by the taxing authorities. The Company considers New York
to be a significant state tax jurisdiction.
NOTE
11. FAIR VALUE MEASUREMENTS (RESTATED)
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.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December
31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
1
|
|
$
|
229,884,479
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Warrant Liability – Private Placement Warrants
|
|
3
|
|
$
|
630,224
|
|
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
11. FAIR VALUE MEASUREMENTS (RESTATED) (cont.)
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 initial measurement, September
30, 2020, and December 31, 2020:
Input
|
|
July 24,
2020
(Initial Measurement)
|
|
|
September 30,
2020
|
|
|
December 31,
2020
|
|
Risk-free interest rate
|
|
|
0.34
|
%
|
|
|
0.34
|
%
|
|
|
0.34
|
%
|
Trading days per year
|
|
|
252
|
|
|
|
252
|
|
|
|
252
|
|
Expected volatility
|
|
|
27.0
|
%
|
|
|
27.0
|
%
|
|
|
27.0
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Stock Price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
The
following table presents the changes in the fair value of the Private Placement Warrants:
|
|
Warrant
Liability
|
|
Fair value as of February 11, 2020 (inception)
|
|
$
|
—
|
|
Initial measurement on July 24, 2020
|
|
|
154,583
|
|
Change in valuation inputs or other assumptions
|
|
|
475,641
|
|
Fair value as of December 31, 2020
|
|
$
|
630,224
|
|
There
were no transfers in or out of Level 3 from other levels in the fair value hierarchy.
NOTE
12. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based upon this review, other than as described below or in these financial statements, the Company did not identify any
subsequent events that would have required adjustment or disclosure in the financial statements.
Merger
agreement
On
January 27, 2021, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) by and among the Company,
Merger Sub and FF. FF is a global mobility technology company that designs and engineers next-generation smart electric connected vehicles.
Pursuant
to the Merger Agreement, Merger Sub will merge with and into FF, with FF surviving the merger (the “Merger” and, together
with the other transactions contemplated by the Merger Agreement, the “Transactions”). As a result of the Transactions, FF
will become a wholly-owned subsidiary of the Company, with the stockholders of FF becoming stockholders of the Company, which will be
renamed “Faraday Future Intelligent Electric, Inc.” (“New FF”).
PROPERTY
SOLUTIONS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE
12. SUBSEQUENT EVENTS (cont.)
Under
the Merger Agreement, the outstanding FF shares and the outstanding FF converting debt will be converted into a number of shares of new
Class A common stock of the Company following the Transactions and, for FF Top Holding Ltd. (“FF Top”), shares of new
Class B common stock of the Company (“New FF common stock”) following the Transactions based on an exchange ratio (the
“Exchange Ratio”), the numerator of which is equal to (i)(A) the number of shares of the Company common stock equal to $2,716,000,000
(plus net cash of FF, less debt of FF, plus debt of FF that will be converted into shares of the Company common stock, plus any additional
bridge loan in an amount not to exceed $100,000,000), (B) divided by $10, minus (ii) an additional 25,000,000 shares which
may be issuable to FF stockholders as additional consideration upon certain price thresholds, and the denominator of which is equal to
the number of outstanding shares of FF, including shares issuable upon exercise of vested FF options and vested FF warrants (in each
case assuming cashless exercise) and upon conversion of outstanding convertible notes.
Additionally,
each FF option or FF warrant that is outstanding immediately prior to the closing of the Merger (and by its terms will not terminate
upon the closing of the Merger) will remain outstanding and convert into the right to purchase a number of shares of the 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.
The
Merger Agreement contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain
conditions as further described in the Merger Agreement.
In
connection with the execution of the Merger Agreement, the Company entered into separate Subscription Agreements with certain accredited
investors or qualified institutional buyers (collectively, the “Subscription Investors”) concurrently with the execution
of the Merger Agreement on January 27, 2021. Pursuant to the Subscription Agreements, the Subscription Investors agreed to subscribe
for and purchase, and the Company agreed to issue and sell, to the Subscription Investors an aggregate of 77,500,000 shares of common
stock of the Company for a purchase price of $10.00 per share, or an aggregate of approximately $775 million, in a private placement.
17,500,000 of such shares ($175 million in net proceeds) will be issued to an anchor investor and the issuance of such shares is subject
to certain regulatory approvals. The Subscription Agreements further require the Company to have an effective shelf registration statement
registering the resale of the shares of the Company’s common stock held by the Subscription Investors within 60 calendar days (or
90 calendar days if the SEC notifies the Company that it will review the registration statement) following the closing of the Transactions.
Subscription
agreement
Also
on January 27, 2021, the Company entered into additional Subscription Agreements with Subscription Investors in the amount of 2,000,000
shares of common stock of the Company for a purchase price of $10.00 per share, or an aggregate of approximately $20 million, which increases
the total amount of the private placement pursuant to the Subscription Agreements to 79,500,000 shares of common stock of PSAC for a
purchase price of $10.00 per share, or an aggregate of approximately $795 million.
Related
Party Loans
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 units at a price of $10.00 per unit at the option of the Sponsor.
The units would be identical to the Private Units. As of the date of these financial statements, there is a $500,000 balance outstanding
under the Note.
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance
and Distribution.
The following is
an estimate of the expenses (all of which are to be paid by the registrant) that we may incur in connection with the securities being
registered hereby.
|
|
Amount
|
|
SEC registration fee
|
|
$
|
306,769.10
|
|
Legal fees and expenses
|
|
|
|
*
|
Accounting fees and expenses
|
|
|
|
*
|
Miscellaneous
|
|
|
|
*
|
Total
|
|
$
|
306,769.10
|
*
|
|
*
|
These fees are calculated based on the securities offered and
the number of issuances and accordingly cannot be defined at this time.
|
We will bear all costs, expenses and fees in connection
with the registration of the securities, including with regard to compliance with state securities or “blue sky” laws. The
Selling Securityholders, however, will bear all underwriting commissions and discounts, if any, attributable to their sale of the securities.
All amounts are estimates except the SEC registration fee and the FINRA filing fee.
Item 14. Indemnification of Directors
and Officers.
Section 145 of the DGCL concerning indemnification
of officers, directors, employees and agents is set forth below.
“Section 145. Indemnification of officers,
directors, employees and agents; insurance.
|
(a)
|
A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act
in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
|
|
(b)
|
A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
|
|
(c)
|
(1)
|
To the extent that a present or former director
or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. For indemnification
with respect to any act or omission occurring after December 31, 2020, references to “officer” for purposes of these paragraphs
(c)(1) and (2) of this section shall mean only a person who at the time of such act or omission is deemed to have consented to service
by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10 (for purposes of this sentence
only, treating residents of this State as if they were nonresidents to apply § 3114(b) of Title 10 to this sentence).
|
|
(2)
|
The corporation may indemnify any other person who is not
a present or former director or officer of the corporation against expenses (including attorneys’ fees) actually and reasonably
incurred by such person to the extent he or she has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein.
|
|
(d)
|
Any indemnification under subsections (a) and (b) of
this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination
that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person
has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be
made, with respect to a person who is a director or officer of the corporation at the time of such determination, (1) by a majority
vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee
of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
|
|
(e)
|
Expenses (including attorneys’ fees) incurred by an
officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors
and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers,
employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.
|
|
(f)
|
The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.
A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall
not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or the bylaws after the
occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding
for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly
authorizes such elimination or impairment after such action or omission has occurred.
|
|
(g)
|
A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s
status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
|
|
(h)
|
For purposes of this section, references to “the corporation”
shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting
or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
|
|
(i)
|
For purposes of this section, references to “other enterprises”
shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect
to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as
a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner
such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
|
|
(j)
|
The indemnification and advancement of expenses provided by,
or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
|
|
(k)
|
The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation
to advance expenses (including attorneys’ fees).
|
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of
expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Section 7.01 of the Amended and Restated Charter
provides:
“To the fullest extent permitted by the DGCL,
as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended after approval by the stockholders
of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended, automatically
and without further action, upon the date of such amendment.”
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have
been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is theretofore
unenforceable.
We have entered into indemnification agreements
with each of our current directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent
permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as
a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements
with future directors and executive officers.
Item 15. Recent Sales of Unregistered
Securities.
The Founder Shares, the Private Warrants and the
shares of Class A Common Stock issued pursuant to the Subscription Agreements in connection with the Private Placement, were not registered
under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2)
of the Securities Act and/or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering without
any form of general solicitation or general advertising.
Item 16. Exhibits.
Exhibit No.
|
|
Description of Exhibits
|
|
Incorporation by Reference
|
2.1+
|
|
Agreement and Plan of Merger, dated as of January 27, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd.
|
|
Annex A to Amendment No. 3 to Registration Statement on Form S-4 filed on June 23, 2021
|
2.2
|
|
First Amendment to Agreement and Plan of Merger, dated as of February 25, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd.
|
|
Exhibit 2.2 to Registration Statement on Form S-4 filed on April 5, 2021
|
2.3
|
|
Second Amendment to Agreement and Plan of Merger, dated as of May 3, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd.
|
|
Exhibit 2.3 to Amendment No. 1 to Registration Statement on Form S-4 filed on June 1, 2021
|
2.4
|
|
Third Amendment to Agreement and Plan of Merger, dated as of June 14, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd.
|
|
Exhibit 2.4 to Amendment No. 3 to Registration Statement on Form S-4 filed on June 23, 2021
|
2.5
|
|
Fourth Amendment to Agreement and Plan of Merger, dated as of July 12, 2021, by and among Property Solutions Acquisition Corp., PSAC Merger Sub Ltd., and FF Intelligent Mobility Global Holdings Ltd.
|
|
Exhibit 2.5 to the Current Report on Form 8-K filed on July 22, 2021.
|
3.1
|
|
Second Amended and Restated Certificate of Incorporation of the Company
|
|
Exhibit 3.1 to the Current Report on Form 8-K filed on July 22, 2021.
|
3.2
|
|
Amended and Restated Bylaws of the Company
|
|
Exhibit 3.3 to Registration Statement on Form S-4 filed on April 5, 2021
|
4.1
|
|
Specimen Common Stock Certificate
|
|
Exhibit 4.2 to Registration Statement on Form S-4 filed on April 5, 2021
|
4.2
|
|
Specimen Warrant Certificate
|
|
Exhibit 4.3 to Registration Statement on Form S-4 filed on April 5, 2021
|
4.3
|
|
Warrant Agreement between Continental Stock Transfer & Trust Company and the Company
|
|
Exhibit 4.5 to Registration Statement on Form S-4 filed on April 5, 2021
|
5.1**
|
Opinion of Sidley Austin LLP.
|
|
10.1
|
|
Amended and Restated Registration Rights Agreement between the Company and certain holders identified therein.
|
|
Exhibit 10.1 to the Current Report on Form 8-K filed on July 22, 2021.
|
10.2
|
|
Form of Subscription Agreement between the Company and the subscribers party thereto.
|
|
Exhibit 10.10 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.3
|
|
Shareholder Agreement between the Company and certain holders identified therein.
|
|
Exhibit 10.3 to the Current Report on Form 8-K filed on July 22, 2021
|
10.4
|
|
Form of Support Agreement between FF Intelligent Mobility Global Holdings Ltd. and FF Top Holding Ltd.
|
|
Exhibit 10.12 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.5
|
|
Form of Support Agreement between FF Intelligent Mobility Global Holdings Ltd. and Season Smart Ltd.
|
|
Exhibit 10.13 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.6
|
|
Form of Support Agreement between FF Intelligent Mobility Global Holdings Ltd. and Founding Future Creditors Trust.
|
|
Exhibit 10.14 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.7
|
|
Sponsor Support Agreement between Property Solutions Acquisition Corp. and Property Solutions Acquisition Sponsor, LLC.
|
|
Exhibit 10.15 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.8
|
|
Form of Lock-up Agreement between the Company and certain shareholders party thereto.
|
|
Exhibit 10.16 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.9
|
|
Form of Lock-up Agreement between the Company and Property Solutions Acquisition Sponsor, LLC.
|
|
Exhibit 10.17 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.10#
|
|
Faraday Future Intelligent Electric Inc. 2021 Stock Incentive Plan
|
|
Exhibit 10.10 to the Current Report on Form 8-K filed on July 22, 2021.
|
10.11
|
|
Second Amended and Restated Note Purchase Agreement, dated as of October 9, 2020 among Faraday&Future Inc., FF Inc., Faraday SPE, LLC, and Robin Prop Holdco LLC, as Issuers, the Guarantors party thereto, Birch Lake Fund Management, LP, as Collateral Agent for the benefit of the Secured Parties, U.S. Bank National Association, as Notes Agent for the Purchasers and the Purchasers Party Thereto
|
|
Exhibit 10.19 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.12
|
|
First Amendment and Waiver to Second Amended and Restated Note Purchase Agreement, dated as of January 13, 2021 among Faraday&Future Inc., FF Inc., Faraday SPE, LLC, and Robin Prop Holdco LLC, as Issuers, the Guarantors Party Thereto, Birch Lake Fund Management, LP, as Collateral Agent for the benefit of the Secured Parties, U.S. Bank National Association, as Notes Agent for the Purchasers and the Purchasers party thereto
|
|
Exhibit 10.20 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.13
|
|
Second Amendment and Waiver to Second Amended and Restated Note Purchase Agreement, dated as of March 1, 2021 among Faraday&Future Inc., FF Inc., Faraday SPE, LLC, and Robin Prop Holdco LLC, as Issuers, the Guarantors party thereto, Birch Lake Fund Management, LP, as Collateral Agent for the benefit of the Secured Parties, U.S. Bank National Association, as Notes Agent for the Purchasers and the Purchasers party thereto
|
|
Exhibit 10.21 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.14
|
|
Ares Capital Corporation Priority Last Out Secured Promissory Note by Faraday&Future Inc., FF Inc., Faraday SPE, LLC
|
|
Exhibit 10.22 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.15
|
|
Ares Centre Street Partnership Priority Last Out Secured Promissory Note by Faraday&Future Inc., FF Inc., Faraday SPE, LLC
|
|
Exhibit 10.23 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.16
|
|
Ares Credit Strategies Priority Last Out Secured Promissory Note by Faraday&Future Inc., FF Inc., Faraday SPE, LLC
|
|
Exhibit 10.24 to Registration
Statement on Form S-4 filed on April 5, 2021
|
10.17
|
|
Ares Direct Finance I LP Priority Last Out Secured Promissory Note by Faraday&Future Inc., FF Inc., Faraday SPE, LLC
|
|
Exhibit 10.25 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.18#
|
|
Offer Letter dated November 23, 2018 between Jiawei Wang and Faraday&Future Inc.
|
|
Exhibit 10.26 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.19#
|
|
Compensation Adjustment Letter dated July 1, 2019 between Jiawei Wang and Faraday&Future Inc.
|
|
Exhibit 10.27 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.20#
|
|
Compensation Adjustment Letter dated October 16, 2018 between Jiawei Wang and Faraday&Future Inc.
|
|
Exhibit 10.28 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.21#
|
|
Offer Letter dated October 10, 2018 between Tin Mok and Faraday&Future Inc.
|
|
Exhibit 10.29 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.22#
|
|
Sign On Bonus Addendum Letter dated March 26, 2019 between Chui Tin Mok and Faraday&Future Inc.
|
|
Exhibit 10.30 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.23#
|
|
Sign On Bonus Addendum Letter dated March 11, 2018 between Chui Tin Mok and Faraday&Future Inc.
|
|
Exhibit 10.31 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.24#
|
|
Smart King Ltd. Equity Incentive Plan, as Adopted on February 1, 2018, as Amended and Restated Effective February 1, 2018
|
|
Exhibit 10.32 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.25#
|
|
Form of Smart King Ltd. Equity Incentive Plan Option Award Agreement (United States)
|
|
Exhibit 10.33 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.26#
|
|
Form of Smart King Ltd. Equity Incentive Plan Option Award Agreement (China)
|
|
Exhibit 10.34 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.27#
|
|
Smart King Ltd. Special Talent Incentive Plan, as Adopted on May 2, 2019, as Amended on July 26, 2020
|
|
Exhibit 10.35 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.28#
|
|
Form of Smart King Ltd. Special Talent Incentive Plan Share Option Agreement (Individual)
|
|
Exhibit 10.36 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.29#
|
|
Form of Smart King Ltd. Special Talent Incentive Plan Share Option Agreement (Entity)
|
|
Exhibit 10.37 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.30#
|
|
Form of Amended and Restated Employment Agreement by and among Faraday Future Intelligent Electric Inc., Faraday&Future Inc. and Dr. Carsten Breitfeld
|
|
Exhibit 10.38 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.31#
|
|
Offer Letter dated March 29, 2021 between Zvi Glasman and Faraday & Future Inc.
|
|
Exhibit 10.39 to Registration Statement on Form S-4 filed on April 5, 2021
|
10.32#
|
|
Form of Director and Officer Indemnification Agreement by and between the Company and its directors and officers
|
|
Exhibit 10.32 to the Current Report on Form 8-K filed on July 22, 2021.
|
16.1*
|
|
Letter
from Marcum LLP, dated as of October 4, 2021
|
|
|
21.1
|
|
Subsidiaries of the Registrant
|
|
Exhibit 21.1 to the Current Report on Form 8-K filed on July 22, 2021.
|
23.1*
|
|
Consent of PricewaterhouseCoopers LLP, independent registered public accountant of the Company
|
|
|
23.2*
|
|
Consent of Marcum LLP, independent registered public accountant of Property Solutions Acquisition Corp.
|
|
|
23.3**
|
|
Consent of Sidley Austin LLP, counsel to the Company (included in Exhibit 5.1)
|
|
|
24.1**
|
|
Power of Attorney (included in
the signature page to the initial registration statement filed on August 20, 2021)
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101).
|
|
|
|
+
|
The
schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule
and/or exhibit will be furnished to the SEC upon request.
|
|
#
|
Indicates
management contract or compensatory plan or arrangement.
|
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
|
A.
|
To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
|
|
(i)
|
To include any prospectus required by section 10(a)(3) of
the Securities Act;
|
|
(ii)
|
To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration
statement.
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(iii)
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To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any material change to such information in the registration
statement;
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B.
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That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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|
C.
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To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of the offering.
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D.
|
That, for the purpose of determining liability under the Securities
Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
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|
E.
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That, for the purpose of determining liability of the registrant
under the Securities Act to any purchaser in the initial distribution of the securities, that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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|
(i)
|
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424;
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(ii)
|
Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii)
|
The portion of any other free writing prospectus relating
to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned
registrant; and
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|
(iv)
|
Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser.
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F.
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Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on October 4, 2021.
|
Faraday Future Intelligent Electric Inc.
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By:
|
/s/ Carsten Breitfeld
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Carsten Breitfeld
|
|
|
Chief Executive Officer
|
Pursuant to the requirements of the Securities Act
of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Name
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|
Title
|
|
Date
|
|
|
|
|
|
/s/
Carsten Breitfeld
|
|
Chief
Executive Officer and Director
|
|
October 4, 2021
|
Carsten Breitfeld
|
|
(principal
executive officer)
|
|
|
|
|
|
|
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/s/
Zvi Glasman
|
|
Chief
Financial Officer
|
|
October 4, 2021
|
Zvi Glasman
|
|
(principal
financial and accounting officer)
|
|
|
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*
|
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Chairman
|
|
October 4, 2021
|
Brian K. Krolicki
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|
|
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|
|
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*
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|
Director
|
|
October 4, 2021
|
Matthias Aydt
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|
|
|
|
|
|
|
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*
|
|
Director
|
|
October 4, 2021
|
Qing Ye
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October 4, 2021
|
Edwin Goh
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October 4, 2021
|
Lee Liu
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October 4, 2021
|
Susan G. Swenson
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October 4, 2021
|
Jordan Vogel
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October 4, 2021
|
Scott D. Vogel
|
|
|
|
|
The undersigned, by signing his name hereto,
does sign and execute this Amendment No. 1 to the Registration Statement on Form S-1 pursuant to a Power of Attorney executed on behalf
of the above-indicated directors of the registrant and previously filed on behalf of the registrant.
* By:
|
/s/
Jarret Johnson
|
|
|
Jarret Johnson
|
|
|
Attorney-in-Fact
|
|
II-8
0
0
Included in Change in Fair Value Measurement of Related Party Notes Payable, Notes Payable, and Warrant Liabilities on the Condensed Consolidated Statements of Operations and Comprehensive Loss.
On April 29, 2019, the Company executed the Note Purchase Agreement (“NPA”) with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA was $200,000. Upon both a Company Preferred Stock offering and prepayment notice by the holder, or on the maturity date of the notes payable, the holder may elect to convert all of the outstanding principal and accrued interest of the notes payable, plus a 20.00% premium, into shares of Preferred Stock in the offering. The Company elected the fair value option for these notes payable. (See Note 7. Fair Value of Financial Instruments.)
On April 9, 2021, the Company signed agreements with certain of its related party notes holders to convert their notes with principal amounts of $194,810 and accrued interest of $71,764 into 57,513,413 shares of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and 87,003,560 shares of A-2 Preferred Stock with a conversion price of $1.96 per share. Under the agreements, the notes ceased to accrue interest on March 31, 2021. On May 13, 2021, related party notes payable with aggregating principal amounts of $90,869 and accrued interest of $43,490 was converted into 57,513,413 shares of Class A-1 Convertible Preferred Stock with a conversion price of $1.67 per share and 19,546,600 shares of Class A-2 Convertible Preferred Stock with a conversion price of $1.96 per share. The outstanding principal balance subsequent to the conversion was $149,674 as of June 30, 2021. The Class A-1 and A-2 Preferred Stock will convert into FFIE Class A Common Stock based on the Exchange Ratio. As of June 30, 2021, $125,071 of the related party notes payable were in default.
As of June 30, 2021, the Company was in default on twelve of its related party notes with a principal value of $22,022. The Company was in compliance with all covenants under its remaining related party notes payable agreements as of June 30, 2021.
0.10
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