If any of the securities being registered on this
form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check
the following box: ☒
If this form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
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.
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities 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:
| ● | 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; |
| ● | changes adversely affecting the business in which the Company
is engaged; |
| ● | the implementation of the Special Committee’s remediation
actions and the Company’s related follow-up actions, and the ability of the Company
to attract and retain employees; |
| ● | the Company’s ability to execute on its plans to develop
and market its vehicles and the timing and cost of these development and marketing programs; |
| ● | the Company’s ability to meet its future capital requirements
and manage its indebtedness, including its ability to refinance its current indebtedness; |
| ● | the ability of the Company’s suppliers to deliver necessary
components for the Company’s products; |
| ● | the Company’s ability to successfully develop or obtain
licenses and other rights to certain technology to reach production for its vehicles; |
| ● | the Company’s ability to remediate the identified material
weaknesses in its internal control over financial reporting; |
| ● | the Company’s ability to navigate economic, operational
and legal risks specific to operations based in China; |
| ● | the Company’s estimates of the size of the markets for
its vehicles and the costs to bring its vehicles to market; |
| ● | the rate and degree of market acceptance of the Company’s
vehicles; |
| ● | the success of other competing manufacturers; |
| ● | the performance and security of the Company’s vehicles; |
| ● | ongoing and potential litigation involving PSAC or the Company
and the outcome of the SEC investigation; |
| ● | general economic conditions; and |
| ● | the impact of the COVID-19 pandemic and its effect on the
business and financial conditions of the Company. |
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
Faraday Future Intelligent Electric, Inc.
(together with its consolidated subsidiaries, “FF,” “the Company,” “we,” “us” or
“our”) 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 intelligent, connected, electric vehicles. FF intends to manufacture vehicles at its production
facility in Hanford, California, with additional future production capacity needs addressed through a contract manufacturing agreement
with Myoung Shin Co., Ltd., an automotive manufacturer headquartered in South Korea. FF has additional engineering, sales, and operational
capabilities in China and is exploring opportunities for potential manufacturing capabilities in China through a joint venture or
other arrangement.
Since its founding, FF has created major
innovations in technology and products, and a user centered business model. We believe these innovations will enable 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, Faraday
Future Intelligent Electric Inc. (f/k/a Property Solutions Acquisition Corp.), 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 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 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 $229.6
million in gross proceeds, of which the Company received $206.4 million in cash, after payment of PSAC’s transaction costs related
to the Business Combination and redemptions of $0.2 million. At the closing of the Business Combination, 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 were cancelled
and converted into a right to receive a pro rata portion of the 127.9 million Class A Common Shares, and 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 24.5 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, Legacy FF options and Legacy FF warrants that were outstanding immediately prior to the
closing of the Business Combination (and by their terms did not terminate upon the closing of the Business Combination) 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 closing of the Business Combination 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, out of which the Company
received $692.4 million after payment of the Company’s transaction costs of $69.0 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 of the Business Combination.
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.”
Special Committee Investigation
On November 15, 2021, the Company’s Board
of Directors (the “Board”) established a special committee of independent directors (“Special Committee”) to
investigate allegations of inaccurate Company disclosures, including those made in an October 2021 short seller report and whistleblower
allegations, which resulted in the Company being unable to timely file its third quarter 2021 Quarterly Report on Form 10-Q, Annual Report
on Form 10-K for the year ended December 31, 2021 and the amended registration statement on Form S-1 (File No. 333-258993), of which
this prospectus forms a part. The Special Committee engaged outside independent legal counsel and a forensic accounting firm to assist
with its review. On February 1, 2022, the Company announced that the Special Committee completed its review, and announced, among other
things, that additional investigative and remedial work would be undertaken under the direction of the Executive Chairperson, reporting
to the Audit Committee. On April 14, 2022, the Company announced the completion of such additional investigative work based on the Special
Committee’s findings. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations
– Recent Development – Special Committee Investigation” for more information about the findings of the Special
Committee.
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. We refer to all our subsidiaries organized in China and in Hong Kong collectively
as the “PRC Subsidiaries,” a complete list of which is set forth in Exhibit 21.1 to the registration statement
of which this prospectus forms a part. As of the date of this prospectus, our only operating subsidiaries in China and in Hong Kong
are FF Automotive (China) Co. Ltd., Ruiyu Automotive (Beijing) Co., Ltd. and Shanghai Faran Automotive Technology Co., Ltd., each
of which was organized in the PRC. For additional information regarding FF’s corporate history, see “Business - Corporate
History and Milestones.”
How Cash is Transferred Through Our Corporate Organization
The organizational chart below shows FFIE’s
operating subsidiaries1 as of the date hereof:
1 | Excludes subsidiaries
with immaterial operations. FF Hong Kong Holding Limited is a holding company subsidiary
organized in Hong Kong. As of the date of hereof, LeSEE Automotive (Beijing) Co. Ltd., a
subsidiary organized in China, has immaterial operations. |
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 Holding 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 Holding 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 Holding 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 transferred cash or assets of $9.1 million from Smart Technology Holdings Ltd. to FF Hong Kong Holding Limited during the fourth
quarter of 2021 and have not transferred any additional cash or assets to the PRC Subsidiaries through May 31, 2022. 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 of the People's Republic of China, and the dividends and distributions from the PRC Subsidiaries
are subject to regulations and restrictions of the PRC 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 Chinese Yuan (“CNY”)
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 CNY 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 — FF 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 that FF may have, and the restrictions on PRC Subsidiaries’
ability to pay dividends or make other payments to FF could restrict its ability to satisfy its liquidity requirements and have a
material adverse effect on FF’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”),
and 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 — The approval of, or
filing or other administrative procedures with, the China Securities Regulatory Commission or other PRC governmental authorities
may be required in connection with certain of our financing activities, and, if required, we cannot predict if we will be able to
obtain such approval or complete such filing or other administrative procedures” 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
| ● | FF has a limited
operating history and faces significant barriers to growth in the electric vehicle industry. |
| | |
| ● | 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. |
| | |
| ● | FF’s operating
results forecast largely relies on management’s assumptions and analyses, which could
be incorrect. |
| | |
| ● | FF may be unable
to meet its future capital requirements. |
| | |
| ● | FF has historically
incurred substantial indebtedness and may continue to do so in the future, and it may not
be able to refinance borrowings on terms that are acceptable to FF, or at all. |
| | |
| ● | FF’s vehicles
are in development and its first vehicle may not be available for sale in the third quarter
of 2022, if at all. |
| | |
| ● | FF’s independent
registered public accounting firm’s report for fiscal years ended December 31, 2021,
and 2020 have expressed substantial doubt about FF’s ability to continue as a going
concern. |
| | |
| ● | The findings
of the Special Committee could adversely affect FF’s operations or financial results. |
| | |
| ● | FF is involved
in an SEC investigation and may be further subject to investigations and legal proceedings
related to the matters underlying the Special Committee investigation. |
| | |
| ● | Potential future
delays in the filing of FF’s reports with the SEC could result in the delisting of
FF’s securities. |
| | |
| ● | FF will depend
on revenue generated from a single model of vehicles in the foreseeable future. |
| | |
| ● | The market for
FF’s vehicles is nascent and not established. |
| ● | FF is dependent
on its suppliers, and the inability of these suppliers to timely deliver necessary components
for FF products could adversely affect FF’s business and results of operations. |
| | |
| ● | FF may not develop
the complex software and technology systems necessary for the production for its electric
vehicles. |
| | |
| ● | FF identified
material weaknesses in its internal control over financial reporting, which could continue
to adversely affect our ability to accurately or timely report its financial condition or
results of operations. |
| | |
| ● | 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. |
| | |
| ● | 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’s contract
manufacturer or other future contract manufacturer may fail to timely produce and deliver
vehicles. |
| | |
| ● | Industry competition
may impair FF’s revenues, increase its costs to acquire new customers, and hinder its
ability to acquire new customers. |
| | |
| ● | FF’s go-to-market
and sales strategy will require substantial investment and commitment of resources and is
subject to numerous risks and uncertainties. |
| | |
| ● | FF faces risks
related to natural disasters, climate change, health epidemics and pandemics, terrorist attacks,
war, civil unrest and other circumstances outside its control. |
| | |
| ● | FF’s election
to protect some of its technologies as trade secrets rather than as patents has certain risks
and disadvantages. |
| | |
| ● | Increased environmental,
safety or other regulations, including disclosure rules, could result in higher costs, expenditures,
and/or sales restrictions. |
| | |
| ● | Increases in
costs, disruption of supply or shortage of materials used to manufacture FF’s vehicles
could harm its business. |
| | |
| ● | FF may be subject
to risks associated with autonomous driving technology. |
| | |
| ● | 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 founder
and Chief Product and User Ecosystem Officer, 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 Global Partners
LLC, a Delaware limited liability company (“FF Global”), which is governed by
an executive committee consisting of seven managers, and may be controlled by YT Jia through
familial and personal relationships, may exert influence over the management of FF through
its issuance of equity interests as additional compensation to the management of FF. FF Global
also may initiate shareholder litigation against FF through indirect equity holdings for
purposes of influencing and/or removing certain officers and directors of FF. |
Risks Related to FF’s Operations in China
FF operates in China, and plans to have
significant operations in the future in China and Hong Kong through its subsidiaries organized in the PRC and in Hong Kong (collectively,
the “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 FF’s
and the Selling Securityholders’ ability to offer or continue to offer our shares of Class A Common Stock and Warrants to investors.
FF also faces similar risks related to its expansion plans in Hong Kong, which is subject to political and economic influence from
China. These risks, each discussed in detail in the section “Risk Factors — Risks Related to FF’s Operations
in China,” include:
| ● | Changes in the
political and economic policies of the PRC government may materially and adversely affect
FF. |
| | |
| ● | Uncertainties
regarding the Chinese legal system, regulations and enforcement policies could adversely
affect FF. |
| | |
| ● | Foreign currency
fluctuations could reduce the value of our common stock and dividends paid on our common
stock. |
| | |
| ● | Changes in the
laws and regulations of China or noncompliance with them could adversely affect FF. |
| | |
| ● | FF 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 FF may have, and the
restrictions on PRC Subsidiaries’ ability to pay dividends or make other payments to
FF could restrict its ability to satisfy its liquidity requirements and have a material adverse
effect on FF’s ability to conduct its business. |
| ● | Under the PRC
Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,”
which could result in unfavorable tax consequences to us and our non-PRC enterprise stockholders. |
| | |
| ● | 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. |
| | |
| ● | PRC regulation
of loans to and direct investments in PRC entities by offshore holding companies may delay
or prevent us from making 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. |
| | |
| ● | The PRC government
can take regulatory actions and make statements to regulate business operations in China
with little advance notice so our assertions and beliefs of the risks imposed by the Chinese
legal and regulatory system cannot be certain, 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 and the Selling Securityholders’
ability to offer or continue to offer shares of Class A Common Stock $0.0001 par value, and
warrants to purchase shares of Class A Common Stock to investors and cause the value of our
securities to significantly decline or be worthless. |
| | |
| ● | The approval
of, or filing or other administrative procedures with the China Securities Regulatory Commission
or other PRC governmental authorities may be required in connection with certain of our financing
activities, and, if required, we cannot predict if we will be able to obtain such approval
or complete such filing or other administrative procedures. |
| | |
| ● | 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. |
| | |
| ● | 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. |
| | |
| ● | We face challenges
from the evolving regulatory environment regarding cybersecurity, information security, privacy
and data protection. Many of these laws and regulations are subject to change and uncertain
interpretation, and any actual or alleged failure to comply with related laws and regulations
regarding cybersecurity, information security, data privacy and protection could materially
and adversely affect our business and results of operations. |
| | |
| ● | Any independent
registered public accounting firm operating in China that FF uses as an auditor for its operations
in China is currently not permitted to be subject to inspection by the Public Company Accounting
Oversight Board (“PCAOB”). |
| | |
| ● | U.S. regulatory
bodies may be limited in their ability to conduct investigations or inspections of our operations
in 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. |
Additional Information
FF’s principal executive office is
located at 18455 S. Figueroa Street, Gardena, CA 90248 (telephone number (310) 415-4807). The Company's website is located at www.ff.com
and its investor relations website is located at investors.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
|
|
Faraday Future Intelligent Electric
Inc. |
|
|
|
Shares
of Class A Common Stock offered by us |
|
33,848,368 shares of Class A Common Stock issuable
upon exercise of the Warrants and conversion of the Notes. |
|
|
|
Shares
of Class A Common Stock offered by the Selling Securityholders |
|
Up
to 256,127,887 shares of Class A Common Stock.
|
|
|
|
Warrants
Offered by the Selling Securityholders |
|
Up to 674,551 Private Warrants. |
|
|
|
Shares of Class A Common Stock outstanding prior to exercise of all outstanding
warrants | |
238,276,213 shares of Class A Common Stock (as of
May 18, 2022). |
|
|
|
Shares
of Class A Common Stock outstanding assuming exercise of all outstanding warrants
| |
266,472,590 shares of Class A Common Stock (based
on total shares outstanding as of May 18, 2022). |
|
|
|
Use
of Proceeds |
|
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.” |
|
|
|
Redemption
|
|
The Warrants are redeemable in certain circumstances.
See “Description of Securities — Description of Warrants” for further discussion. |
|
|
|
Market
for Class A Common Stock and Warrants |
|
Our shares of Class A Common Stock and Public Warrants
are currently traded on NASDAQ under the symbols “FFIE” and “FFIEW,” respectively. |
|
|
|
Risk
Factors |
|
See “Risk Factors” and other
information included in this prospectus for a discussion of factors you should consider before investing in our securities. |
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 production-intent 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 in the third quarter of 2022, 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 commercial
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 considering 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 intelligent, connected 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 $153 million for the three months ended
March 31, 2022 and $517 million and $147 million for the years ended December 31, 2021 and 2020, respectively. Net cash used in operating
activities was $122 million for the three months ended March 31, 2022 and $340 million and $41 million for the years ended December 31,
2021 and 2020, 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 and the conflict in Ukraine 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:
| ● | continues to develop FF 91, FF 81, and FF 71 series and Smart
Last Mile Delivery (“SLMD”) electric vehicle models; |
| | |
| ● | develops and equips its manufacturing facility in Hanford,
California to produce FF 91, and prepares for manufacturing capabilities in South Korea and
other potential manufacturing options, and in China for additional production capacity for
FF 91 and other electric vehicle models; |
| | |
| ● | builds up inventories of parts and components for FF 91; |
| | |
| ● | develops and expands its design, development, maintenance,
servicing and repair capabilities; |
| | |
| ● | opens offline FF stores; and |
| | |
| ● | increases its sales and marketing activities. |
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:
| ● | whether it can obtain sufficient capital to sustain and grow
its business; |
| | |
| ● | its ability to manage growth; |
| | |
| ● | whether it can manage relationships with key suppliers; |
| | |
| ● | whether it can sign up and manage relationships with business
partners for them to invest in and operate sales and service centers; |
| | |
| ● | the ability to obtain necessary regulatory approvals; |
| | |
| ● | demand for its products and services; |
| | |
| ● | the timing and cost of new and existing marketing and promotional
efforts; |
| | |
| ● | competition, including established and future competitors; |
| | |
| ● | its ability to retain existing key management, to integrate
recent hires and to attract, retain and motivate qualified personnel; |
| ● | the overall strength and stability of domestic and international
economies; |
| | |
| ● | regulatory, legislative and political changes; and |
| | |
| ● | consumer spending habits. |
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 for the foreseeable
future as it continues to develop and grow its business. While the Company currently expects to have sufficient cash on hand to commercially
launch the FF 91 in the third quarter of 2022, FF’s cash liquidity needs after the launch of the FF 91 will depend on the extent
to which FF’s actual costs vary from FF’s estimates and FF’s ability to control these costs and raise additional funds.
Any challenges in supplier re-engagements, delays in ramping capacity or labor at Hanford or for sales and service engagements, rising
prices of materials, or ongoing global supply chain disruptions 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. FF is exploring various alternatives to raise additional funding and finance its ongoing operations, including equipment leasing
and construction financing of FF’s Hanford, California production facility, secured syndicated debt financing, convertible notes,
working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent
on FF’s assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time.
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 other 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.
Since inception, FF has incurred cumulative
losses from operations, negative cash flows from operating activities and had an accumulated deficit of $3,078 million and $2,908 million
as of March 31, 2022 and December 31, 2021, respectively. In addition, FF had working capital (deficit) (being the extent to which total
consolidated current liabilities exceeds total consolidated current assets less restricted cash) of $98 million, $288 million and $(835)
million as of March 31, 2022, December 31, 2021 and 2020, 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:
| ● | limit FF’s ability to satisfy obligations under certain
debt instruments, to the extent there are any; |
| | |
| ● | 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; |
| | |
| ● | increase FF’s vulnerability to adverse general economic
and industry conditions; |
| ● | 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; |
| | |
| ● | increase its exposure to interest rate and exchange rate fluctuations; |
| | |
| ● | limit its ability to borrow additional funds and impose additional
financial and other restrictions on FF, including limitations on declaring dividends; and |
| | |
| ● | increase the cost of additional financing. |
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 in the third quarter of 2022, 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 SLMD electric
vehicle models that appeal to customers. Although FF plans to commence commercial sales of its first vehicle, the FF 91 series, in the
third quarter of 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 its 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 raise substantial
doubt about FF’s ability to continue as a going concern. There is no assurance that FF will be successful in executing upon its
operating plan and be able to maintain an adequate level of liquidity, which would 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 $3,078 million, $2,908 million
and $2,391 million as of March 31, 2022, December 31, 2021 and 2020, respectively. FF expects to continue to generate significant
operating losses for the foreseeable future. Based on FF’s recurring losses from operations since inception and continued cash
outflows from operating activities, in FF’s audited consolidated financial statements for the years ended December 31, 2021 and
2020, 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 consolidated financial statements
for the years ended December 31, 2021 and 2020, FF’s independent registered public accounting firm included an emphasis of
matter paragraph stating that FF’s recurring losses from operations and continued 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, 2021 and 2020 do not include any adjustments that may result from the outcome of this uncertainty. However, after
the closing of the Business Combination and the PIPE Financing on July 21, 2021, FF received gross proceeds aggregating $991.0 million
which it used to pay $84.3 million in transaction costs and $139.6 million (in addition to equity) to settle certain liabilities. The
Company expects to use the remaining net proceeds of $767.1 million from the Business Combination, as well as $172.0 million in net proceeds
received from the issuance of notes payable during 2021, to finance the ongoing operations of the business, including settlement of indebtedness.
FF management expects that the net proceeds from the Business Combination, along with cash balances held by FF prior to the closing of
the Business Combination, will be sufficient to complete the final stages of the development and production of the FF 91 electric vehicle
which is anticipated in the third quarter of 2022. Ongoing operations of the Company beyond the launch of the FF 91 will require the
Company to raise additional funding. FF management’s plans include the continued development of its electric vehicle platform and
bringing electric vehicle models to market. FF 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.
Ongoing operations will require FF to raise
additional funding. FF is exploring various alternatives to raise additional funding and finance its ongoing operations, including equipment
leasing and construction financing of FF’s Hanford, California production facility, secured syndicated debt financing, convertible
notes, working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts
are dependent on FF’s assessment of opportunities available in the marketplace and the circumstances of the business at the relevant
time.
The timely achievement of FF’s operating
plan as well as its ability to maintain an adequate level of liquidity are subject to various risks associated with FF’s ability
to continue to successfully obtain additional sources of funding, and control and effectively manage its costs, as well as factors outside
of the Company’s control, including those related to global supply chain disruptions, and the rising prices of materials and ongoing
impact of the COVID-19 pandemic. FF’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 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. Based on its recurring losses from operations since inception and continued cash outflows from operating activities, FF 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
FF’s unaudited condensed consolidated financial statements for the three months ended March 31, 2022 were issued.
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 consolidated 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 FF’s 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.
The findings of the Special Committee relating to allegations
of inaccurate disclosures and remedial measures relating thereto could impact FF’s operations or financial results, and there can
be no assurance that the remedial measures that have been and are being implemented will be successful, implemented or timely.
As previously disclosed on November 15, 2021,
FF’s Board of Directors established a special committee of independent directors (the “Special Committee”) to investigate
allegations of inaccurate Company disclosures. The Special Committee engaged outside independent legal counsel, Kirkland & Ellis
LLP, and a forensic accounting firm, Alvarez and Marsal, to assist with its review. The Special Committee has completed its review and
additional investigative work based on the Special Committee’s findings performed under the direction of the Executive Chairperson
and reporting to the Audit Committee. In connection with the Special Committee review and subsequent investigative work, several findings
were made, including that certain statements made by or on behalf of FF were inaccurate. Based on the results of the Special Committee
investigation and subsequent investigative work described above, the Board approved a number of remedial actions, which FF has implemented
or is in the process of implementing. See “Management’s Discussion and Analysis of Financial Conditions and Results of
Operations – Recent Developments – Special Committee Investigation” for more information regarding the findings
and remedial actions relating to the Special Committee investigation.
FF, under the direction of the newly appointed
Executive Chairperson, is continuing to implement the remedial actions approved by FF Board of Directors and is committed to addressing
the issues identified in connection with the Special Committee review and subsequent investigative work. No assurance can be provided
that such remedial measures will be implemented in a timely manner or will be successful to prevent inaccurate disclosures in the future.
FF also cannot predict whether, or to what extent, such remedial actions will impact its operations or financial results. In addition,
the findings of the Special Committee review and subsequent investigative work performed at the direction of the Executive Chairperson
could further subject FF to litigation and regulatory investigations and could cause FF to fail to meet its reporting obligations, any
of which could diminish investor confidence in FF, cause a decline in the price of FF’s common stock and limit FF’s ability
to access the capital markets.
For the audits of the years ended December 31, 2021 and
2020, FF’s independent registered public accounting firm included an explanatory paragraph 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 2021 and 2020 from
its independent registered public accounting firm include an emphasis of matter paragraph stating that FF’s recurring losses from
operations and continued cash outflows from operating activities raise substantial doubt about FF’s ability to continue as a going
concern. FF’s consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
As of the date FF’s audited consolidated financial statements as of December 31, 2021 were issued, FF management expects that it
would be required to obtain additional funding to continue as a going concern within the next 12 months, resulting in there being substantial
doubt about FF's ability 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 consolidated financial statements. If such an event 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 FF’s 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 is involved in an SEC investigation, and may be further
subject to investigations and legal proceedings related to the matters underlying the Special Committee investigation, which may result
in adverse findings, damages, the imposition of fines or other penalties, increased costs and expenses and the diversion of management’s
time and resources.
On December 23, 2021, a putative class action
lawsuit alleging violations of the Securities Exchange Act of 1934 was filed in the United States District Court, Central District of
California, against the Company, among others, and its current Global CEO, its former CFO, its current Chief Product and User Ecosystem
Officer, as well as the CFO of Legacy FF and former CFO of FF, and the Co-CEOs of PSAC. Also, on March 8, March 21, April 11, and April
25 2022, putative stockholder derivative lawsuits were filed in the United States District Court, Central District of California and
United States District Court, District of Delaware against numerous current and former officers and directors of the Company alleging
violations of the Securities Exchange Act of 1934 and various common law claims. See “Business – Legal Proceedings” for further information regarding these lawsuits.
In connection with the Special Committee investigation,
FF, certain members of the management team and FF employees received a notice of preservation and subpoena from the staff of the SEC
stating that the SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation
beginning in October 2021. FF, which had previously voluntarily contacted the SEC in connection with the Special Committee investigation,
is cooperating fully with the SEC’s investigation. The outcome of such an investigation is difficult to predict, and the SEC may
expand the scope of its investigation beyond that of the Special Committee. We have incurred, and may continue to incur, significant
expenses related to legal and other professional services in connection with the SEC investigation. At this stage, we are unable to assess
whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range
of any potential loss. In addition, the SEC may subject our directors, officers and employees to fines, penalties and other punitive
actions. In addition, in June 2022, FF received a preliminary request for information from the U.S. Department of Justice in connection with the
matters that were the subject of the Special Committee investigation, and FF is in the process of responding to, and intends to fully
cooperate with, such request.
FF has incurred legal and accounting expenses
and may continue to incur significant legal and accounting expenditures in connection with the Special Committee investigation, SEC investigation
and the shareholders lawsuits. Any legal proceedings resulting from these investigations and litigation, including further shareholder
derivative litigation or governmental inquiries or investigations may further divert management’s time and attention and may result
in the incurrence of significant expense, including legal fees. Such legal proceedings could also have a material adverse effect on our
business, financial condition, results of operations and cash flows including as a result of such expenses or arising from any consequences
of such legal proceedings including damages, monetary fines, sanctions, penalties, adverse publicity and damage to reputation.
Potential future delays in the filing of FF’s reports
with the SEC could result in the delisting of FF’s securities which would have a material adverse effect on the market value of
FF’s securities and could have a material adverse effect on its business.
FF was not timely in filing with the SEC its
quarterly report on Form 10-Q for the quarter ended September 30, 2021 (the “2021 Q3 Form 10-Q”). As a result of such delay,
FF received a letter from Nasdaq notifying FF that it was not in compliance with the requirements of Nasdaq Listing Rule 5250(c)(1) for
continued listing. FF received a similar letter on April 4, 2022 from Nasdaq because FF was not able to timely file with the SEC its
Annual Report on Form 10-K for the year ended December 31, 2021. As of the date hereof, FF has filed its required SEC reports and is
current on its periodic reporting obligations.
In the event that any future periodic report
is delayed, there is no assurance that we will be able to regain or maintain compliance with Nasdaq’s continued listing requirements
with respect to any such delayed periodic report, which would result in our Class A Common Stock being delisted.
Delays in filing periodic reports and related
financial statements could result in the delisting of FF’s securities which would significantly reduce the liquidity and market
value of FF’s securities. In addition, such a delay could adversely affect FF’s ability to obtain financing and access the
capital markets, and to the extent FF fails to make timely filings in the future, its access to financing may be impaired. The inability
to obtaining financing may have a material adverse effect on FF’s ability to grow its business, acquire assets through acquisitions
or optimize its portfolio and capital structure.
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 SLMD 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 SLMD 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 approximately 1,800
purchased components sourced from approximately 150 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. Additionally, the COVID-19 pandemic has caused disruptions in the supply
chain, which may continue due to the complex and compounding problems, including shortages of personnel. 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. 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 and could result in a material change in FF’s operations and a material reduction in
the market value of FF’s securities.
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:
| ● | Demand in
the automobile industry is highly volatile; |
| ● | Final delivered
range, performance and quality of FF’s vehicles may vary from estimates; |
| ● | 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; |
| ● | 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; |
| ● | FF competes
with other automotive manufacturers for consumer spending; |
| ● | 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; |
| ● | FF may not
be able to attract a sufficient number of retail partners to support its expected sales volumes;
and |
| ● | FF’s
efforts to develop and market its SLMD vehicles might not be successful given the fact that
its target customers are commercial logistic companies which have different requirements
compared to retail consumers. |
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 assurance 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.
FF 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. The material weaknesses are as follows:
| ● | 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, management did not establish formal reporting lines in pursuit
of its objectives. Further, 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. |
| ● | 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. |
| ● | FF did not design and maintain effective controls for
communicating and sharing information between the legal, capital markets, and accounting
and finance departments. Specifically, the accounting and finance departments were not consistently
provided the complete and adequate support, documentation, and information including the
nature of relationships with certain counterparties to record transactions within the financial
statements timely, completely and accurately. |
These material weaknesses contributed to the following
additional material weaknesses:
| ● | 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 to 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. |
| ● | 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. |
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, accrued interest for certain notes payable, and the fair value
of the Vendor Trust as of December 31, 2019. Additionally, 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.
| ● | 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. |
In connection with the Special Committee investigation,
and the completion of additional investigative and remedial work based on Special Committee findings, which were performed under the
direction of the newly-appointed Executive Chairperson, reporting to the Audit Committee, additional material weaknesses were identified
in FF’s internal control over financial reporting. Specifically, in addition to the material weaknesses described above relating
to management not establishing formal reporting lines in pursuit of its objectives as well as maintaining effective controls for communicating
and sharing information between the legal, capital markets, and accounting and finance departments, the following material weaknesses
were identified:
| ● | FF did not maintain an effective control environment or demonstrate
a commitment to maintain integrity and ethical values. Specifically, certain members of senior
management failed to reinforce the need for an attitude of compliance and internal control
awareness with certain of FF’s governance, accounting and finance policies and procedures.
This resulted in the inaccurate and incomplete disclosures of certain relationships, arrangements,
and transactions. |
This material weakness contributed to the following
additional material weakness:
| ● | FF did not design and maintain effective controls related to
the identification and disclosure of certain arrangements and transactions with related parties. |
The material weaknesses identified in connection
with the Special Committee investigation resulted in the revision of our previously filed financial statements as of and for the period
ended December 31, 2020 and for the period ended March 31, 2021 related to notes payable, related party notes payable, accrued interest,
related party accrued interest, interest expense, and related party interest expense.
Additionally, each of the material weaknesses
described above 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.
FF has begun implementation of a plan to remediate
the material weaknesses described above. 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, 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 that 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 that 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 in the third quarter of 2022. 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:
| ● | pace of bringing
production equipment and processes online with the capability to manufacture high-quality
units at scale; |
| ● | compliance
with complex and evolving environmental, workplace safety and similar regulations; |
| ● | channels
to secure necessary equipment, tools and components from suppliers on acceptable terms and
in a timely manner; |
| ● | the ability
to attract, recruit, hire and train skilled employees; |
| ● | a health
emergency such as the outbreak of the COVID-19 pandemic, difficult economic conditions and
international political tensions, the conflict in Ukraine; and |
| ● | other delays
and cost overruns. |
Production and manufacturing of some of FF’s vehicles
will 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 is outsourcing 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 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 manufacturers (other
than with a third-party contract manufacturer in South Korea) or joint venture, and the parties could revise or terminate the preliminary
memorandum of understanding. 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 though the definitive agreement has been signed with the third-party contract
manufacturer in South Korea, 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 and such international trade conflicts
have continued under the Biden Administration.
On December 23, 2021, the Uyghur Forced Labor
Prevention Act, which effectively prohibits imports of any goods made either wholly or in part in Xinjiang, was signed into law. The
law prohibits “the importation of goods made with forced labor” unless U.S. Customs and Border Protection determines, based
on “clear and convincing evidence”, that the goods in question were not produced “wholly or in part by forced labor”,
and submits a report to the U.S. Congress setting out its findings. While we do not currently expect that this law will directly affect
our supplies, since we do not believe that our suppliers source materials from Xinjiang for the products they sell to us, other renewable
energy companies’ attempts to shift suppliers in response to this law, withhold release orders, or other policy developments could
result in shortages, delays, and/or price increases that could disrupt our own supply chain or cause our suppliers to renegotiate existing
arrangements with us or fail to perform on such obligations. Broader policy uncertainty could also reduce Chinese panel production, affecting
supplies and/or prices for panels, regardless of supplier. While we have developed multiple supply sources in a variety of countries,
we could still be adversely affected by increases in our costs, negative publicity related to the industry, or other adverse consequences
to our business.
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 Biden administration 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,
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
own and partner 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 own stores, partner 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 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 stores and showrooms
(such partners are “FF Partners” and such stores or showrooms are “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, climate change,
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, war (such as the conflict
in Ukraine), terrorist attacks, climate change 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 has executed an agreement 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 periodically 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 U.S. Small Business Administration (SBA) lender East West
Bank under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The
Company received total proceeds of $9.2 million from the PPP Note. In accordance with the requirements of the CARES Act, the Company
used the proceeds for payroll costs and rent. As of December 31, 2021, the SBA informed the Company that a principal amount of $9.0 million
as well as accrued interest of $0.2 million was forgiven. The balance of $0.2 million (including accrued interest) was paid in April
2022.
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. Certain current and former executives of 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 cash flow, 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:
| ● | any patent
applications FF submits may not result in the issuance of patents; |
| ● | the scope
of FF’s issued patents may not be broad enough to protect its proprietary rights; |
| ● | FF’s
issued patents may be challenged and/or invalidated by its competitors or others; |
| ● | the costs
associated with enforcing patents, confidentiality and invention agreements and/or other
intellectual property rights may make aggressive enforcement impracticable; |
| ● | current and
future competitors may circumvent FF’s patents; |
| ● | FF’s
in-licensed patents may be invalidated, or the owners of these patents may breach their license
arrangements; and |
| ● | 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. |
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 and took effect 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’s business requires it to use and
store confidential information, including information relating to its suppliers and other third parties, and FF’s customers’
personal information and preferences. 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 or gain access to confidential information of our suppliers,
other third parties or customers. 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. The conflict between Russia and Ukraine
may increase the risk of cyber attacks.
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 regulations and disclosure rules 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 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. Evolving disclosure
rules on environmental matters may also entail additional compliance and reporting costs, including, for instance, the new climate change
reporting rules proposed by the SEC which are expected to come into effect over the next three years.
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 the FF battery pack has been designed
with the management system and thermal event alarming system which can actively and continuously monitor each cell voltage and also the
battery pack temperature and pressure condition 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 pack 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. 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 had, and in the future may have 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 CNY
241.2 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 initial public offering 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.
The appeal was denied on July 22, 2021. In addition, YT Jia was also sued in a securities market misrepresentation litigation before
the Beijing Financial Court (the “Litigation”) in May 2021. The Litigation is in relation to the alleged misrepresentation
made by LeTV. Three representatives acting on behalf of two thousand investors, claim damages to the investors in a total amount of CNY
4,571,777,814.99 due to LeTV’s alleged misrepresentation. The lawsuit names 24 defendants, including LeTV, YT Jia, other former
directors, supervisors, executives of LeTV and the agencies which provided services for LeTV’s IPO or listing, claiming they are
jointly liable. The court has held two pre-hearing meetings for the parties to exchange their evidence and present their examination
and cross-examination opinions. The judgment of the Litigation is yet to be handed down by the Beijing Financial Court. Furthermore,
YT Jia was disciplined as part of the Special Committee investigation. See “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations – Recent Developments – Special Committee Investigation” for more information
regarding the findings and remedial actions relating to the Special Committee investigation.
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. In addition, if YT Jia’s employment by FF were to be terminated for any reason,
FF’s business, customer relationships, prospects, brand, financial condition and results of operations could be adversely affected.
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 May 25, 2022, creditors of more
than 80% of the total allowed claims in the restructuring plan 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 purchases 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 related to purchases or actions deemed as “high consumption”,
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 seven managers, may exert influence over the management of FF through its issuance of equity interests as additional compensation
to the management of FF.
As described in this prospectus under the caption “Partnership
Program,” certain current and former executives of 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 36.2% 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 Global’s internal governance perspective.
FF Global is managed by its board of managers (the “FF Global Board”), which currently consists of seven managers - YT Jia,
Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng and Philip Bethell. A majority of the managers present at a meeting
of the FF Global Board where there a quorum is required to approve any material actions of FF Global (“Reserved Matters”),
including relating to the voting and disposition of shares of FFIE held by FF Top and indirectly owned by FF Global. In the event of
a tie at any meeting of the FF Global Board, the manager designated by Chaoying Deng as the managing partner has a casting vote. Except
for the Reserved Matters, management of FF Global has been delegated to the managing partner for efficient management. Based on our investigation,
we believe that YT Jia has significant influence over and may control the outcome of any actions taken by the FF Global Board through
a series of familial and personal relationships that he has with the other managers on the FF Global Board. The managers, except for
Chaoying Deng, are nominated by the partners of FF Global from the existing partners that satisfy certain qualifications and are elected
by all partners by plurality voting according to the policies and procedures adopted by the committee. In addition, the creditors’
trust from YT Jia’s Chapter 11 bankruptcy has a substantial preferred economic interest in Pacific Technology Holding LLC and has
observatory rights on the FF Global Board.
FF Global has issued, and may in the future
issue, units to members of FF management and FF employees as additional incentives to attract and retain talent of FF and FF Global.
The decisions on the issuance of FF Global units to FF management and employees are made by the FF Global Board, 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, and are required to report certain events related to their interests in FF Global to FF pursuant to its Insider
Investment Reporting Policy. By controlling the decision making regarding additional incentives to be granted to the management and employees
of FF, FF Global and its board of managers may exert influence over the management of FF outside the purview or control of FF’s
Board of Directors. FF Global’s interests may conflict with the interests of FF. FF Global may also initiate shareholder litigation
against FF through indirect equity holdings for purposes of influencing FF and/or removing certain officers and directors of FF.
FF is subject to legal proceedings and claims arising in the
ordinary course of business.
In addition to the shareholder class
action and derivative matters discussed above, FF has been and continues to be involved in legal proceedings and claims in the
ordinary course of FF’s business. We could also be subject to claims and litigation by investors based on the decline of the
price of our common stock. Outcome of any litigation is inherently uncertain. FF evaluates these claims and litigation proceedings
to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these
assessments and estimates, FF may establish reserves, as appropriate. Further, in the course of its operations, 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 United States. FF’s PRC Subsidiaries are involved in
32 proceedings or disputes in which the PRC Subsidiaries are defendants and one dispute in which a PRC entity is a plaintiff and has
received a prevailing judgment. 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, and accrued penalties thereof, are approximately $9.5 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. Additionally, FF Global, an
indirect shareholder of FF, has threatened to initiate shareholder litigation against FF for purposes of changing the management of
FF.
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.
The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these
legal disputes may result in adverse monetary damages, penalties or injunctive relief against FF, which could negatively impact its financial
position, cash flows or results of operations. Any claims or litigation, even if fully indemnified or insured, could damage FF’s
reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while FF maintains insurance for
certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various
exclusions as well as retentions and caps on amounts recoverable. Even if FF believes a claim is covered by insurance, insurers may dispute
our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount
of FF’s recovery.
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 the future in China and in Hong Kong (which is subject to political and economic influence from China), 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 the pandemic. 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, data security, privacy protection requirements and similar matters. If the CSRC or other regulatory agencies later
promulgate new rules or explanations requiring that we obtain their approvals for any additional offering, we may be unable to obtain
such approvals which could significantly limit or completely hinder our ability to raise additional capital.
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 raise
additional capital and reduce the value of our 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
or financial performance and/or could result in a material reduction in the value of our Class A Common Stock and Warrants or hinder
our ability to raise necessary capital.
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 CNY 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 CNY 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 CNY appreciated by approximately 5.5% against the U.S. dollar; and in 2019, the CNY 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 CNY 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 CNY 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 CNY 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 CNY exchange rates and achieve policy goals. If the exchange rate between the CNY 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 that 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 FF’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
of the PRC (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 making 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,
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 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 so, so our assertions and beliefs of the risks imposed by the Chinese
legal and regulatory system cannot be certain so our assertions and beliefs of the risks imposed by the Chinese legal and regulatory
system cannot be certain.
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’ operations and a
material reduction in the value of our Class A Common Stock and Warrants. 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 and the Selling Securityholders’ ability to offer or continue to offer our shares of Class A Common Stock
and Warrants 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, as the PRC laws and regulations
are still evolving rapidly and their interpretation and implementation are subject to uncertainties, our operations could be adversely
affected, directly or indirectly, by existing or future PRC laws and regulations relating to its business or industry.
The approval of, or filing or other administrative procedures
with, the China Securities Regulatory Commission or other PRC governmental authorities may be required in connection with certain of
our financing activities, and, if required, we cannot predict if we will be able to obtain such approval or complete such filing or other
administrative procedures.
The PRC governmental authorities may strengthen
oversight over offerings that are conducted overseas and/or foreign investment in overseas-listed China-based issuers from time to time.
Such actions taken by the PRC governmental authorities may intervene with our operations at any time, which are beyond our control. For
instance, on July 6, 2021, the relevant PRC governmental authorities promulgated the Opinions on Strictly Cracking Down on Illegal Securities
Activities, which 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. On December 24, 2021, the CSRC published the Provisions of the State
Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and Administrative
Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or collectively, the
Draft Overseas Listing Regulations, which set out the new regulatory requirements and filing procedures for Chinese companies seeking
direct or indirect listing in overseas markets. The Draft Overseas Listing Regulations, among others, stipulate that Chinese companies
that seek to offer and list securities in overseas markets directly or indirectly, including through single or multiple acquisition,
share swap, transfer of shares or other means, shall fulfill the filing procedures with and report relevant information to the CSRC,
and that an initial filing shall be submitted within three (3) working days after the application for an initial public offering is submitted.
Moreover, an overseas offering and listing is prohibited under circumstances if (i) it is prohibited by PRC laws, (ii) it may constitute
a threat to or endanger national security as reviewed and determined by competent PRC authorities, (iii) it has material ownership disputes
over equity, major assets, and core technology, (iv) in recent three years, the Chinese operating entities, and their controlling shareholders
and actual controllers have committed relevant prescribed criminal offenses or are currently under investigations for suspicion of criminal
offenses or major violations, (v) the directors, supervisors, or senior executives have been subject to administrative punishment for
severe violations, or are currently under investigations for suspicion of criminal offenses or major violations, or (vi) it has other
circumstances as prescribed by the State Council.
The Draft Overseas Listing Regulations, among
others, further stipulate that if the issuer meets the following conditions, its offering and listing shall be determined as an “indirect
overseas offering and listing by a Chinese company” and is therefore subject to the filing requirement: (1) the revenues, profits,
total assets or net assets of the Chinese operating entities in the most recent financial year accounts for more than 50% of the corresponding
data in the issuer’s audited consolidated financial statements for the same period; (2) the majority of senior management in charge
of business operation are Chinese citizens or have domicile in PRC, and its principal place of business is located in PRC or main business
activities are conducted in PRC.
According to the Draft Overseas Listing Regulations,
if the Business Combination was determined as an “indirect overseas offering by a Chinese company” and we failed to complete
the filing procedures with the CSRC for the Business Combination, or fell within the scope of any of the circumstances that is prohibited
by the State Council, we may be subject to penalties, sanctions and fines imposed by the CSRC and relevant departments of the State Council.
In severe circumstances, the business of our PRC subsidiaries may be ordered to suspend and their business qualifications and licenses
may be revoked.
The Draft Overseas Listing Regulations were
released only for soliciting public comments at this stage and their provisions and anticipated adoption or effective date are subject
to changes and thus their interpretation and implementation remain substantially uncertain. We cannot predict the impact of the Draft
Overseas Listing Regulations on the Business Combination, FF’s listing on U.S. exchanges, and our future securities offering or
other forms of financing activities, if any, at this stage, or guarantee that we will be able to satisfy the scrutinized and new regulatory
requirements in case they were adopted in the current form. If it is determined in the future that approval of, or filing or other administrative
procedures with, the CSRC or other PRC governmental authorities are required for the Business Combination or our future financing activities,
we cannot assure you we can obtain such approval or complete such filing or other required procedures in a timely manner. Any failure
or delay in obtaining or completing such approval, filing or other required procedures, or a rescission of any such approval or filing
or other procedures, would subject us to sanctions by the CSRC or other PRC governmental authorities. These PRC governmental authorities
may impose fines and/or other penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating
privileges in China, delay or restrict the repatriation of the proceeds from our offshore financing activities into China or take other
actions that could materially and adversely affect our business, financial condition, results of operations, and prospects. Any uncertainties
or negative publicity arising from these events could also adversely affect our business, financial condition, results of operations,
and prospects.
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 Regulations on Mergers and Acquisitions
of Domestic Companies by Foreign Investors adopted by six PRC regulatory agencies, or the M&A Rules, 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. Moreover, the
PRC Anti-Monopoly Law requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds
must be cleared by the relevant anti-monopoly authority before they can be completed.
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, issued by the MOFCOM and 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 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, promulgated by the MIIT on January 6, 2017 and amended on July 24, 2020, 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 face challenges from the evolving regulatory environment
regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change
and uncertain interpretation, and any actual or alleged failure to comply with related laws and regulations regarding cybersecurity,
information security, data privacy and protection could materially and adversely affect our business and results of operations.
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 MIIT, 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.
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 took 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 December 2021, the Cyberspace Administration
of China and 12 other related authorities promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022.
The Cybersecurity Review Measures stipulates that:
| ● | the CSRC is included as one of the regulatory authorities
for purposes of jointly establishing the state cybersecurity review working mechanism; |
| ● | the purchase of network products and services by a “critical
information infrastructure operator” and the data processing activities of a “network
platform operator” that affect or may affect national security shall be subject to
the cybersecurity review; |
| ● | if a network platform operator who possesses or controls personal
information of more than one million users intends to go public in a foreign country, it
must apply for a cybersecurity review with the Cyberspace Administration of China; and |
| ● | the relevant PRC governmental authorities may initiate cybersecurity
review if they determine certain network products, services, or data processing activities
affect or may affect national security. |
Furthermore, on October 29, 2021, the Measures
for the Security Assessment of Cross-border Data Transmission (Draft for Comment) were proposed by the Cyberspace Administration of China
for public comments, which require that any data processor providing important data collected and generated during operations within
the PRC or personal information that should be subject to security assessment according to law to an overseas recipient shall conduct
security assessment. On November 14, 2021, the Cyberspace Administration of China published a discussion draft of Regulations on the
Administration of Cyber Data Security for public comment, which provides that data processors conducting the following activities shall
apply for cybersecurity review: (i) merger, reorganization or division of internet platform operators that have acquired a large number
of data resources related to national security, economic development or public interests affects or may affect national security; (ii)
listing abroad of data processors processing over one million users’ personal information; (iii) listing in Hong Kong which affects
or may affect national security; or (iv) other data processing activities that affect or may affect national security. The draft also
provides that operators of large internet platforms that set up headquarters, operation centers or R&D centers overseas shall report
to the national cyberspace administration and competent authorities. In addition, the draft also requires that data processors processing
important data or going public overseas shall conduct an annual data security self-assessment or entrust a data security service institution
to do so, and submit the data security assessment report of the previous year to the local branch of the Cyberspace Administration of
China before January 31 each year. As of the date of this prospectus, the abovementioned drafts have not been formally adopted, and substantial
uncertainties exist with respect to their enactment timetable, final content, interpretation and implementation.
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 network platform operator that is engaged in data processing that affect or may affect national security, they could be
subject to PRC cybersecurity review.
As there remains significant uncertainty in
the interpretation and enforcement of relevant PRC laws and regulations relating to cybersecurity, information security, data privacy
and protection, our PRC Subsidiaries could become subject to enhanced cybersecurity review or non-compliance 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
investigations in accordance 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.
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 is currently not 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 is currently not 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. On December 2, 2021, the SEC adopted final amendments implementing
the disclosure and submission requirements under the HFCA, pursuant to which the SEC will identify a “Commission-Identified Issuer”
if an issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined
it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, and will then
impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December
16, 2021, the PCAOB issued a report to notify the SEC its determinations that it is unable to inspect or investigate completely registered
public accounting firms headquartered in Mainland China and Hong Kong, respectively, and identifies the registered public accounting
firms in Mainland China and Hong Kong that are subject to such determinations. As noted above, our independent registered public accounting
firm is subject to inspection by the PCAOB, thus we do not expect to be identified as a “Commission-Identified Issuer” under
the current framework of the HFCA. 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 Class A Common Stock and Warrants.
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 and limitations on the ability of our PRC Subsidiaries’
ability to pay dividends or make payment to us, may limit our ability to obtain cash from FF subsidiaries. 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:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity for our securities; |
| ● | 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; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain
additional financing in the future. |
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:
| ● | actual or anticipated fluctuations in FF’s financial
results or the financial results of companies perceived to be similar to it; |
| ● | changes in the market’s expectations about FF’s
operating results; |
| ● | FF’s operating results failing to meet the expectation
of securities analysts or investors in a particular period; |
| ● | FF’s ability to attract and retain senior management
or key operating personnel, and the addition or departure of key personnel; |
| ● | changes in financial estimates and recommendations by securities
analysts concerning FF or the transportation industry in general; |
| ● | operating and share price performance of other companies that
investors deem comparable to FF; |
| ● | FF’s ability to market new and enhanced products and
technologies on a timely basis; |
| ● | changes in laws and regulations affecting FF’s business; |
| ● | FF’s ability to meet compliance requirements; |
| ● | commencement of, or involvement in, threatened or actual litigation
and government investigations; |
| ● | changes in FF’s capital structure, such as future issuances
of securities or the incurrence of additional debt; |
| ● | the volume of FF’s common stock available for public
sale; |
| ● | any change in FF’s Board of Directors or management; |
| ● | 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; |
| ● | ongoing and potential litigation involving FF, including the
SEC investigation; |
| ● | the implementation of the Special Committee’s recommendations
and the Company’s related remedial actions; and |
| ● | general economic and political conditions such as recessions,
interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. |
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 potential future 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 potential future 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. As described
in “Risk Factors - 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,” management has identified material weaknesses in the
Company’s internal control over financial reporting. If FF does not remediate such material weaknesses, or if other material weaknesses
are identified, or 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.
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:
| ● | may significantly dilute the equity interest of investors; |
| ● | may subordinate the rights of holders of Common Stock if preferred
stock is issued with rights senior to those afforded our Common Stock; |
| ● | 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 |
| ● | may adversely affect prevailing market prices for our Common
Stock. |
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 provides 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:
| ● | 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; |
| ● | prohibiting cumulative voting in the election of directors; |
| ● | limiting the adoption, amendment or repeal of our Amended
and Restated 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; |
| ● | prohibiting stockholder action by written consent; and |
| ● | limiting the persons who may call special meetings of stockholders. |
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 prospectus 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:
| ● | 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; |
| ● | We may, in our discretion, indemnify employees and agents
in those circumstances where indemnification is permitted by applicable law; |
| ● | 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; |
| ● | 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 |
| ● | We may not retroactively amend our amended and restated bylaw
provisions to reduce our indemnification obligations to directors, officers, employees and
agents. |
Concentration of ownership may have the effect of delaying or
preventing a change in control.
Legacy FF stakeholders collectively own a significant
amount of our outstanding Common Stock. Legacy FF Stakeholders include FF Top, which owns 64,000,588 shares of Class B Common Stock,
and Season Smart Limited, which owns 66,494,117 shares of Class A Common Stock, representing 19.7% and 20.5%, respectively, of our outstanding
Common Stock as of May 18, 2022 (including, for this purpose, 20,410,111 shares of Class A Common Stock issuable upon submission of paperwork
to the transfer agent and 2,387,500 shares of Class A Common Stock issuable upon the effectiveness of the registration statement of which
this prospectus forms a part as outstanding shares as of May 18, 2022). In addition, FF Top 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 36.2% of our outstanding Common Stock as of May 18, 2022 (based
on same assumptions as above). 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. FF Top, an entity controlled by FF Global, which
in turn is controlled by its executive committee consisting of seven voting managers (i.e., YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok,
Prashant Gulati, Chaoying Deng and Philip Bethell), beneficially owns, directly or indirectly, all of the outstanding shares of Class
B Common Stock, which account for 19.7% of FF’s total outstanding shares of Common Stock (i.e., Class A Common Stock and Class
B Common Stock combined) and voting power as of May 18, 2022 (including, for this purpose, 20,410,111 shares of Class A Common
Stock issuable upon submission of paperwork to the transfer agent and 2,387,500 shares of Class A Common Stock issuable upon the effectiveness
of the registration statement of which this prospectus forms a part as outstanding shares as of May 18, 2022). 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 FF.
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 FF Top to own 71.0% 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. 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 for 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
has incurred and 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 has incurred and will continue to incur 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. Under a number of those requirements, we have to carry out activities Legacy FF has not done previously. For example,
FF has created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, expenses associated
with SEC reporting requirements will be incurred on a continuous basis. Furthermore, if any issues in complying with those requirements
are identified (for example, if FF identifies additional material weaknesses or significant deficiency in internal control over financial
reporting), we would 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 May 18, 2022, there were 571 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.
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
Faraday
Future Intelligent Electric, Inc. (together with its consolidated subsidiaries, “FF,” “the Company,” “we,”
“us” or “our”) 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, 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 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, PSAC changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent
Electric Inc., and FF’s Class A Common Stock and warrants (“Public Warrants”) originally issued in the initial public
offering of PSAC began trading on The Nasdaq Global Select Market (“NASDAQ”) under the ticker symbols “FFIE”
and “FFIEW,” respectively.
With
headquarters in Los Angeles, California, FF designs and engineers next-generation, intelligent, connected, electric vehicles. FF intends
to manufacture vehicles at its production facility in Hanford, California, with additional future production capacity needs addressed
through a contract manufacturing agreement with Myoung Shin Co., Ltd., an automotive manufacturer headquartered in South Korea. FF has
additional engineering, sales, and operational capabilities in China and is exploring opportunities for potential manufacturing capabilities
in China through a joint venture or other arrangement.
Since
its founding, FF has created major innovations in technology, products, and a user-centered business model. FF believes these innovations
will 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. We believe 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 competitive edge in acceleration and range, enabled by an expected
industry-leading inverter design, and proprietary drive system. |
| ● | 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 March 31,
2022, FF has been granted more than 650 patents globally. |
| ● | FF’s
B2C (business-to-customer) passenger vehicle launch pipeline over the next five years includes
the FF 91 series, the FF 81 series, and the FF 71 series. |
| ● | FF
intends to commercially launch the FF 91 in the third quarter of 2022. FF believes that the
FF 91 will be the first ultra-luxury EV to offer a highly personalized, fully connected user
experience for driver and passengers. |
| ● | FF
plans to commercially launch its second passenger vehicle, the FF 81, in 2024, 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 2026. |
FF has adopted a hybrid manufacturing strategy
consisting of its refurbished manufacturing facility in Hanford, California and a collaboration with Myoung Shin Co., Ltd, a contract
manufacturing partner in South Korea. FF is also exploring other potential contract manufacturing options in addition to the contract
manufacturing agreement in South Korea. FF is also exploring the possibility of manufacturing capacity in China through a joint venture
or other arrangements. All passenger vehicles as well as the SLMD vehicle are expected to be available for sale in the U.S. and China.
European markets may be added as early as 2023.
Emerging
Growth Company Status
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth
companies. Any such election to not take advantage of the extended transition period is irrevocable.
FF
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. FF 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, manufacture, engineering, sale, and distribution
of electric vehicles and related products in the global market.
Impact
of COVID-19 on FF’s Business (in thousands)
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 manufacture, 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, 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. While the stay-at-home orders were lifted on June 15, 2021, FF
continues to operate under various return-to-work protocols and must continue to follow certain safety and COVID-19 protocols. 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. The extent of the continuing impact of the COVID-19 pandemic on FF’s operational
and financial performance is uncertain and will depend on many factors outside FF’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, including FF’s supply chain, and on
the demand for consumer products. Future measures taken by government authorities in response the COVID-19 pandemic 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 (“SBA”). In 2020, Legacy FF received a Paycheck Protection Program
(“PPP”) loan in the amount of $9,168. The Company was notified by East West Bank that a principal amount of $8,975 as well
as accrued interest of $155 relating to the PPP Loan had been forgiven as of December 31, 2021. The Company paid the remaining principal
and accrued interest of $195 in aggregate in April 2022.
The
COVID-19 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 titled “Risk Factors” for a full discussion of the risks associated
with the COVID-19 pandemic.
Business
Combination
On
June 24, 2021, the registration statement on Form S-4 (File No. 333-255027), initially filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 5, 2021 (as amended, the “Registration Statement”), relating to the Business Combination was
declared effective by the SEC, and (ii) PSAC established a record date of June 24, 2021 (the “Record Date”) and a meeting
date of July 21, 2021 for its special meeting of stockholders (the “Special Meeting”), where the Business Combination was
approved. For purposes of the discussions in this section related to conversion on the closing of the Business Combination of all issued
and outstanding Legacy FF Ordinary Stock into shares of Common Stock of FF in accordance with the terms and conditions of the Merger
Agreement and the settlement of liabilities in conjunction with the closing of the Business Combination, we refer to that parties’
right to receive Class A and Class B Common Stock.
Recent
Developments
FF
accomplished the following major milestones during the three months ended March 31, 2022:
| ● | Announced
that Myoung Shin Co., Ltd., an automotive manufacturer headquartered in South Korea, has
been contracted to manufacture FF’s second vehicle, the FF 81, with Start of Production
(“SOP”) scheduled for 2024. |
| ● | Unveiled
the first production-intent FF 91 ultra-luxury EV. This marks FF’s manufacturing Milestone
#4, pre-production builds for final engineering validation and certification, now referred
to as production-intent vehicles. |
| ● | Received
dealer and distributor license from the State of California facilitating direct sales in
the State of California and online sales nationally. |
| ● | Signed
the lease for FF’s flagship store in Beverly Hills, California and confirmed the design
firm for the store. The initial term of the lease is 126 months, with two five-year tenant
extension options. Further, FF announced the active search for a second flagship store for
the U.S. |
| ● | Appointed
Susan Swenson as Executive Chairperson and Jordan Vogel as Lead Independent Director of the
Board of Directors. FF’s Board of Directors consists of nine directors, five of whom
are independent under applicable rules. |
| ● | Announced
that Mathias Hofmann became the new Head of Global Supply Chain after the retirement of Benedikt
Hartmann effective February 25, 2022. Mathias comes to FF after a nearly 30-year career with
BMW, where he served as a Vice President with global responsibilities in purchasing and plant
management. He has worked on four continents, including China, and was most recently Plant
Director in Brazil. He has extensive experience in both plant operations and direct and indirect
purchasing. |
| ● | Appointed
Becky Roof as Interim Chief Financial Officer (CFO) and engaged an affiliate of AlixPartners
to accelerate implementation of Special Committee recommendations, including, but not limited
to financial controls and material weakness remediation. Ms. Roof is a seasoned financial
executive who has served in an interim CFO capacity at numerous public and private companies. |
| ● | Announced
401 preorders as of March 31, 2022. Preorders are fully refundable, non-binding, paid deposits
for the FF 91 Futurist Alliance Edition and/or the FF 91 Futurist vehicles available initially
for sale to customers in the U.S. and China. FF 91 Futurist Alliance Edition preorders require
a $5,000 deposit for customers in the U.S. and an CNY 50,000 deposit for customers in China.
FF 91 Futurist preorders require a $1,500 deposit for customers in the U.S. and an CNY 20,000
deposit for customers in China. A limited number of preorders were for higher deposit amounts. |
Subsequent
to March 31, 2022, FF accomplished the following major milestones:
| ● | Marked
Production Milestone #5 at FF’s Hanford, California manufacturing facility, with the
start of installation of all mechanical, electrical and plumbing systems to support equipment
installation. |
| ● | Signed
a sourcing agreement for battery packs for the FF 91 with a leading global battery supplier
and innovator in lithium-ion technology. The FF 91 battery pack will feature state-of-the-art
technology designed to deliver superior power, energy, and charging speeds. |
Special
Committee Investigation
As
previously disclosed, on November 15, 2021, the Company’s Board of Directors (the “Board”) established a special committee
of independent directors (“Special Committee”) to investigate allegations of inaccurate Company disclosures, including those
made in an October 2021 short seller report and whistleblower allegations, which resulted in the Company being unable to timely file
its third quarter 2021 Quarterly Report on Form 10-Q, Annual Report on Form 10-K for the year ended December 31, 2021 and amended Registration
Statement on Form S-1 (File No. 333-258993). The Special Committee engaged outside independent legal counsel and a forensic accounting
firm to assist with its review. On February 1, 2022, the Company announced that the Special Committee completed its review. On April
14, 2022, the Company announced the completion of additional investigative work based on the Special Committee’s findings which
were performed under the direction of the Executive Chairperson, reporting to the Audit Committee. In connection with the Special Committee’s
review and subsequent investigative work, the following findings were made:
| ● | In
connection with the Business Combination, statements made by certain Company employees to
certain investors describing the role of Yueting (“YT”) Jia, the Company’s
founder and former CEO, within the Company were inaccurate and his involvement in the management
of the Company post-Business Combination was more significant than what had been represented
to certain investors. |
| ● | The
Company’s statements leading up to the Business Combination that it had received more
than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several
hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications
of interest. |
| ● | Consistent
with the Company’s previous public disclosures regarding identified material weaknesses
in its internal control over financial reporting, the Company’s internal control over
financial reporting requires an upgrade in personnel and systems. |
| ● | The
Company’s corporate culture failed to sufficiently prioritize compliance. |
| ● | Mr.
Jia’s role as an intermediary in leasing certain properties which were subsequently
leased to the Company was not disclosed in the Company’s corporate housing disclosures. |
| ● | In
preparing the Company’s related party transaction disclosures, the Company failed to
investigate and identify the sources of loans received from individuals and entities associated
with Company employees. |
In
addition, certain individuals failed to fully disclose to individuals involved in the preparation of the Company’s SEC filings
their relationships with certain related parties and affiliated entities in connection with, and following, the Business Combination,
and failed to fully disclose relevant information, including but not limited to, information in connection with related parties and corporate
governance to the Company’s independent registered public accounting firm PricewaterhouseCoopers LLP. Further, certain individuals
failed to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.
Based
on the results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of
inaccurate FF disclosures that it evaluated, were not supported by the evidence reviewed.
Based
on the results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following
remedial actions:
| ● | certain
remedial actions designed to enhance oversight and corporate governance of the Company, namely
the following: |
| ● | the
appointment of Susan Swenson, a member of the Board, to the newly created position of Executive
Chairperson of FF. |
|
● |
Dr. Carsten Breitfeld, FF’s Global Chief Executive Officer, reporting
directly to Ms. Swenson and receiving a 25% annual base salary reduction; |
| ● | the
removal of Mr. Jia as an executive officer, although continuing in his position as Chief
Product & User Ecosystem Officer of the Company, and reporting directly to Ms. Swenson,
receiving a 25% annual base salary reduction, and his role limited to focusing on (a) Product
and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology; |
| ● | Matthias
Aydt, Senior Vice President, Business Development and Product Definition and a director of
the Company, being placed on probation as an executive officer for a six-month period, during
which period he will remain as a non-independent member of the Board; |
| ● | the
appointment of Jordan Vogel as Lead Independent Director; certain changes to the composition
of Board committees, including Brian Krolicki stepping down from his role as Chairman of
the Board and Chair of the Nominating and Corporate Governance Committee and becoming a member
of the Audit and Compensation Committees of the Board; Jordan Vogel stepping down from the
Nominating and Corporate Governance Committee; and Scott Vogel becoming the Chair of the
Audit Committee and the Nominating and Corporate Governance Committee of the Board; and |
| ● | the
suspension without pay of Jiawei (“Jerry”) Wang, the Company’s former Vice
President, Global Capital Markets, who subsequently notified the Board of his decision to
resign from FF on April 10, 2022; |
| ● | the
assessment and enhancement of FF’s policies and procedures regarding financial accounting
and reporting and the upgrading of FF’s internal control over financial accounting
and reporting, including by hiring additional financial reporting and accounting support,
in each case at the direction of the Audit Committee; |
| ● | the
implementation of enhanced controls around FF’s contracting and related party transactions,
including regular attestations by FF’s employees with authority to bind FF to contracts
and related party transactions, for purposes of enabling FF to make complete and accurate
disclosures regarding related party transactions; |
| ● | the
hiring of a Chief Compliance Officer, who reports on a dotted line to the Chair of the Audit
Committee, and assessing and enhancing FF’s compliance policies and procedures; |
| ● | the
implementation of a comprehensive training program for all directors and officers regarding,
among other things, internal FF policies; |
| ● | the
separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary; and |
| ● | certain
other disciplinary actions and terminations of employment with respect to other FF employees
(none of whom is an executive officer). |
Subsequent
to the Company announcing the completion of the Special Committee investigation on February 1, 2022, the Company, certain members of
the management team and employees of the Company received a notice of preservation and subpoena from the staff of the SEC stating that
the SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation. The
Company, which had previously voluntarily contacted the SEC in connection with the Special Committee investigation in October 2021, is
cooperating fully with the SEC’s investigation. The outcome of such an investigation is difficult to predict. FF has incurred,
and may continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation.
At this stage, FF is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s
investigation or estimate the range of any potential loss. In addition, in June 2022, FF received a preliminary request for information from the U.S. Department of Justice in connection with the
matters that were the subject of the Special Committee investigation, and FF is in the process of responding to, and intends to fully
cooperate with, such request.
South
Korea Contract Manufacturing Agreement
In
February 2022, the Company entered into a definitive contract manufacturing and supply agreement with Myoung Shin Co., Ltd. (“Myoung
Shin”), a South Korea-based automotive manufacturer and parts supplier, to manufacture the Company’s second vehicle, the
FF 81. The agreement has an initial term of nine years from the start of production of the FF 81, which is scheduled for 2024. Pursuant
to the agreement, Myoung Shin shall maintain sufficient manufacturing capabilities and capacity to supply FF 81 vehicles to the Company
in accordance with the Company’s forecasts and purchase orders. The Company and Myoung Shin will each manufacture and supply certain
FF 81 parts that Myoung Shin will use in the manufacture and assembly of FF 81 vehicles.
Components
of FF’s Results of Operations
Key
Factors Affecting Operating Results (in thousands)
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 titled “Risk Factors.”
Vehicle
Launch
FF
expects to derive revenue from the sale of the FF 91, which FF anticipates to launch during the third quarter of 2022. FF plans to manufacture
the FF 91 in its own manufacturing facility in Hanford, California. The FF 81, FF 71, and SLMD electric vehicle models are in various
stages of 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. FF 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 will fund its ongoing operations
through a combination of various funding and financing alternatives, including equipment leasing and construction financing of the Hanford,
California manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings,
among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s assessment of
opportunities available in the marketplace and the circumstances of the business at the relevant time. Any delays in the successful completion
of manufacturing facilities will impact FF’s ability to generate revenue. For additional discussion of the substantial doubt about
FF’s ability to continue as a going concern, see Note 2, Liquidity and Capital Resources in the notes to the unaudited Condensed
Consolidated Financial Statements for the quarter ended March 31, 2022 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. 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 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 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 now that it operates as a public company.
Loss
on Disposal of Property and Equipment
During
the year ended December 31, 2021, the Company wrote off $64,191 relating to the abandonment of certain FF 91 program construction
in progress assets, primarily vendor tooling, machinery and equipment, due to the redesign of the related FF 91 components and implementation
of FF’s cost reduction program. Charges associated with disposals are recognized within operating expenses in the Consolidated
Statements of Operations and Comprehensive Loss.
Change
in Fair Value Measurements
Change
in fair value measurements consists of the losses and gains as a result of fair value measurements of certain financial instruments which
FF records at fair value. Changes in fair value measurement of related party notes payable and notes payable have decreased following
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. Related party interest expense has decreased
relative to prior periods, 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. Interest expense decreased as the majority of notes payable and vendor payables in trust were either settled in cash or 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 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.
(Loss)
Gain at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in Trust, Net
(Loss)
gain at settlement of related party notes payable, notes payable, and vendor payables in trust, net consists of losses resulting from
the settlement of related party notes payable, notes payable, and vendor payables in trust in connection with the Business Combination.
Gain on extinguishment of related party notes payable, notes payable, and vendor payables in trust consists of gains resulting from extinguishment
of related party notes payable and notes payable in connection with a debt modification that was accounted for as extinguishment for
the year ended December 31, 2020. FF expects these amounts to decrease significantly following the completion of the Business Combination.
Results
of Operations (in thousands) (Unaudited)
FF
has not generated any revenue from the design, development, manufacturing, engineering, sale, or distribution of its electric vehicles.
Please refer to the section “Risk Factors” for a full discussion on the risks and uncertainties related to costs.
Comparison
of the Three Months Ended March 31, 2022 and 2021
| |
Three
Months Ended March 31, | |
| |
2022 | | |
2021 | |
Consolidated Statements
of Operations | |
| | |
| |
Operating
expenses | |
| | | |
| | |
Research and
development | |
$ | 114,935 | | |
$ | 6,721 | |
Sales and marketing | |
| 6,186 | | |
| 1,682 | |
General
and administrative | |
| 27,880 | | |
| 10,993 | |
Total
operating expenses | |
| 149,001 | | |
| 19,396 | |
| |
| | | |
| | |
Loss from operations | |
| (149,001 | ) | |
| (19,396 | ) |
Change in fair value measurements | |
| 1,186 | | |
| (26,917 | ) |
Interest expense | |
| (3,746 | ) | |
| (19,174 | ) |
Related party interest
expense | |
| (622 | ) | |
| (9,752 | ) |
Other
expense, net | |
| (915 | ) | |
| (283 | ) |
Loss before income taxes | |
| (153,098 | ) | |
| (75,522 | ) |
Income
tax provision | |
| — | | |
| (3 | ) |
Net
loss | |
$ | (153,098 | ) | |
$ | (75,525 | ) |
Research
and Development
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Research and
development | |
$ | 114,935 | | |
$ | 6,721 | | |
$ | 108,214 | | |
| 1,610.1 | % |
The
increase in research and development expense for the three months ended March 31, 2022 was primarily due to the increase in engineering,
design, and testing (“ED&T”) services of $82,745 as the Company re-engaged suppliers and made significant purchases for
ED&T services to progress the development of the FF 91; the increase in personnel and compensation related expenses of $15,198 and
employee benefits expense of $1,895 both due to increased headcount; the increase in information technology expense of $3,017 due to
increases in business activities and headcount, and amortization of prepaid hosting costs incurred for the three months ended March 31,
2022 with no such charges occurring in the same period in 2021; and increase in stock-based compensation expense of $879 because performance
conditions associated with certain stock options were met or became probable.
Sales
and Marketing
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Sales and marketing | |
$ | 6,186 | | |
$ | 1,682 | | |
$ | 4,504 | | |
| 267.8 | % |
The
increase in sales and marketing expense for the three months ended March 31, 2022 was primarily due to the increase in personnel
and compensation related expenses of $3,078 and employee benefits expense of $249 both due to an increase in headcount; and an increase
in marketing expenses of $746 due to an increase in marketing efforts.
General
and Administrative
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
General and
administrative | |
$ | 27,880 | | |
$ | 10,993 | | |
$ | 16,887 | | |
| 153.6 | % |
The
increase in general and administrative expense for the three months ended March 31, 2022 was primarily due to the increase in professional
services primarily related to assist the Special Committee investigation in the amount of $14,862; the increase in personnel and compensation
related expenses of $985 and employee benefits expense of $411 both due to increases in headcount.
Change
in Fair Value Measurements
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Change
in fair value measurements | |
$ | 1,186 | | |
$ | (26,917 | ) | |
$ | 28,103 | | |
| 104.4 | % |
The
change in the change in fair value measurements for the three months ended March 31, 2022, as compared to the same period in 2021,
primarily related to the remeasurement of notes payable issued during the first quarter of 2021, which contained significant original
issue discounts and favorable conversion features, resulting in a charge to fair value measurement expense during the first quarter of
2021.
Interest
Expense
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Interest expense | |
$ | (3,746 | ) | |
$ | (19,174 | ) | |
$ | 15,428 | | |
| 80.5 | % |
The
decrease in interest expense for the three months ended March 31, 2022, was due to the Company’s settlement of $85,202 principal
of notes payable upon closing of the Business Combination, repayment of $85,000 principal amount of notes payable in the three months
ended March 31, 2022 and certain debt issuance costs and warrant valuations charged to interest expense in the three months ended March
31, 2021.
Related
Party Interest Expense
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Related party
interest expense | |
$ | (622 | ) | |
$ | (9,752 | ) | |
$ | 9,130 | | |
| 93.6 | % |
The
decrease in related party interest expense for the three months ended March 31, 2022 as compared to the same period in 2021 was
primarily due to the related parties notes payable balance outstanding decreasing period over period, $13,636 as of March 31, 2022
and $298,667 as of March 31, 2021
Other
Expense, Net
| |
Three
Months Ended March 31, | | |
Change | |
| |
2022 | | |
2021 | | |
Amount | | |
% | |
Other expense,
net | |
$ | (915 | ) | |
$ | (283 | ) | |
$ | (632 | ) | |
| (223.3 | )% |
The
increase in other expense, net for the three months ended March 31, 2022 as compared to the same period in 2021 was primarily due
to $894 increase in foreign exchange loss primarily related to deposits held in other currencies than the U.S. Dollar that are remeasured
at the end of each period.
Comparison
of the Years Ended December 31, 2021 and 2020
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | |
Consolidated Statements
of Operations | |
| | |
| |
Operating expenses | |
| | |
| |
Research and
development | |
$ | 174,935 | | |
$ | 20,186 | |
Sales and marketing | |
| 17,118 | | |
| 3,672 | |
General and administrative | |
| 97,905 | | |
| 41,071 | |
Loss
on disposal of property and equipment | |
| 64,191 | | |
| 10 | |
Total
operating expenses | |
| 354,149 | | |
| 64,939 | |
| |
| | | |
| | |
Loss
from operations | |
| (354,149 | ) | |
| (64,939 | ) |
Change
in fair value measurements | |
| (22,700 | ) | |
| (5,076 | ) |
Interest
expense | |
| (30,181 | ) | |
| (32,173 | ) |
Related
party interest expense | |
| (16,663 | ) | |
| (41,546 | ) |
Other
expense, net | |
| (5,668 | ) | |
| (5,455 | ) |
(Loss)
gain at settlement of related party notes payable, notes payable, and vendor payables in trust, net | |
| (86,904 | ) | |
| 2,107 | |
Loss
before income taxes | |
| (516,265 | ) | |
| (147,082 | ) |
Income
tax provision | |
| (240 | ) | |
| (3 | ) |
Net
loss | |
$ | (516,505 | ) | |
$ | (147,085 | ) |
Research
and Development
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Research and
development | |
$ | 174,935 | | |
$ | 20,186 | | |
$ | 154,749 | | |
| 766.6 | % |
The
increase in research and development expense for the year ended December 31, 2021 was primarily due to an increase in engineering,
design, and testing (“ED&T”) services expense of $51,950 as the Company re-engaged suppliers and made significant purchases
for ED&T services to progress the development of the FF 91; an amount paid for a non-exclusive, perpetual, irrevocable, and sublicensable
license to use a platform owned by Liankong, a subsidiary of Geely Holding (“Geely Payment”) of $50,000; increase in personnel
and compensation related expense of $31,067 and employee benefits of $2,885 due to increases in headcount, including the addition of
key senior management personnel; increase in payroll expense of $7,914 related to bonuses for employees; increase in professional services
expense of $4,585 due to increase in consulting services and increase in overhead cost allocations; and increase in information technology
expense of $2,643 due to increases in business activities and headcount.
Sales
and Marketing
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Sales and marketing | |
$ | 17,118 | | |
$ | 3,672 | | |
$ | 13,446 | | |
| 366.2 | % |
The
increase in sales and marketing expense for the year ended December 31, 2021 was primarily due to an increase in personnel and compensation
related expense of $5,950 and employee benefits of $728 due to increases in headcount, including the addition of key senior management
personnel; increase in sales and marketing expense of $2,579 due to increased marketing efforts; increase in payroll expense of $2,256
related to bonuses for employees; increase in information technology expense of $662 due to increases in business activities and headcount;
and increase in travel expenses of $320 due to increased travel in connection with the restart of the FF 91 program.
General
and Administrative
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
General and
administrative | |
$ | 97,905 | | |
$ | 41,071 | | |
$ | 56,834 | | |
| 138.4 | % |
The
increase in general and administrative expense for the year ended December 31, 2021 was primarily due to an increase in professional
services expense of $10,850 due to an increase in spending for consulting services and the special committee investigation; increase
in legal expense of $21,337 related to additional accruals for contingent legal liabilities; increase in payroll expense of $8,447 related
to bonuses for employees; increase in personnel and compensation related expense of $5,507 and employee benefits of $1,484 due to increases
in headcount, including the addition of key senior management personnel; increase in insurance expense of $3,591 due to the Company’s
new directors and officers insurance policies; and an increase in information technology expense of $3,226 due to increases in business
activities and headcount.
Loss
on Disposal of Property and Equipment
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Loss on disposal
of property and equipment | |
$ | 64,191 | | |
$ | 10 | | |
$ | 64,181 | | |
| NM | |
For
the year ended December 31, 2021, the Company recorded a loss of $64,191 related to the abandonment of certain construction in progress
FF 91 program assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation
of FF’s cost reduction program.
Change
in Fair Value Measurements
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Change
in fair value measurements | |
$ | (22,700 | ) | |
$ | (5,076 | ) | |
$ | (17,624 | ) | |
| 347.2 | % |
The
change in fair value measurements of $17,624 for the year ended December 31, 2021 was primarily due to $43,030 fair value measurement
expense in the year ended December 31, 2021 from conversion premiums included in notes payable and related party notes payable borrowings,
as well as changes related to the original issue discounts and the fair value of warrants issued on select borrowings. The increase in
the fair value of the liabilities is primarily due to tightening of the credit spreads of the Company due to the increased probability
of the close of the Business Combination. This increase in fair value was partially offset by decrease in fair value of the liabilities
during the fourth quarter of 2021 as the yield increased due to an increase in the overall risk profile of the Company. During 2020,
the Company experienced liquidity difficulties when compared to 2021, which delayed the execution of its strategic plans, causing the
credit spread to widen which led to a decrease in the liability in that period. The fair value of The9 obligation reflected an expense
of $1,735 in the year ended December 31, 2021 as compared to gain of $3,872 in the year ended December 31, 2020. These increases in expenses
were partially reduced by a $20,265 gain as a result of adjusting the Company’s obligation to issue registered shares of Class
A Common Stock in connection with services provided as part of the Business Combination and $1,800 gain from a decrease in the value
of the Private Warrants during the year ended December 31, 2021.
Interest
Expense
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Interest expense | |
$ | (30,181 | ) | |
$ | (32,173 | ) | |
$ | 1,992 | | |
| (6.2 | )% |
The
decrease in interest expense for the year ended December 31, 2021 was primarily due to the Company’s settlement of $85,202
principal of notes payable upon closing of the Business Combination with no further interest accrued on those notes payable from July
21, 2021 to December 31, 2021.
Related
Party Interest Expense
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Related party
interest expense | |
$ | (16,663 | ) | |
$ | (41,546 | ) | |
$ | 24,883 | | |
| (59.9 | )% |
The
decrease in related party interest expense for the year ended December 31, 2021 as compared to 2020 was primarily due to certain
related party notes payable ceasing to accrue interest on May 13, 2021 as related party notes payable of $90,869 and related party accrued
interest of $43,490 converted to shares of Legacy FF; and the Company’s settlement of $91,420 principal of related party notes
payable upon closing of the Business Combination in July 2021. No further interest accrued on those settled related party notes payable
from July 21, 2021 to December 31, 2021.
Other
Expense, net
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
Other expense,
net | |
$ | (5,668 | ) | |
$ | (5,455 | ) | |
$ | (213 | ) | |
| 3.9 | % |
The
increase in other expense, net for the year ended December 31, 2021 as compared to 2020 was primarily due to increase in write off
of non-customer related note receivables of $2,055 and late fees and penalties of $1,918, partially offset by an increase in foreign
exchange gain of $3,634 related to a note payable held in Chinese Renminbi (CNY) that is remeasured at the end of each period and property
and other taxes of $180.
(Loss)
Gain at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in Trust, Net
| |
Year
Ended December 31, | | |
Change | |
| |
2021 | | |
2020 | | |
Amount | | |
% | |
(Loss)
gain at settlement of related party notes payable, notes payable and vendor payables in trust, net | |
$ | (86,904 | ) | |
$ | 2,107 | | |
$ | (89,011 | ) | |
| NM | |
The
loss at settlement of related party notes payable, notes payable, and vendor payables in trust, net for the year ended December 31,
2021 was due to the settlement of certain related party notes payable, notes payable, and vendor payables in trust with the commitment
to issue of 24,464,889 shares of Class A Common Stock at the closing of the Business Combination at a price below the fair value on the
date of settlement. This expense was partially offset by forgiveness of the Company’s Payroll Protection Loan principal of $8,975
and accrued interest of $155.
Liquidity
and Capital Resources (in thousands)
As
described in the “Overview” section of this MD&A, the COVID-19 pandemic impacted FF’s ability to raise funds and
may have a material adverse impact on future periods as FF prepares to bring its vehicles to market, including its cash flows from financing
activities, which fund 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 the section titled, “Risk Factors” for a full discussion of the risks
associated with the COVID-19 pandemic.
As
of March 31, 2022, the Company’s principal sources of liquidity was cash totaling $276,374, which was held for working capital
and general corporate purposes.
The
Company’s business plan contemplates that it will launch the FF 91 for delivery to customers beginning in the third quarter of
2022, with testing, validation, and certification complete in the third quarter of 2022.
The
Company has evaluated whether there are certain conditions and events, when 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 of FF for the quarter ended March 31, 2022 were issued. Based on its recurring losses from operations since inception
and continued cash outflows from operating activities, 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 the unaudited Condensed Consolidated Financial Statements of
FF for the quarter ended March 31, 2022 were issued.
Since
its formation, the Company has devoted substantial effort and capital resources to strategic planning, engineering, design, and development
of its electric vehicle platform, development of initial electric vehicle models, and capital raising. Since inception, the Company has
incurred cumulative losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $3,077,614
as of March 31, 2022. After the closing of the Business Combination and the PIPE Financing on July 21, 2021, the Company received
gross proceeds aggregating $990,983, which it used to settle certain liabilities and the remainder of which management expects to use
to finance the ongoing operations of the business.
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 (see Note 8, Related Party Notes Payable and Note 9, Notes Payable in
the Notes to the unaudited Condensed Consolidated Financial Statements of FF for the quarter ended March 31, 2022 included elsewhere
in this prospectus), the sale of Preferred and Common Stock (see Note 12, Stockholders’ Equity in the Notes to the unaudited
Condensed Consolidated Financial Statements of FF for the quarter ended March 31, 2022 included elsewhere in this prospectus) and the
net proceeds received from the Business Combination and the PIPE Financing (see Note 3, Business Combination in the Notes to the
unaudited Condensed Consolidated Financial Statements of FF for the quarter ended March 31, 2022 included elsewhere in this prospectus).
The
Company’s ongoing liquidity needs will depend on the extent to which the Company’s actual costs vary from the Company’s
estimates and the Company’s ability to control these costs, as well as the Company’s ability to raise additional funds. The
Company is exploring various funding and financing alternatives to fund its ongoing operations, including equipment leasing, construction
financing of the Hanford, California manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans,
and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s
assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time.
The
timely 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, control
and effectively manage its costs, as well as factors outside of the Company’s control, including those related to global supply
chain disruptions, the rising prices of materials and potential impact of the COVID-19 pandemic. Refer to the section titled, “Risk
Factors” for a full discussion of the risks. The Company’s forecasts and projections of working capital reflect significant
judgment and estimates for which there are inherent risks and uncertainties. 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 funding 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.
Significant
Related Party Notes Payable and Notes Payable Facilities
The
Company has been significantly funded by notes payable from related parties and third-parties. The related parties include employees
as well as affiliates of employees and affiliates and other companies controlled or previously controlled by the Company’s founder
and former CEO.
The
following tables summarize the outstanding related party notes payable and notes payable as well as the related schedules of maturities
of the related party notes payable and notes payable. See Note 8, Related Party Notes Payable and Note 9, Notes Payable
in FF’s unaudited Condensed Consolidated Financial Statements for the quarter ended March 31, 2022 included elsewhere in this prospectus.
Related
party notes payable consists of the following as of March 31, 2022:
|
|
March
31, 2022 |
|
|
|
|
Note
Name |
|
Contractual
Maturity
Date |
|
Contractual
Interest
Rates |
|
|
Balance
as
of March 31,
2022 |
|
|
Interest
Expense for
the Three
Months
Ended
March 31,
2022 |
|
Related
party notes – China |
|
Due
on Demand |
|
|
18.00 |
% |
|
$ |
9,451 |
|
|
$ |
622 |
|
Related
party notes – China various other |
|
Due
on Demand |
|
|
0.00 |
% |
|
|
4,185 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
13,636 |
|
|
$ |
622 |
|
Schedule
of Principal Maturities of Related Party Notes Payable
The
future scheduled principal maturities of related party notes payable as of March 31, 2022 were as follows:
Years
ended December 31, | |
| |
Due
on demand | |
$ | 13,636 | |
Related
party notes payable consists of the following as of December 31, 2021:
| |
December
31, 2021 |
Note
Name | |
Contractual
Maturity Date | |
Contractual
Interest
Rates | | |
Unpaid
Balance | | |
Net
Carrying
Value at
12/31/21 | |
Related party
notes - China | |
Due
on Demand | |
| 18.00 | % | |
$ | 9,411 | | |
$ | 9,411 | |
Related
party notes - China various other | |
Due
on Demand | |
| 0.00 | % | |
| 4,244 | | |
| 4,244 | |
Total
related party notes payable | |
| |
| | | |
$ | 13,655 | | |
$ | 13,655 | |
The
Company has entered into notes payable agreements with third parties, which consists of the following as of March 31, 2022:
| |
March
31, 2022 | |
| |
Note
Name | |
Contractual
Maturity Date | |
Contractual
Interest Rates | | |
Unpaid
Principal
Balance | | |
Fair
Value
Measurement
Adjustments | | |
Original
issue
discount and
proceeds
allocated to
warrants | | |
Net
Carrying
Value | | |
Interest
Expense for the
Three Months
Ended
March 31, 2022 | |
June
9, 2021 Note 1 and Note 2 | |
December
9, 2022 | |
| 0.00 | % | |
| 40,000 | | |
| 8,697 | | |
| (9,522 | ) | |
| 39,175 | | |
| — | |
August
10, 2021 Optional Notes | |
February 10, 2023 | |
| 15.00 | % | |
| 33,917 | | |
| 11,499 | | |
| (11,518 | ) | |
| 33,898 | | |
| 1,272 | |
Notes payable –
China various other | |
Due on Demand | |
| 0.00 | % | |
| 5,482 | | |
| — | | |
| — | | |
| 5,482 | | |
| — | |
PPP Loan | |
April 17, 2022 | |
| 1.00 | % | |
| 193 | | |
| — | | |
| — | | |
| 193 | | |
| — | |
Auto
loans | |
Various | |
| Various | | |
| 117 | | |
| — | | |
| — | | |
| 117 | | |
| — | |
| |
| |
| | | |
$ | 79,709 | | |
$ | 20,196 | | |
$ | (21,040 | ) | |
$ | 78,865 | | |
$ | 1,272 | |
Schedule
of Principal Maturities of Notes Payable
The
future scheduled principal maturities of notes payable as of March 31, 2022 are as follows:
Due on demand | |
$ | 5,483 | |
2022 | |
| 40,309 | |
2023 | |
| 33,917 | |
| |
$ | 79,709 | |
Notes
payable consists of the following as of December 31, 2021:
| |
December
31, 2021 |
Note
Name | |
Contractual
Maturity
Date | |
Contractual
Interest Rates | | |
Unpaid
Balance | | |
Fair
Value
Measurement
Adjustments | | |
Original
issue
discount and
proceeds allocated
to warrants | | |
Net
Carrying
Value | |
March
1, 2021 Notes | |
March
1, 2022 | |
| 14.00 | % | |
$ | 55,000 | | |
$ | 7,692 | | |
$ | (5,997 | ) | |
$ | 56,695 | |
August
26, 2021 Notes | |
March
1, 2022 | |
| 14.00 | % | |
| 30,000 | | |
| 1,011 | | |
| (87 | ) | |
| 30,924 | |
June
9, 2021 Note 1 and Note 2 | |
December
9, 2022 | |
| — | % | |
| 40,000 | | |
| 8,503 | | |
| (9,522 | ) | |
| 38,981 | |
August
10, 2021 Optional Notes | |
February
10, 2023 | |
| 15.00 | % | |
| 33,917 | | |
| 12,283 | | |
| (11,518 | ) | |
| 34,682 | |
Notes
payable - China various other | |
Due
on demand | |
| — | % | |
| 5,458 | | |
| — | | |
| — | | |
| 5,458 | |
Notes payable | |
April
17, 2022 | |
| 1.00 | % | |
| 193 | | |
| — | | |
| — | | |
| 193 | |
Auto
loans | |
Various | |
| Various | | |
| 121 | | |
| — | | |
| — | | |
| 121 | |
Total
notes payable | |
| |
| | | |
$ | 164,689 | | |
$ | 29,489 | | |
$ | (27,124 | ) | |
$ | 167,054 | |
Cash
Flow Analysis
Presented
below is a summary of FF’s cash flows for the periods indicated:
| |
Three
Months Ended March 31, | |
| |
2022 | | |
2021 | |
Net cash provided by (used in) | |
| | |
| |
Operating activities | |
$ | (122,364 | ) | |
$ | (20,319 | ) |
Investing activities | |
| (44,398 | ) | |
| (711 | ) |
Financing activities | |
| (85,676 | ) | |
| 72,997 | |
Effect
of exchange rate changes on cash and restricted cash | |
| (653 | ) | |
| (548 | ) |
Operating
Activities
FF
continues to experience negative cash flows from operations as FF designs and develops its vehicles and builds its infrastructure both
in the United States and China. FF’s cash flows from operating activities are significantly affected by FF’s cash investments
to support the growth of FF’s business in areas such as research and development associated with FF’s electric vehicles,
corporate planning, and general and administrative functions. 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 in operating activities was $122,364 and $20,319 for the three months ended March 31, 2022 and 2021, respectively. The
largest components of FF’s cash used by operating activities during the three months ended March 31, 2022, were $33,601 for
wages and compensation related expenses, and $9,350 for professional services. Other movements were related to changes in working capital.
The
largest component of FF’s cash used by operating activities during the three months ended March 31, 2021, was $9,657 for wages
and compensation related expenses, $8,995 for professional services, and $1,553 for rent and related expenses. Cash outflows of $772
was related to interest paid to lenders.
Investing
Activities
Net
cash used in investing activities was $44,398 and $711 for the three months ended March 31, 2022, and 2021, respectively, related
to the acquisition of fixed assets.
Financing
Activities
Net
cash (used in) provided by financing activities was ($85,676) and $72,997 for the three months ended March 31, 2022, and 2021, respectively.
Net
cash used in financing activities during the three months ended March 31, 2022, primarily consists of $87,065 in repayment of notes
payable, including liquidation premiums, and $466 in payments of finance lease obligations partially offset by $1,855 in proceeds from
exercise of stock options.
Net
cash provided by financing activities during the three months ended March 31, 2021, primarily consists of $76,140 in cash proceeds
from the issuance of notes payable and $2,650 in proceeds from exercise of stock options. These inflows were partially offset by $3,355
in repayments of notes payable, $1,528 in repayments of related party notes payable and $1,110 in payments of finance lease obligations.
Effect
of Exchange Rate Changes on Cash and Restricted Cash
The
exchange rates effect on Cash and Restricted Cash was an unfavorable $653 and $548 for the three months ended March 31, 2022 and
2021, respectively. 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 Chinese Renminbi. Fluctuations in exchange rates against the U.S. dollar
may positively or negatively affect FF’s operating results.
Presented
below is a summary of FF’s cash flows for the periods indicated:
| |
For
the Year Ended December 31, | |
(in
thousands) | |
2021 | | |
2020 | |
Net cash provided by (used in) | |
| | |
| |
Operating activities | |
$ | (339,765 | ) | |
$ | (41,165 | ) |
Investing activities | |
| (95,681 | ) | |
| 2,993 | |
Financing activities | |
| 966,569 | | |
| 36,831 | |
Effect
of exchange rate changes on cash and restricted cash | |
| (2,473 | ) | |
| (186 | ) |
Operating
Activities
FF
continues to experience negative cash flows from operations as FF designs and develops its vehicles and builds its infrastructure both
in the United States and China. FF’s cash flows from operating activities are significantly affected by FF’s cash investments
to support the growth of FF’s business in areas such as research and development associated with FF’s electric vehicles,
corporate planning, and general and administrative functions. 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 in operating activities was $339,765 and $41,165 for the years ended December 31, 2021 and 2020, respectively.
The
largest components of FF’s cash used by operating activities during the year ended December 31, 2021 were $89,646 for wages
and compensation related expenses; $50,000 for a non-exclusive, perpetual, irrevocable, and sublicensable license to use a platform,
the Geely License, owned by Liankong, a subsidiary of Geely Holding; $28,356 for professional services and for prepayment of software
hosting costs. Other movements were related to changes in working capital.
Net
cash used by operating activities was $41,165 for the year ended December 31, 2020. The largest component of FF’s cash used during
the year was $38,785 for wages, compensation related expenses and professional services. Cash outflows of $3,137 was related to interest
paid to lenders. Other movements were related to changes in working capital.
Investing
Activities
Net
cash (used in) provided by investing activities was ($95,681) and $2,993 for the year ended December 31, 2021 and 2020, respectively.
Cash used for investing activities for the year ended December 31, 2021, include $95,681 for the acquisition of property and equipment.
Net
cash provided by investing activities for the year ended December 31, 2020, consists of $3,600 in proceeds from notes receivable,
offset by $607 in payments for the acquisition of property and equipment.
Financing
Activities
Net
cash provided by financing activities for the year ended December 31, 2021 and 2020 was $966,569 and 36,831, respectively.
Cash
provided from financing activities during the year ended December 31, 2021 primarily consists of $229,583 in cash proceeds from
the issuance of Class A Common Stock, net of $206 redemptions of as a result of the Business Combination, $761,400 in cash proceeds from
the PIPE Financing, $172,031 in proceeds from the issuance of notes payable net of original issuance discounts, and $10,587 from the
exercise of stock options. These were partially offset by cash payments of $61,130 for PIPE Financing transaction costs, $48,210 for
settling notes payable and accrued interest, $38,217 for settling related party notes payable and accrued interest, $27,722 for settling
vendor payables in trust, $23,148 for Business Combination transaction costs, $3,355 for debt transaction costs, and $3,212 for capital
lease obligations.
Net
cash provided by financing activities during the year ended December 31, 2020, primarily consists of proceeds from the issuance
of notes payable of $40,595 and proceeds from issuance of related party notes payable of $10,556. These proceeds were partially offset
by payments of vendor payables in trust of $4,500, payments for notes payable obligations of $3,621, payments of notes payable issuance
costs of $4,562, and payments of capital leases obligations of $1,926.
Effect
of Exchange Rate Changes on Cash and Restricted Cash
The
exchange rates effect on Cash and Restricted Cash was negative for the years ended December 31, 2021 and 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 Chinese Yuan. Fluctuations in exchange rates against the U.S. dollar may positively or negatively affect FF’s
operating results. The effect of exchange rate change was an unfavorable $2,473 and $186 for the years ended December 31, 2021 and
2020, respectively.
Contractual
Obligations and Commitments
The
following table sets forth, as of March 31, 2022, significant cash obligations that affect FF’s future liquidity:
| |
Payments
Due by Period | |
| |
Total | | |
2022
(9 months) | | |
2023
-
2024 | | |
2025
-
2026 | | |
Thereafter | |
| |
(in
thousands) | |
Operating lease
obligations | |
$ | 33,031 | | |
$ | 3,833 | | |
$ | 8,557 | | |
$ | 8,897 | | |
$ | 11,744 | |
Finance
lease obligations | |
| 11,346 | | |
| 1,940 | | |
| 3,923 | | |
| 3,620 | | |
| 1,863 | |
Related
party notes payable | |
| 13,636 | | |
| 13,636 | | |
| — | | |
| — | | |
| — | |
Related
party accrued interest | |
| 12,222 | | |
| 12,222 | | |
| — | | |
| — | | |
| — | |
Notes
payable | |
| 79,709 | | |
| 45,792 | | |
| 33,917 | | |
| — | | |
| — | |
Notes
payable accrued interest | |
| 1,493 | | |
| 1,493 | | |
| — | | |
| — | | |
| — | |
Palantir
license | |
| 41,667 | | |
| 2,667 | | |
| 19,500 | | |
| 19,500 | | |
| — | |
Total
contractual obligations | |
$ | 193,104 | | |
$ | 81,583 | | |
$ | 65,897 | | |
$ | 32,017 | | |
$ | 13,607 | |
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.
The
Company settled certain notes payable during the three months ended March 31, 2022 as follows:
| |
Three
months ending March 31, 2022 |
Note
Name | |
Contractual
Maturity Date | |
Contractual
Interest
Rates | | |
Net
carrying
value at
12/31/2021 | | |
Fair
Value
Measurement
Adjustments | | |
Payment
Premium | | |
Cash
Payment | |
March 1, 2021 Notes(2) | |
March 1,
2022 | |
| 14.00 | % | |
| 56,695 | | |
| (1,695 | ) | |
| — | | |
| (55,000 | ) |
August 26, 2021 Notes(2) | |
March
1, 2022 | |
| 14.00 | % | |
| 30,924 | | |
| (924 | ) | |
| 2,065 | | |
| (32,065 | ) |
| |
| |
| | | |
$ | 87,619 | | |
$ | (2,619 | ) | |
$ | 2,065 | | |
$ | (87,065 | ) |
Critical
Accounting Estimates
The
preparation of our 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 FF’s management.
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 variability and volatility.
For
a description of FF’s significant accounting policies, see Note 1, Nature of Business and Organization, and Summary of Significant
Accounting Policies of the Notes to Consolidated Financial Statements of FF for the years ended December 31, 2021 and 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 the
Consolidated Financial Statements. Management believes the following critical accounting policies reflect the more significant estimates
and assumptions used in the preparation of FF’s Consolidated Financial Statements.
See
Note 1. Nature of Business and Organization and Basis of Presentation in the Notes to the unaudited Condensed Consolidated Financial
Statements of FF for the quarter ended March 31, 2022 included elsewhere in this prospectus for discussion of estimates related to accounting
pronouncements recently adopted.
Description |
|
Judgements
and Uncertainties |
|
Effect
if Actual Results Differ from Assumptions |
Stock-Based Compensation |
|
|
|
|
The
Company’s stock-based compensation awards consist of options granted to employees, directors and non-employees for the
purchase of common stock. 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. For options with service conditions,
the value of the award is recognized as expense over the requisite service period on a straight-line basis. For performance-based
awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance
milestones when the achievement of each individual performance milestone becomes probable.
Fair
value of common stock — Prior to the close of the Business Combination, there was no public market for Legacy FF’s Class
A Ordinary Stock. Therefore, Legacy FF’s Board of Directors determined the fair value of Legacy FF’s Class A 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
stock was 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 granted stock options with exercise prices equal to the fair value of Legacy FF’s Class A Ordinary Stock
on the date of grant. After the close of the Business Combination, the closing price of FF’s Class A Common Stock on the NASDAQ
as reported will be used.
|
|
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 common
share (when there is no public market for the share), the risk-free interest rate, the expected term of the award, the expected
volatility of the price of FF’s common shares, and the expected dividend yield of FF’s common share.
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 — The Company determines the expected volatility based on the historical average volatilities of publicly traded
industry peers. 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 FF’s own Class A Common Stock price becomes available,
unless circumstances change such that the identified companies are no longer similar to FF, in which case more suitable companies
whose stock prices are publicly available would be utilized in the calculation.
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 for the
foreseeable future.
Forfeiture
rate — Stock-based compensation expense is reduced for forfeitures, which the Company estimates 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.
|
|
These
estimates involve inherent uncertainties and the application of management’s judgment. If FF had made different assumptions,
FF’s stock-based compensation expense and its net loss could have been materially different.
An
increase in risk-free interest rate will reduce the estimated fair value of a stock option grant, while decrease in these factors
will have an opposite effect.
Likewise,
a decrease in volatility and expected term will decrease the estimated fair value of a stock option grant, while an increase in these
factors will have an opposite effect.
The
Company does not expect to change the dividend yield assumption in the near future.
|
Description |
|
Judgements
and Uncertainties |
|
Effect
if Actual Results Differ from Assumptions |
Fair Value
of Ordinary Shares |
|
|
|
|
Prior
to the Business Combination, FF was required to estimate the fair value of the ordinary shares underlying FF’s stock-based
awards. The fair value of the ordinary shares underlying FF’s stock-based awards had been determined in each case by FF’s
Board of Directors, with input from management and contemporaneous third-party valuation expert. FF believes that its Board of
Directors has the relevant experience and expertise to determine the fair value of FF’s ordinary shares. 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 FF’s ordinary shares, the valuation of FF’s ordinary shares had 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.
|
|
FF
considered various objective and subjective factors to determine the fair value of FF’s ordinary shares as of each grant
date, including:
●
Contemporaneous valuations performed by unrelated third-party experts;
●
The progress of FF’s research and development;
●
FF’s stage of development and commercialization and FF’s business strategy;
●
Industry information, such as external market conditions affecting the electric car industry and trends within
the electric car industry;
●
Lack of marketability of FF’s ordinary shares;
●
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 FF’s business;
●
Prices, privileges, powers, preferences, and rights of our convertible preferred stock relative to those of FF’s
ordinary shares;
●
Forecasted cash flow projections for FF’s business;
●
Illiquidity of stock-based awards involving securities in a private company; and
●
Macroeconomic conditions.
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 FF’s ordinary shares. If FF had used different assumptions or estimates, the fair value
of FF’s ordinary shares and FF’s stock-based compensation expense could have been materially different.
|
|
During
2020 and 2021 (prior to the closing of the Business Combination), FF’s estimated fair value of its Class A Ordinary Shares
remained relatively consistent, fluctuating between $2.449 per share as of March 31, 2020 (“March 2020 valuation”)
and $2.767 per share as of January 20, 2021 (“January 2021 valuation”). As of April 20, 2021, FF’s estimated
fair value of its Class A Ordinary Shares was $7.948 (“April 2021 valuation”).
In
order to estimate the fair value of FF’s Class A Ordinary Stock, FF utilized more than one valuation approach. The March 2020
valuation was 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 and April 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
2020, 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. Please refer to Key Factors
Affecting Operating Results and Liquidity and Capital Resources and Going Concern within FF’s Management’s Discussion
and Analysis of Financial Condition and Results of Operations for further details on FF’s operations, capital resources, and
going concern.
The
increase in value between the January 2021 valuation and the April 20, 2021 was due to FF’s progress towards the Business Combination.
During the latter half of 2020, 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 FF. As 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 FF’s equity as of the January 2021 valuation and April 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.
|
Description |
|
Judgements
and Uncertainties |
|
Effect
if Actual Results Differ from Assumptions |
Fair
Value Measurements and Fair Value of Related Party Notes Payable and Notes Payable |
|
|
|
|
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.
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 shares. The probability
of a liquidity event and the derived discount rate are assumptions used to estimate the fair value of FF’s notes payable carried
at fair value. For further discussion see Note 8, Fair Value of Financial Instruments in the Notes to FF’s Consolidated
Financial Statements included elsewhere in this prospectus.
|
|
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, the standard establishes a three-tier value hierarchy, which prioritizes the inputs
used in measuring fair value as follows:
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. Level 1 valuations are obtained from readily available pricing sources
for market transactions involving identical assets, liabilities, or funds.
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. Level 2 valuations are usually obtained through market data of the investment itself as well as market
transactions involving comparable assets, liabilities or funds.
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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Certain
of the related party notes payable and notes payable contain embedded liquidation premiums with
conversion rights that represent embedded derivatives whose value is directly related to the fair
value of the Company’s common stock. As the value of Company’s common stock increases,
the value of these related party notes payable and notes payable increases, and as the value of
Company’s common stock decreases, the value of these related party notes payable and notes
payable decrease. |
Description |
|
Judgements
and Uncertainties |
|
Effect
if Actual Results Differ from Assumptions |
Income Taxes |
|
|
|
|
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.
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 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. 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.
|
|
The Company
has recognized a full valuation allowance as of December 31, 2021 and 2020 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 $256,413
and $148,546 as of December 31, 2021 and 2020, respectively. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the period in which the temporary timing differences become deductible. |
Recent
Accounting Pronouncements
See
Note 1, Nature of Business and Organization and Basis of Presentation in the Notes to the unaudited Condensed Consolidated Financial
Statements of FF for the quarter ended March 31, 2022 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
Pursuant
to Item 305(e) of Regulation S-K, FF is not required to provide the information required by this Item as it is a “smaller reporting
company.”
Internal
Control Over Financial Reporting
FF management identified material weaknesses
in FF’s internal control over financial reporting. The material weaknesses in FF’s internal control over financial reporting
remained unremediated as of the year ended December 31, 2021 and the three months ended March 31, 2022. See the section titled “Risk
Factors — 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.”
Segment
Information
FF
has determined that FF operates as one reportable segment, which is the design, development, manufacturing, engineering and sale and
distribution of electric vehicles and related products in the global market.
Emerging
Growth Company Status
In
April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage
of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the
adoption of certain accounting standards until those standards would otherwise apply to private companies. FF has elected to take advantage
of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements
available to emerging growth companies. As a result of the accounting standards election, FF will not be subject to the same implementation
timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison
of FF’s financial statements to those of other public companies more difficult.
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 all our subsidiaries organized in China and in Hong Kong collectively as the “PRC Subsidiaries,”
a complete list of which is set forth in Exhibit 21.1 to the registration statement of which this prospectus forms a part. As of the
date of this prospectus, our only operating subsidiaries in China and in Hong Kong are FF Automotive (China) Co. Ltd., Ruiyu Automotive
(Beijing) Co., Ltd. and Shanghai Faran Automotive Technology Co., Ltd., each of which was organized in the PRC. 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
Faraday
Future Intelligent Electric, Inc. (together with its consolidated subsidiaries, “FF,” “the Company,” “we,”
“us” or “our”) is a California-based global shared intelligent mobility ecosystem company with a vision to disrupt
the automotive industry.
With
headquarters in Los Angeles, California, the Company designs and engineers next-generation intelligent, connected, electric 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. The Company has additional engineering, sales, and operational capabilities
in China and is exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangement.
Since
its founding, the Company has created major innovations in technology and products, and a user centered business model. We believe these
innovations will enable 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.”) systems.
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
an industry-leading inverter design, and a propulsion system that provides a competitive edge in electric drivetrain 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 a highly personalized user experience.
Since
inception, FF has developed a differentiated portfolio of valuable intellectual property. As of March 31, 2022, the Company has been
granted more than 650 patents (with approximately a third issued in the U.S., and slightly less than two-thirds issued in China, and
the remaining issued in other jurisdictions). Key patents include FF’s inverter assembly, 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 the FF 91 series, the FF 81 series, and
the FF 71 series, each designed to target different passenger vehicle segments. In addition to passenger vehicles, and leveraging its
VPA and other proprietary technology, FF plans to launch a Smart Last Mile Delivery (“SLMD”) vehicle to address the high
growth last mile delivery market.
Each
of the three passenger vehicle series is planned in two different configurations (the FF 91 will also come in a limited edition model).
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 the FF 91 series in the third quarter of 2022. Please refer to “Risk Factors - FF’s vehicles
are in development and its first vehicle may not be available for sale in the third quarter of 2022, if at all” for a discussion
on risks and uncertainties related to the expected launch. Toward that goal, FF has completed most of its vehicle development milestones,
and recently announced the completion of its first production-intent build at the Hanford manufacturing plant. The 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 vehicles:
| ● | FF
81 series, FF’s second passenger vehicle, is envisioned to 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. |
| ● | FF
71 series, FF’s mass market passenger vehicle, plans to 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. |
Product
Positioning
All
FF passenger vehicles will share common brand “DNA” of:
| ● | Intelligence,
Internet and connectivity; |
| ● | superior
driving experience: leading power, performance and driving range; and |
| ● | personalized
user experience: space, comfort and internet experience |
The
flagship FF 91 series will define the FF brand DNA. This DNA will carry over to FF 81 and FF 71 series vehicles at lower price points.
With such brand DNA, FF believes its products will 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
a collaboration with Myoung Shin, a contract manufacturing partner in South Korea. FF is also exploring other potential contract manufacturing
options in addition to the contract manufacturer agreement in South Korea. The Company is also exploring the possibility of manufacturing
capacity in China through a joint venture or other arrangement.
As
of the date hereof:
| ● | 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; and |
| ● | FFIE
entered into a definitive contract manufacturing and supply agreement with Myoung Shin Co.,
Ltd. (“Myoung Shin”), a South Korea-based automotive manufacturer and parts supplier,
to manufacture the Company’s second vehicle, the FF 81. The agreement has an initial
term of nine years from the start of production of the FF 81, which is scheduled for 2024.
Pursuant to the agreement, Myoung Shin shall maintain sufficient manufacturing capabilities
and capacity to supply FF 81 vehicles to FF in accordance with the Company’s forecasts
and purchase orders. FF and Myoung Shin will each manufacture and supply certain FF 81 parts
that Myoung Shin will use in the manufacture and assembly of FF 81 vehicles. |
Distribution
Model
FF management anticipates making its first
passenger vehicles available in the U.S., followed shortly thereafter by a rollout in China. Expansion of sales to Europe may begin as
early as 2023, and additional markets may be added thereafter. 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.
Projected
product performance with industry-leading propulsion technology
FF’s
propulsion system includes an industry-leading inverter design and proprietary drive propulsion system. FF’s proprietary FF Echelon
Inverter has the technological advantage of driving a large amount of current in a small space using proprietary parallel Insulated Gate
Bipolar Transistors (“IGBTs”), achieving low inverter losses and high efficiency. The propulsion system has high torque accuracy
with fast transient response. The electric motor drive units are fully integrated with the inverter, transmission and control unit to
create industry-leading volume and design efficiency. Propelled by an integrated FF designed powertrain, 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, a NVIDIA based autonomous driving system, and a high-speed connectivity
system that will be capable of up to three simultaneous 5G connections. Together, these systems will 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 FF 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 also 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. FF’s proprietary
inverter design provides high current and is integrated into the electric drive unit, creating a high power-to-weight ratio. The patented
keyless entry technology recognizes the user from a distance, opens (rather than simply unlocking) doors and customizes the user’s
seating area using facial-recognition-prompted download of FFID data. Patented autonomous driving technology will allow users 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”) (available post-launch via a software upgrade). 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 automotive, communication, and internet experience. FF’s Executive
Chairperson, Sue Swenson, has a long experience in public company governance, particularly in technology, media and communications companies.
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,
focuses on product and mobility ecosystem; internet and AI; and advanced R&D technology. 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 TVs, 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 targeted launch of commercial production in the third quarter of 2022
FF
has achieved several commercial milestones as it works to bring the FF 91 to the market. When FF launches the FF 91, the Company expects
to be the first entrant in the ultra-luxury EV segment. Please refer to “Risk Factors - FF’s vehicles are in development
and its first vehicle may not be available for sale in the third quarter of 2022, if at all” for a discussion on risks and
uncertainties related to the expected launch. FF has recently completed the first of its planned production-intent vehicles at the Hanford
manufacturing plant and will produce many more in the coming months for testing, validation, and marketing purposes. As of the date hereof,
only a few standard off-the-shelf components remain to be sourced.
Electric
Vehicle Industry Overview and Market Opportunity
The
electric vehicle industry is poised for explosive growth. Based on the Electric Vehicle Outlook 2021 report, a long-term forecast published
in May 2021 by Bloomberg New Energy Finance (“BNEF Report”), which forecasts that passenger electric vehicle sales in the
U.S., Europe, and China could grow to a total of approximately 14.0 million vehicles in 2025, from 3.1 million vehicles in 2020, and
then continue to grow rapidly.
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 are estimated to exceed 65%
of all passenger electric vehicle sales by 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 three-quarters of
all new passenger vehicles sold will be electric, with markets in China and parts of Europe achieving even higher penetration. For commercial
electric vehicles, demand for electric small vans, and trucks are expected to rise quickly, with the U. S., Europe, and China markets
expanding faster than the overall market, according to the 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 of 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 generally represent the most expensive components of an electric vehicle. The falling price of lithium-ion
batteries is expected to be among the most important factors 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 89% from 2010 to 2021 to $131/kWh. They project the cost of lithium-ion batteries will fall below $100/kWh by 2024
and continue to decline as advancements in manufacturing and technology continue. 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 (“new energy vehicle”) 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 significant near-term impact from COVID-19, the global shared mobility fleet (i.e., ride-hailing and
car-sharing) is expected to represent more than 15% 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 75% of shared mobility vehicles by 2040, representing a dramatic increase from current low single digit penetration. 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”), which was previously 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 | Excludes
subsidiaries with immaterial operations. FF Hong Kong Holding Limited is a holding company
subsidiary organized in Hong Kong. As of the date of hereof, LeSEE Automotive (Beijing) Co.
Ltd., a subsidiary organized in China, has immaterial operations. |
Milestones
Significant
milestones in FF’s historical development and commercialization of FF’s electric vehicles include the following:
| ● | In
2015, FF completed its first test mule car, and a fully developed electric vehicle Beta prototype
was completed in August 2016. |
| ● | 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. |
| ● | 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. |
| ● | 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. |
| ● | 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. |
| ● | 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. |
| ● | 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.
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. The joint venture and contract manufacturing projects with Geely Holding are temporarily on hold. |
| ● | In
January 2021, FF announced that it entered into a definitive agreement for a business combination
with PSAC, with the combined company to be listed on the NASDAQ Stock Market under the ticker
symbol “FFIE”. |
| ● | In
July 2021, FF announced that it completed its previously announced merger with PSAC, which
resulted in the combined company being renamed Faraday Future Intelligent Electric. The common
stock and warrants of the Company began trading on the NASDAQ Stock Market on July 22, 2021
as “FFIE” and “FFIEW”, respectively. |
| ● | In
September 2021, FF completed the installation of pilot equipment in the pre-production build
area of its Hanford, California facility. |
| ● | In
October 2021, FF received its final Certificate of Occupancy (“CO”) for a dedicated
area for pre-production manufacturing at the facility in Hanford, California. |
| ● | In
December 2021, FF started foundation construction for all remaining production areas in the
Hanford facility, including body, propulsion, warehouse and vehicle assembly. Interior foundation
work in the production area is now complete, major mechanical systems, including electrical
and plumbing, are now being installed and equipment installation is underway. |
| ● | In
February 2022, FF announced that Myoung Shin Co., Ltd., an automotive manufacturer headquartered
in South Korea, had been contracted to manufacture FF’s second vehicle, the FF 81,
with SOP scheduled for 2024. |
| ● | In
February 2022, FF unveiled the first production-intent FF 91 EV manufactured at its Hanford,
California plant. |
| ● | In
May 2022, FF marked Production Milestone #5 at its Hanford, California manufacturing facility,
with the start of installation of all mechanical, electrical and plumbing systems to support
equipment installation. |
Partnership
Program
Certain
current and former executives of 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 36.2%
of the voting power 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 Global’s internal governance perspective. FF
Global is managed by its board of managers (“FF Global Board”), which currently consists of seven managers - YT Jia, Matthias
Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng and Philip Bethell. A majority of the managers of FF Global present at a meeting
of the FF Global Board where there is a quorum is required to approve any material actions of FF Global (“Reserved Matters”),
including actions relating to the voting and disposition of shares of FFIE held by FF Top Holding LLC (f/k/a FF Top Holding Ltd.) (“FF
Top”) and indirectly owned by FF Global. In the event of a tie at any meeting of the FF Global Board, the manager designated by
Chaoying Deng as the managing partner has a casting vote. Except for the Reserved Matters, management of FF Global has been delegated
to the managing partner for efficient management. Based on our investigation, we believe that YT Jia has significant influence over and
may control the outcome of any actions taken by the FF Global Board through a series of familial and personal relationships that he has
with the other managers on the FF Global Board. 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
spirit, and have made significant contributions to become partners or preparatory partners of FF Global, and issues corresponding units
to them. The units may be redeemed by FF Global if the FF Global Board determines in its sole discretion that the holder has acted in
a manner that is detrimental to FF Global, FF or any of their affiliates, breached the operating agreement of FF Global or any other
agreement between the holder and FF Global or ceased to provide services to FF Global, FF or their affiliates with or without cause.
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.
In addition, the creditors’ trust from YT Jia’s Chapter 11 bankruptcy has a substantial preferred economic interest in Pacific
Technology Holding LLC and has observatory rights on the FF Global Board.
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 in collaboration with suppliers and has been integrated into the FF vehicle design 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. The 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 believes its proprietary and patented
designed electric powertrain provides a competitive edge in horsepower, efficiency, and acceleration performance.
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
designed its electric motor drive units (including gearbox). 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 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 many of its competitors in terms of performance because of its proprietary, advanced packaging, stator-rotor
design, and unique inverter layout.
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 is designed to 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 (“ADAS”) 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 (FF proprietary user ID). FFID provides a unique FF 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 FF vehicles will offer multiple human-machine interface (“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
has designed the first generation of FF vehicle series (FF 91) with 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 of 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:
|
● |
Intelligence, Internet and connectivity; |
|
|
|
|
● |
modern design: styling; |
| ● | superior
driving experience: leading power, performance, and driving range; and |
| ● | personalized
user experience: space, comfort, and internet experience. |
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 believes
its products will 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 (126 inches), 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 built numerous prototypes and pre-production
assets for validation and testing, and recently completed its first production-intent build at its Hanford, California manufacturing
plant. FF aims to launch FF 91 in the third quarter of 2022. Please refer to “Risk Factors - FF’s vehicles are in development
and its first vehicle may not be available for sale in the third quarter of 2022, if at all” for a discussion on risks and
uncertainties related to the expected launch.
FF
believes that FF 91 represents a “new species” of electric mobility that combines high performance, precise handling, the
comfort of a luxury passenger vehicle, and an intelligent, connected user interface which provides a unique mobility experience to both
driver and passenger. 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 (the FF 91 Futurist) is designed to produce 1,050 horsepower and 12,510 Nm of torque to all four wheels.
This enables the FF 91 Futurist to have torque vectoring in the rear for enhanced vehicle dynamics and stability. Its all-wheel drive
system offers greater traction control as well as precise power distribution. This technology delivers superior acceleration and safety.
The
variable platform architecture for FF 91 series houses floor-mounted batteries, as well as FF’s proprietary inverter, the FF Echelon
Inverter, and integrated electric motor drive units. FF 91 is expected to charge at up to a 200kW rate. FF plans to provide charging
solutions available through FF’s self-owned stores and FF Partner-owned stores and showrooms.
The FF 91 aims to deliver a top-quality experience
that emphasizes personalization and comfort for all users of the vehicle, including both 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 the swipe of a user’s fingers. The reconfigurable 3D touch steering wheel can allow further user
configurability. The 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 a large 27-inch rear passenger display,
allowing passengers to stream their favorite movies, TV shows and live sports while the 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 5G modems to realize aggregated high internet speed and great coverage by multiple 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 (post
launch) 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 the 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 will also offer 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 an autonomous driving software solution is validated and released). FF anticipates
that its autonomous driving system will deliver several highway autonomy and 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 currently has a target starting price of $180,000.
FF 81
The 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. The FF 81 will be designed and built on FF’s
proprietary VPA enabling more than 60% carry-over of common parts from the 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.
The FF 81 aims to deliver a premium user experience
that emphasizes personalization. The 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 is expected to compete with
vehicles such as the Tesla Models S/X, BMW X5 and Range Rover Sport, etc.
FF 71
FF’s third planned passenger vehicle,
the 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. The 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 the FF 91 and the FF 81, FF does not expect to start design and development of the FF 71 until
2023 and plans to launch the FF 71 Futurist configuration in 2025, assuming that sufficient funding is secured in a timely manner.
FF 71 Futurist is expected to compete with
vehicles such as the Porsche Macan, BMW X3, and Jaguar I-Pace.
Commercial Vehicles
Smart Last Mile Delivery (“SLMD”)
FF plans to provide purpose-built Smart Last
Mile Delivery vehicles by leveraging its proprietary technologies developed for FF’s passenger vehicles, to build tailored SLMD
configurations to meet the exact customer needs, whether for fleet provider or last mile delivery divisions, while reducing development
time and costs.
FF’s technical solutions for advanced connectivity
and user experience are well-suited to the SLMD market, where rapid growth is fueling demand for increasingly sophisticated solutions
and features. Such features may include:
| ● | Advanced connectivity and telematics for next-gen fleet
management; |
| ● | 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 design enables additional use cases
(utilities, tradesmen, and others) with minimal additional time or investment.
Manufacturing Strategy
FF plans to build FF 91 series vehicles in
its manufacturing facility in Hanford, California with a projected annual capacity of 10,000 vehicles. 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 the
FF 91 (i.e., exceeding 10,000 vehicles annually), FF can expand production operations in Hanford or seek capacity expansion elsewhere.
For the FF 81, FF plans to outsource direct vehicle production to its contract manufacturing partner in South Korea, as FF believes outsourcing
will reduce capital investment and accelerate its go-to-market strategy for launching the FF 81, while providing the benefit of flexibility
to scale volume to match demand level. FF may outsource the production of the FF 71 to its contract manufacturing partner in South Korea
or a manufacturing partner in China or elsewhere. These plans align with FF’s hybrid, 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 contract manufacturing and supply agreement with Myoung Shin 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 experience centers and FF Partner-owned experience centers. The self-operated experience centers
are expected to establish FF brand awareness, while the FF Partner-owned experience centers are expected to expand the sales and distribution
network without substantial capital investment by FF.
FF recently announced that its first flagship
experience center will be located in Beverly Hills, California, and that the Company is currently looking for a second U.S. location.
FF expects to open other Company-operated experience centers in the U.S. and China. 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.
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 based on a revenue sharing model and territory and/or services performed. Users accessing
FF.com can directly purchase the vehicle online and can choose their closest FF experience centers or FF Partner-operated experience
centers and showroom for support. Customers going to an FF Partner-operated experience centers 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-operated experience centers. As FF will oversee delivery of the
vehicles, both FF stores and FF Partner-operated experience centers and showrooms will be able to run their operations in an asset-light
fashion.
The
FF Partner-owned experience centers 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 ramp up its service capabilities, FF U.S., FF’s primary U.S. operating subsidiary,
has engaged Somit Solutions and plans to engage Cox Automotive
to support the FF After-sales Systems and Operations. Somit Solutions will develop the underlying systems required to support all after-sales
elements, such as warranty, parts catalog, repair manual systems. Cox Automotive will support FF after-sales operations, such as roadside
assistance, towing logistics, as well as leveraging Cox’s extensive service center network. Additionally, FF users will 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 has partnered with reputable suppliers in
North America, Europe, and Asia. FF has selected and on-boarded suppliers for all critical parts for the FF 91. 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 March 31, 2022,
FF has been granted more than 650 patents (with approximately a third issued in the U.S., slightly less than two-thirds issued in China,
and the remaining issued in other jurisdictions). FF intends to continue to file additional patent applications with respect to its technology.
FF’s patented technology covers UI/UX, powertrain, ADAS, body, hardware/software platform and chassis. Key patents include FF’s
inverter assembly, 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
In
February 2022, FF U.S. entered into a definitive contract
manufacturing and supply agreement with Myoung Shin Co., Ltd. (“Myoung Shin”), a South Korea-based automotive manufacturer
and parts supplier, to manufacture the Company’s second vehicle, the FF 81. The agreement has an initial term of nine years from
the start of production of the FF 81, which is scheduled for 2024. Pursuant to the agreement, Myoung Shin shall maintain sufficient manufacturing
capabilities and capacity to supply FF 81 vehicles to FF in accordance with the Company’s forecasts and purchase orders. FF and
Myoung Shin will each manufacture and supply certain FF 81 parts that Myoung Shin will use in the manufacture and assembly of FF 81 vehicles.
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 was 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 joint venture and contract manufacturing projects with
Geely Holding are temporarily on hold.
On September 7, 2021, the Company paid Liankong,
a subsidiary of Geely Holding, which 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, a one-time amount of $50 million for a non-exclusive, perpetual,
irrevocable, and sublicensable license to use a platform, the Geely License, owned by Liankong. The Geely platform is an electric automotive
chassis that the Company plans to use in the development and production of future electric vehicle models.
After-Sales and Service
FF U.S. has engaged Somit Solutions to support
developing the underlying after-sales Service Systems (U.S. and China), plans to engage Cox Automotive to support Aftersales Operations
(U.S. only), as has engaged SalesForce (US only) to launch and service the FF 91 in compliance with governmental agencies and to support
Critical Path to deliver and service the first FF 91, in alignment with the company’s user journeys.
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, 2027 |
Hanford, California | |
| 1,100,000 | | |
Manufacturing | |
December 31, 2027 |
Beverly Hills, California | |
| 10,511 | | |
Retail | |
August 31, 2032 |
San Jose, California | |
| 30,260 | | |
Office | |
March 31, 2025 |
Beijing, China | |
| 31,653 | | |
Administrative services, research and development, strategic planning | |
December 14, 2022 |
Guangdong, China | |
| 1,309 | | |
Administrative services, research and development, strategic planning | |
June 30, 2022 |
Shanghai, China | |
| 6,431 | | |
Administrative services, research and development, strategic planning | |
August 10, 2022 |
Shanghai, China | |
| 3,288 | | |
Administrative services, research and development, strategic planning | |
June 10, 2022 |
Shanghai, China | |
| 2,799 | | |
Administrative services, research and development, strategic planning | |
July 19, 2023 |
Shanghai, China | |
| 16,458 | | |
Administrative services, research and development, strategic planning | |
April 30, 2027 |
FF is refurbishing the Hanford manufacturing
facility. 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 June 6, 2022, FF had 759 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 is committed to the principle of ESG and is committed to building a safer, cleaner world. We have a diverse
workforce and are committed to maintaining the highest standards of ethics and behavior.
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 range
ratings, as determined by EPA, as well as crash test ratings as determined by NHTSA.
FF vehicles sold outside of the U.S. will be
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 may earn tradable credits under certain governmental programs designed
to incentivize such activities. 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 14 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, Virginia, 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 14 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 of licensing requirements 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-operated
experience centers and service centers, while partners in certain states will support by providing services via partner-owned experience
centers and showrooms. FF U.S. has received its dealer license from the State of California and is able to sell automobiles across the
U.S.
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, Lucid Motors, 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
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 were 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 ultimately received
interests in the Vendor Trust related to approximately $8.4 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 of the Business Combination, 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 of the Business Combination.
Additionally, FF’s PRC Subsidiaries are
involved in 32 proceedings or disputes in China in which PRC Subsidiaries are defendant and one dispute in which a PRC entity is a plaintiff
and has received a prevailing judgment. 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, and accrued penalties thereof, are approximately $9.5 million. Additionally, FF Global, an indirect shareholder
of FF, has threatened to initiate shareholder litigation against FF for purposes of changing the management of FF.
On December 23, 2021, a putative class action
lawsuit alleging violations of the Securities Exchange Act of 1934 was filed in the United States District Court, Central District
of California, against the Company and its current Chief Executive Officer, its current Chief Financial Officer, its current Chief Product
and User Ecosystem Officer, as well as the CFO of Legacy FF, and the Co-CEOs of PSAC (the “Putative Class Action”). On March
7, 2022, the following individuals were appointed as Lead Plaintiffs: Byambadorj Nomin, Hao Guojun, Peihao Wang and Shentao Ye. On the
same date, Wolf Haldenstein and Pomerantz LLP were appointed as Co-Lead Counsel. Lead Plaintiffs filed an amended complaint on May 6,
2022. Defendants’ currently scheduled deadline to respond to the amended complaint is July 5, 2022. The defendants believe the
suit is without merit and therefore intend to vigorously defend the suit. Given the early stages of the legal proceedings, it is not
possible to predict the outcome of the claims.
On March 8 and March 21, 2022, putative derivative
lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims were filed in the United
States District Court, Central District of California. On April 8, 2022, these two derivative lawsuits were consolidated. On May 24,
2022, the consolidated derivative actions were stayed pending resolution of a motion to dismiss in the Putative Class Action. Additionally,
on April 11 and 25, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and various
common law claims were filed in the United States District Court, District of Delaware. These lawsuits purport to assert claims on behalf
of the Company against numerous current and former officers and directors of the Company (discussed further in “Management’s
Discussion and Analysis of Financial condition and Results of Operations”). Given the early stages of the legal proceedings,
it is not possible to predict the outcome of the claims.
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 June
6, 2022, certain information regarding our directors and executive officers who are responsible for overseeing the management of our
business.
Name |
|
Age |
|
Position |
Susan
G. Swenson |
|
74 |
|
Executive
Chairperson and Director |
Dr.
Carsten Breitfeld |
|
58 |
|
Global
Chief Executive Officer and Director(4) |
Becky
Roof |
|
66 |
|
Interim
Chief Financial Officer (effective March 1, 2022) |
Chui
Tin Mok |
|
47 |
|
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. |
Jordan
Vogel |
|
42 |
|
Lead
Independent Director(3) |
Brian
Krolicki |
|
61 |
|
Director(1)(2)(3) |
Edwin
Goh |
|
43 |
|
Director(1)(4) |
Lee
Liu |
|
56 |
|
Director(2)(3) |
Qing
Ye |
|
39 |
|
Director(4) |
Scott
D. Vogel |
|
46 |
|
Director(1)(2) |
(1) |
Member of the Audit Committee |
(2) |
Member of the Nominating and Corporate Governance
Committee |
(3) |
Member of the Compensation Committee |
(4) |
Member of the Finance and Investment Committee |
Executive Officers and Directors
Ms. Susan G. Swenson was
appointed as Executive Chairperson effective February 1, 2022. Ms. Swenson has served as a member of the Board 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
Board based on her extensive leadership and directorship experience with technology, media and communications companies.
Dr. Carsten Breitfeld has
served as FF’s Global Chief Executive Officer since September 2019 and has served as a member of the Board 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, BMW’s first luxury plug-in hybrid. 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 Board based on his extensive executive experience in the automotive industry and his experience with FF and service as FF’s
Global Chief Executive Officer.
Ms. Becky Roof was appointed Interim
Chief Financial Officer of FF effective March 1, 2022. Ms. Roof has been a Managing Director of AlixPartners, LLP, a global consulting
firm, since 2000. She has previously served as Interim Chief Financial Officer of Lordstown Motors Corp. (Nasdaq: RIDE), the Eastman
Kodak Company (NYSE: KODK), Hudson’s Bay Company, Aceto Corp., Anchor Glass Corporation, and several other privately held entities.
In addition, Ms. Roof currently serves on the advisory board of Texas Wall Street Women and is a member of the United Way Women’s
Initiative in Houston. Prior to joining AlixPartners, Ms. Roof was a director in the corporate finance, regeneration and disputes practice
for PricewaterhouseCoopers. Previously, she provided litigation support, fraud investigative work, and corporate recovery consulting
services for Ernst & Young LLP. Ms. Roof is a CPA (licensed in Texas)*. She earned a Bachelor of Science degree in business administration
and Bachelor of Arts degree in geology from Trinity University.
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 experienced in managing marketing
and sales functions in global internet tech companies. Prior to joining FF, Mr. Mok worked in Trend Lab Limited, which Mr. Mok founded
in January 2018. 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. Mr. Mok served as the Global Vice President of Sales and Marketing of Meizu Technology Co.,
Ltd. from 2010 to 2013. 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 the Board of Directors since July 2021. Mr. Aydt has been placed on probation as an executive
officer for a six-month period effective April 12, 2022. 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
Board of Directors based on his extensive executive experience in the automotive industry and with FF and his strategic and technical
background.
| * | Although AlixPartners
employs CPAs, it is not an accounting firm. |
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,, and leads the product execution strategy. Mr. Kruse has 44 years of industry experience. Mr. Kruse also sits on the advisory
board of American Battery Solutions and XNRGI Battery Technology. 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
at 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. Qing Ye has served as
a member of the 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 Legacy FF 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’s degree in Electronics
Engineering from Zhongshan University and his Bachelor’s degree in Engineering and Administration from Huazhong Science and Technology
University.
Mr. Ye is well-qualified to serve on the Board
of Directors due to his extensive leadership experience in electric vehicle and technology companies.
Mr. Jordan Vogel has served
as a member of the Board of Directors since July 2021. Mr. Vogel was appointed as FF’s Lead Independent Director effective January
31, 2022. 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 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
Board of Directors due to his investment experience and special purpose acquisition company experience.
Mr. Brian K. Krolicki has
served as a member of the Board since July 2021, and from July 2021 to January 2022, as Chairman of the Board of Directors. 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
experience 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 positions, including Chairman of the Nevada Commission on Economic Development
and President of the Nevada State Senate. 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 Board 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 has served
as a member of the Board of Directors since July 2021. Mr. Goh has extensive experience in finance and strategy in the Technology, Media
and Telecommunications (TMT) sector. Mr. Goh also serves as a business consultant to a variety of companies. 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 Board
of Directors based on his skills and experiences in finance and consulting and knowledge of the technology and internet industry.
Mr. Lee Liu has served as
a member of the Board of Directors since July 2021. Mr. Liu has extensive experience in human resources, 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 Finance
and Economics. He also holds an Executive MBA degree from Peking University and a Bachelor’s degree in Microelectronics from Tianjin
University.
Mr. Liu is well-qualified to serve on the Board
of Directors based on his extensive background in technology and internet services and human resources management.
Mr. Scott D. Vogel has served
as a member of the 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 and Avaya Holdings Corp.
since December 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
Board of Directors due to his mix of experience with executive management oversight, finance and capital markets, human resources and
compensation, and strategic planning.
Except for Messrs. Jordan Vogel, our Lead Independent
Director, and Scott D. Vogel, a director, who are brothers, there are no other family relationships among any of our directors or executive
officers.
Board Composition
The Board directs the management of FF’s
business and affairs, as provided by Delaware law, and conducts its business through meetings of the Board and its standing committees.
The Board consists of nine members, each of whom are standing for re-election at the Annual Meeting to serve a one-year term and until
respective successors have been duly elected and qualified or until their earlier death, resignation or removal. Under the Shareholder
Agreement, FF and FF Top have agreed to take reasonably necessary action (subject to applicable fiduciary duties of the Board) to nominate
and seek re-election of the initial Board at the first annual meeting following the closing of the Business Combination.
Board Leadership Structure
The primary responsibilities of the Board are
to provide oversight, strategic guidance, counseling and direction to FF’s management. The Board meets on a regular basis and additionally
as required. Pursuant to our Corporate Governance Guidelines, the Board determines the leadership structure that it deems most appropriate
for FF and serves the interests of FF and its stockholders. If the Chairman of the Board is not independent, the independent members
of the Board shall elect from among themselves a director to serve as the Lead Independent Director.
Effective February 1, 2022, the Board appointed
Ms. Swenson as Executive Chairperson and Mr. Vogel as Lead Independent Director. The Board believes that having an Executive Chairperson
and Lead Independent Director is the most appropriate leadership structure for FF currently because it:
| ● | provides efficient and effective governance and leadership
to FF; |
| ● | ensures the Board is apprised of current risks and issues
that may impact FF in a timely manner; and |
| ● | presents a single point of leadership to all FF stakeholders. |
Under our Corporate Governance Guidelines,
in addition to the duties set forth in FF’s bylaws or as otherwise prescribed by the Board, from time to time, such the duties
of the Lead Independent Director include:
| ● | coordinate the activities of the other non-management directors; |
| ● | preside over executive sessions of the independent directors,
Board meetings at which the Chairman is not present and Board discussions when the topic
presents a conflict (or potential conflict) for the Chairman; |
| ● | facilitate communication and serve as a liaison between the
CEO, management and the independent directors; |
| ● | advise the CEO as to the sufficiency, quality, quantity and
timeliness of information provided to the Board; |
| ● | in coordination with the Executive Chairperson, (i) approve
meeting agendas for the Board; (ii) approve information sent to the Board; and (iii) approve
meeting schedules for the Board to ensure that there is sufficient time for discussion of
all agenda items; |
| ● | after each executive session of the independent directors,
provide feedback to the Chairperson and assist in effectuating the decisions and recommendations
of the independent directors; |
| ● | together with the Chair of the Nominating and Corporate Governance
Committee, guide the annual performance evaluation of the Board; |
| ● | participate in the Compensation Committee’s annual performance
evaluation of the CEO, and guide the Board in its consideration of the CEO’s compensation; |
| ● | participate in Board and CEO succession planning; |
| ● | interview, along with the Chair of the Nominating and Corporate
Governance Committee, potential candidates for election to the Board and make recommendations
to the Nominating and Corporate Governance Committee and the Board; |
| ● | advise the Nominating and Corporate Governance Committee on
committee chairs and members; |
| ● | in consultation with the CEO and Chair of the Nominating and
Corporate Governance Committee, coordinate the assessment of Board responsibilities, composition,
leadership and committee structure, organization and charters and evaluate the need for any
changes; |
| ● | assist in orienting and integrating new directors to the Board; |
| ● | recommend the retention of outside advisors and consultants
who report directly to the Board; and |
| ● | be available, if requested by major stockholders, for consultation
and direct communication. |
Independence of Directors
FF adheres to the rules of NASDAQ in determining
whether a director is independent. The Board has consulted, and will consult on an ongoing basis, 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 the Board, would interfere with
the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that Jordan Vogel,
Brian Krolicki, Edwin Goh, Lee Liu and Scott D. Vogel are independent directors. The independent members of the Board have regularly
scheduled meetings at which only independent directors are present. A majority of the Board will 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 Board
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
The Board oversees the risk management activities
designed and implemented by management. The Board executes its oversight responsibility both directly and through its committees. The
Board also considers 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 provides appropriate updates to the Board and the Audit Committee. The Board 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.
The Audit Committee assists the Board in oversight
of cybersecurity risks, in addition to oversight of the performance of our audit function. We have implemented a number of security measures
designed to protect our systems and data, including firewalls, antivirus and malware detection tools, patches, log monitors, routine
back-ups, system audits, routine password modifications, and back-up recovery procedures. We utilize third-party cloud services in connection
with our operations. We and our third-party service providers have also designed certain security features into our solutions .
FF employees receive a comprehensive information security awareness training periodically throughout the year. Our Nominating and Corporate
Governance Committee monitors the effectiveness of our Corporate Governance Guidelines, including whether they are successful in preventing
illegal or improper liability-creating conduct. The Nominating and Corporate Governance Committee is also responsible for overseeing
FF’s environmental, sustainability and governance efforts and progress and related risks. Our Compensation Committee assesses and
monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. All committees report
to the Board, as appropriate, including when a matter rises to the level of material or enterprise risk.
Board Meetings and Committees
During fiscal 2021, the Board of PSAC, our predecessor,
held eight meetings. Following the completion of the Business Combination on July 21, 2021, the FF Board held 15 meetings. Each director
of PSAC and FF attended or participated in 75% or more of the aggregate of the total number of meetings of the Board and the total number
of meetings of all Board Committees on which such director served (in each case held during such director’s relevant period of
service).
Audit Committee
FF’s Audit Committee currently consists
of Scott Vogel, Edwin Goh and Brian Krolicki, each of whom is “independent” as such term is defined for audit committee members
under the rules of the SEC and the listing standards of NASDAQ. Mr. Vogel is the chair of the Audit Committee. The Board has determined
that Edwin Goh, Brian Krolicki and Scott Vogel each qualifies as an “audit committee financial expert” as defined under the
rules of the SEC.
As more fully described in its charter, the
primary responsibilities of the Audit Committee include:
| ● | to appoint the independent registered public accounting firm
and oversee the relationship, and approve the audit and non-audit services to be performed
by the independent registered accounting firm; |
| ● | to review FF’s quarterly and annual financial statements
with management and the independent registered public accounting firm; |
| ● | to review FF’s financial reporting processes and internal
controls; |
| ● | to review and approve all transactions between FF and related
persons; and |
| ● | to discuss the policies with respect to risk assessment and
risk management, information technology and cybersecurity risks, and other major litigation
and financial risk exposures, and the steps management has taken to monitor and control such
exposures. |
The Audit Committee held six meetings during fiscal
2021. The Audit Committee has adopted a written charter approved by the Board, which is available on FF’s website at https://investors.ff.com/corporate-governance/governance-overview.
Compensation Committee
FF’s Compensation Committee is currently
comprised of Lee Liu, Brian Krolicki and Jordan Vogel, each of whom is “independent” as such term is defined for compensation
committee members under the rules of the SEC and the listing standards of NASDAQ. Mr. Liu is the chair of the Compensation Committee.
As more fully described in its charter, the
primary responsibilities of the Compensation Committee include:
| ● | to review and approve the corporate goals and objectives relevant
to CEO compensation, evaluate at least annually the CEO’s performance in light of those
goals and objectives and make recommendations to the Board with respect to the CEO’s
compensation, including salary, bonus, fees, benefits, incentive awards and perquisites,
based on this evaluation; |
| ● | to recommend to the Board the compensation of executive officers
other than the CEO; |
| ● | to recommend to the Board the adoption, material modification
or termination of the Company’s compensation plans, including incentive compensation
and equity-based plans, policies and programs; |
| ● | to recommend to the Board appropriate compensation for the
Company’s non-employee directors, including compensation and expense reimbursement
policies for attendance at Board and committee meetings; |
| ● | to consider whether risks arising from FF’s compensation
plans, policies and programs for its employees are reasonably likely to have a material adverse
effect on the Company, including whether the Company’s incentive compensation plans
encourage excessive or inappropriate risk taking; and |
| ● | to determine stock ownership guidelines and monitor compliance
with such guidelines. |
The Compensation Committee held six
meetings during fiscal 2021. The Compensation Committee has adopted a written charter approved by the Board, which is available on
FF’s website at https://investors.ff.com/corporate-governance/governance-overview.
Nominating and Corporate Governance
Committee
FF’s Nominating and Corporate Governance
Committee is currently comprised of Scott Vogel, Lee Liu and Brian Krolicki, each of whom is “independent” under the rules
of the SEC and the listing standards of NASDAQ. Mr. Vogel is the chair of the Nominating and Governance Committee.
As more fully described in its charter, the
primary responsibilities of the Nominating and Corporate Governance Committee include:
| ● | to assist the Board in identifying prospective director nominees
and recommending nominees for each annual meeting of stockholders to the Board; |
| ● | to recommend to the Board regarding its size, membership and
leadership, as well as committee membership and structure; |
| ● | to develop and recommend to the Board a set of corporate governance
guidelines applicable to FF and monitor compliance with such guidelines; |
| ● | to oversee the annual self-evaluation process to determine
whether the Board and its committees and individual directors are functioning effectively
and report the results of the self-evaluation process to the Board; and |
| ● | to oversee FF’s environmental, sustainability and governance
efforts and progress. |
The Nominating and Corporate Governance Committee
did not meet during fiscal 2021. The Nominating and Corporate Governance Committee has adopted a written charter approved by the Board,
which is available on FF’s website at https://investors.ff.com/corporate-governance/governance-overview.
Finance and Investment Committee
FF’s Finance and Investment Committee
currently comprised of Edwin Goh, Dr. Carsten Breitfeld and Bob Ye. Mr. Goh serves as chair 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 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 Governance
Committee held two meetings during fiscal 2021. The Finance and Investment Committee has adopted a written charter approved by the
Board.
Guidelines for Selecting Director Nominees
The Nominating and Corporate Governance Committee
is responsible for, among other things, determining the criteria for Board membership, recommending Board candidates, and proposing any
changes to the composition of the Board; provided that the nomination of directors by FF Top is subject to the Shareholder Agreement.
The guidelines for selecting nominees, which are specified in the Nominating and Corporate Governance 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 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. |
In selecting director nominees, the Nominating
and Corporate Governance Committee considers 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. The Nominating and Corporate
Governance 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.
In conducting this assessment, the Nominating
and Corporate Governance Committee considers diversity (such as gender or racial/ethnic diversity), age, skills, industry and professional
background, independence and such other factors as it deems appropriate given the current needs of the Board and the Company, to maintain
a balance of knowledge, experience and capability. Provided that the nomination of directors by FF Top is subject to the Shareholder
Agreement.
Each of our current Directors joined the Board
in connection with the Business Combination. None of our Directors, who are all standing for re-election, has been elected by our public
stockholders. We believe that each of our Directors possess the attributes described above. As noted in the Director biographies, our
Directors have experience, qualifications and skills across a wide range of public and private companies, possessing a broad spectrum
of experience both individually and collectively.
Each of our current directors joined the Board
in connection with the Business Combination (or, in the case of Mr. Jordan Vogel, in connection with the initial public offering of PSAC
in July 2020). None of our directors, who are all standing for re-election, has been elected by our public stockholders. We believe that
each of our directors possesses the attributes described above. As noted in the director biographies under the section titled “Director
Nominees,” our directors have significant experience, qualifications and skills across a wide range of public and private companies,
possessing a broad spectrum of experience both individually and collectively.
It is the policy of the Nominating and Corporate
Governance Committee to consider persons for Board nomination identified by its members, management, stockholders, investment bankers
and others, and to evaluate those individuals using the same criteria. The Nominating and Corporate Governance Committee will not distinguish
among nominees recommended by stockholders and other persons. The Company’s stockholders may recommend nominees for consideration
by the Nominating and Corporate Governance Committee by submitting the names and supporting information to the Company’s Secretary
or the Chair of the Nominating and Corporate Governance Committee; provided that the nomination of directors by FF Top is subject to
the Shareholder Agreement. Under the Shareholder Agreement entered into between FF and FF Top, based on FF Top having voting power over
36.2% of our issued and outstanding common stock as of May 18, 2022, FF Top currently has the right to nominate four out of nine directors
on the Board. Susan G. Swenson, Edwin Goh, Brian Krolicki and Lee Liu are deemed to be the four FF Top director designees under the Shareholder
Agreement.
Code of Business Conduct and Ethics
FF has a Code of Business Conduct and 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 Business
Conduct and Ethics is posted on FF’s website at https://investors.ff.com/corporate-governance/governance-overview. FF intends to
disclose on its website any future amendments of the Code of Business Conduct and 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 Business Conduct and 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 the Board or Compensation Committee.
Shareholder and Interested Party Communications
Any stockholder or other interested party who
wishes to communicate with our Board or any individual director may send written communications to our Board or such director c/o Faraday
Future Intelligent Electric Inc., 18455 S. Figueroa Street, Gardena, California, Attention: Lead Independent Director. Our Corporate
Secretary shall initially review and compile all such communications and may summarize such communications prior to forwarding to the
appropriate party. Our Corporate Secretary will not forward communications that are not relevant to the duties and responsibilities of
the Board. The Board will generally respond, or cause the Company to respond, in writing to bona fide communications from stockholders
addressed to one or more members of the Board. Please note that requests for investor relations materials should be sent to ir@faradayfuture.com.
EXECUTIVE
AND DIRECTOR COMPENSATION
This section discusses the material components
of the executive compensation program for certain of FF’s executive officers and directors. As an “emerging growth company”
as defined in the JOBS Act, FF is not required to include a Compensation Discussion and Analysis section and has elected to apply the
scaled back disclosure requirements applicable to emerging growth companies, which require compensation disclosure for FF’s principal
executive officer and its two most highly compensated executive officers other than the principal executive officer whose total compensation
for 2021 exceeded $100,000 and who were serving as executive officers as of December 31, 2021. We refer to these individuals as “named
executive officers.” For 2021, FF’s named executive officers and the positions each held as of December 31, 2021 were:
| ● | Dr. Carsten Breitfeld, Global Chief Executive Officer |
| ● | Yueting Jia (YT Jia), Founder and Chief Product and
User Ecosystem Officer |
| ● | Chui Tin Mok, Executive Vice President and Head of User Ecosystem |
We expect that FF’s executive compensation
program will continue to evolve to reflect FF’s status as a newly publicly-traded company, while still supporting FF’s overall
business and compensation objectives of attracting, motivating and retaining individuals who contribute to the long-term success of FF.
For example, during 2021, the Board of Directors, upon recommendation of its Compensation Committee, adopted a clawback policy allowing
FF to clawback compensation following a financial restatement or misconduct by a covered executive. Each of the named executive officers
is subject to the clawback policy. The compensation committee of the Board of Directors is responsible for administering FF’s executive
compensation program and, at the direction of the Compensation Committee, FF has retained Mercer (US) Inc. (“Mercer”), an
independent executive compensation consultant, to help advise on FF’s executive compensation program.
2021 Compensation of Named Executive Officers
Base Salary
Base salaries are intended to provide a level
of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components
of the executive compensation program. In general, FF seeks to provide a base salary level designed to reflect each executive officer’s
scope of responsibility and accountability. Please see the “Salary” column in the “Summary Compensation Table -
Fiscal 2021” for the base salary amounts received by each named executive officer in 2021. Following the completion of the
previously disclosed investigation by the special committee of independent directors in January 2022, FF’s Board of Directors approved
a 25% reduction in the annual base salaries for Dr. Breitfeld and Mr. Jia.
Bonuses
During 2021, our named executive officers also
received retention bonuses pursuant to the terms of their employment agreements. Please see “Employment Agreements, Offer Letters
and Other Compensatory Agreements” below for further information regarding the 2021 retention bonuses received by our named
executive officers. In addition, during 2021, our named executive officers received lump sum bonuses equal to the amount by which each
of his base salary was reduced pursuant to the Company’s Crowd Entrepreneurship Program (CEP), which was a voluntary salary reduction
program adopted by the Company in March 2020 in response to the COVID-19 crisis and which reduced salary was repaid through a combination
of equity grants and a cash bonus. Pursuant to the terms of their offer letters, Messrs. Mok and Jia were also eligible for discretionary
target bonuses in the amount of $300,000 and $350,000, respectively. As of the date of this prospectus, the actual discretionary bonus
amounts for Messrs. Mok and Jia had not yet been determined. A Form 8-K disclosing these amounts will be filed if any discretionary bonuses
are awarded with respect to 2021. Please see the “Bonus” column in the “Summary Compensation Table - Fiscal 2021”
for the retention bonuses and CEP bonuses received by each named executive officer in 2021.
Equity Awards
To further focus FF’s executive officers
on FF’s long-term performance, FF has granted equity compensation in the form of stock options and, in 2021, restricted stock.
During 2021, Dr. Breitfeld received stock options with respect to 565,200 shares, which are scheduled to vest over seven years, with
226,080 shares subject to these options scheduled to vest as follows: 25% on the one-year anniversary of the start of production of FF
91 (the “FF 91 SOP”) and the remaining 75% in equal monthly installments over the following 36 months thereafter; 113,040
shares subject to these options scheduled to vest in 48 equal monthly installments beginning on the one-year anniversary of the FF 91
SOP; 113,040 shares subject to these options scheduled to vest in 48 equal monthly installments beginning on the two-year anniversary
of the FF 91 SOP; and 113,040 shares subject to these options scheduled to vest in 48 equal monthly installments beginning on the three-year
anniversary of the FF 91 SOP.
Prior to the closing of the Business Combination,
employees of Legacy FF received restricted stock awards that were converted into shares of FF at the closing of the Business Combination.
As a result, Dr. Breitfeld and Messrs. Jia and Mok received restricted stock awards with respect to 67,312, 72,749 and 21,477 shares,
respectively. These restricted stock awards were being granted in recognition of reduced prior compensation received by employees of
Legacy FF. These restricted stock awards vested 90 days following the closing of the Business Combination, subject to the recipient’s
continued employment through such date.
Please see the “Summary Compensation
Table - Fiscal 2021” and the “Outstanding Equity Awards at 2021 Fiscal Year-End” table for further information
regarding the equity grants received by the named executive officers during 2021.
Summary Compensation Table — Fiscal 2021
The following table sets forth certain information
concerning compensation paid to the named executive officers for the fiscal year ended December 31, 2021 and, to the extent required
by the SEC executive compensation disclosure rules, 2020:
Name and Principal Position | |
Year | | |
Salary ($)(1) | | |
Bonus ($)(2) | | |
Stock Awards ($)(3) | | |
Option Awards ($)(3) | | |
Non-Equity
Incentive Plan
Compensation ($) | | |
All Other Compensation
($)(4) | | |
Total ($) | |
Dr. Carsten Breitfeld(5) | |
| 2021 | | |
| 1,908,333 | | |
| 1,998,354 | | |
| 673,125 | | |
| 2,213,144 | | |
| — | | |
| 413,357 | | |
| 7,206,313 | |
Global Chief Executive Officer | |
| 2020 | | |
| 468,313 | | |
| 400,000 | | |
| — | | |
| 1,765,581 | | |
| — | | |
| 221,911 | | |
| 2,855,805 | |
Chui Tin Mok(6) | |
| 2021 | | |
| 450,000 | | |
| 469,917 | | |
| 214,773 | | |
| — | | |
| | | |
| — | | |
| 1,134,690 | |
Executive Vice President and Head of
User Ecosystem | |
| 2020 | | |
| 163,417 | | |
| 200,000 | | |
| — | | |
| 285,760 | | |
| — | | |
| — | | |
| 649,177 | |
Yueting Jia(7) | |
| 2021 | | |
| 650,379 | | |
| 587,250 | | |
| 727,500 | | |
| — | | |
| — | | |
| 15,728 | | |
| 1,980,857 | |
Founder and Chief Product and User Ecosystem
Officer | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
(1) | The annualized base salaries for the named executive officers at the beginning of fiscal 2020
were as follows: Dr. Breitfeld, $2,250,000; Mr. Mok, $500,000 and Mr. Jia, $900,000. In response to
the COVID-19 pandemic, Legacy FF reduced the base salaries of each named executive officer in March
2020, which continued through March 2021. The amounts reported in this column for 2020 and 2021 represent
base salaries earned by the named executive officers during fiscal 2020 and 2021, which included the
application of the COVID-19 reduction. |
(2) | Pursuant to the terms of their offer letters, Messrs. Mok and Jia were also eligible for discretionary
target bonuses in the amount of $300,000 and $350,000, respectively. As of the date of this prospectus,
the actual discretionary bonus amounts for Messrs. Mok and Jia had not yet been determined. A Form
8-K disclosing these amounts will be filed if any discretionary bonuses are awarded with respect to
2021. |
(3) | The amounts reported in this column reflect the grant date fair value of time-based restricted
stock and time-based stock option awards, as applicable, granted to the named executive officers during
2021 and are accounted for in accordance with FASB ASC Topic 718. The awards were valued in accordance
with FASB ASC Topic 718 and, in the case of Dr. Breitfeld’s performance-based option, based on
the assumed achievement of the performance condition at the time of grant, which was considered the
probable achievement level at the time of grant. Please see Note 14 to FF’s audited financial
statements for the year ended December 31, 2021 included elsewhere in this prospectus for a discussion
of the relevant assumptions used in calculating these amounts. |
(4) | For Dr. Breitfeld, this amount includes (1) $202,692 for each of 2020 and 2021, which is the
allocated value of the costs incurred by the Company with respect to the corporate housing provided
to Dr. Breitfeld in each applicable year, (2) a tax reimbursement for 2021 of $199,315 with respect
to the corporate housing benefit, and (3) the value of a rental car provided to Dr. Breitfeld during
the applicable years in the amounts of $11,350 for 2021 and $19,219 for 2020. FF updated its methodology
for determining the aggregate incremental cost of corporate housing as compared to its prior filings.
Previously, the methodology used to determine the cost of the corporate housing was determined on a
per bedroom basis rather than the full cost of the rental property. In addition, FF updated its methodology
for determining the aggregate incremental cost to reflect the fact that the rented property was used
exclusively by Dr. Breitfeld. The “aggregate incremental cost” reflects the amount paid
on a monthly basis to a third-party leasing agency. For Mr. Jia, this amount represents the incremental
cost of his use of a company car provided to him during 2021. |
(5) | The amount included
in the “Bonus” column for Dr. Breitfeld for 2021 represents the portion of the
signing and retention bonus ($400,000) granted to Dr. Breitfeld that vested during 2021.
The remaining portion of the signing and retention bonus vests based on Dr. Breitfeld’s
continued employment through August 2022. In addition, this amount includes the lump sum
bonus equal to the amount by which his base salary was reduced pursuant to the Company’s
Crowd Entrepreneurship Program (CEP), which was a voluntary salary reduction program adopted
by the Company in March 2020 in response to the COVID-19 crisis and which reduced salary
was repaid through a combination of equity grants and a cash bonus. Please see “Employment
Agreements, Offer Letters and Other Compensatory Agreements” below for further
information regarding the 2021 bonuses received by Dr. Breitfeld. |
(6) | The amount included
in the “Bonus” column for Mr. Mok for 2021 represents the portion of the signing
and retention bonus ($200,000) granted to Mr. Mok that vested during 2021. 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.” In addition, this amount includes the lump sum
bonus equal to the amount by which his base salary was reduced pursuant to the CEP. |
(7) | Mr. Jia was not a named executive officer in 2020. The amount included in the “Bonus”
column for Mr. Jia for 2021 represents the lump sum bonus equal to the amount by which his base salary
was reduced pursuant to the CEP. |
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, in his capacity as a partner in FF Global, will be granted an initial option to purchase 13 million Class A ordinary shares
of Legacy FF (which was granted in April 2020). 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 and $5,000 for accounting advisors retained to advise Dr. Breitfeld on the computation of
his personal taxes. 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 although
no reimbursements were made with respect to 2021.
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 Global 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. Dr. Breitfeld’s employment
agreement was further amended in January 2022 to provide that he will report to the Executive Chairperson and that he will receive
an annual base salary of $1,687,500.
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.
Yueting Jia
Mr. Jia entered into an offer letter with FF
U.S. in March 2021 that provides for his employment as Founder and Chief Product and User Ecosystem Officer. The offer letter provides
for Mr. Jia to receive an annual base salary of $600,000 and eligibility to receive an annual performance bonus of up to $350,000. Mr.
Jia is also entitled to participate in FF U.S.’s health insurance, 401(k) plan, paid time off and paid holidays.
Outstanding Equity Awards at 2021 Fiscal Year-End
FF Equity Awards:
The table below sets forth certain information
concerning outstanding stock options to purchase Class A Common Stock of FF. As of December 31, 2021, Mr. Jia did not hold any outstanding
equity awards with respect to FF.
Option Awards |
Name | |
Date of
Grant | | |
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | |
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | |
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) | | |
Option
Exercise
Price ($) | | |
Option
Expiration
Date | |
Dr. Carsten Breitfeld | |
| 4/8/2020 | | |
| 137,771 | | |
| 1,285,827 | (1) | |
| — | | |
| 2.41 | | |
| 4/8/2030 | |
| |
| 7/26/2020 | | |
| 11,981 | | |
| 53,905 | (2) | |
| — | | |
| 2.41 | | |
| 7/26/2030 | |
Chui Tin Mok | |
| 4/28/2021 | | |
| — | | |
| | | |
| 565,200 | (3) | |
| 7.95 | | |
| 4/28/2031 | |
| |
| 5/30/2019 | | |
| 367,397 | | |
| 480,403 | (4) | |
| — | | |
| 2.55 | | |
| 5/30/2029 | |
Yueting Jia | |
| 7/26/2020 | | |
| 45,165 | | |
| 187,329 | (5) | |
| — | | |
| 2.41 | | |
| 7/26/2030 | |
| |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
(1) | This option is scheduled to vest as follows (subject in each case to the named executive officer’s
continued employment through the applicable vesting date): |
| ● | With respect to 321,456 shares, in twenty-one equal
monthly installments on the third day of each month through September 3, 2023. |
| ● | With respect to 252,573 shares, in thirty-three equal
monthly installments on the third day of each month through September 3, 2024. |
| ● | With respect to 344,418 shares, in forty-five equal
monthly installments on the third day of each month through September 3, 2025. |
| ● | With respect to 367,380 shares, in forty-eight equal
monthly installments beginning on September 3, 2022. |
(2) | This option vested 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
named executive officer’s continued employment through the applicable vesting date. |
(3) | This option is scheduled to vest as follows (subject in each case to the named executive officer’s
continued employment through the applicable vesting date): |
| ● | With respect to 226,080 shares, 25% on the one-year
anniversary of the FF 91 SOP and the remaining 75% in thirty-six equal monthly installments
thereafter. |
| ● | With respect to 113,040 shares, in forty-eight equal
monthly installments beginning on the one-year anniversary of the FF 91 SOP. |
| ● | With respect to 113,040 shares, in forty-eight equal
monthly installments beginning on the two-year anniversary of the FF 91 SOP. |
| ● | With respect to 113,040 shares, in forty-eight equal
monthly installments beginning on the three-year anniversary of the FF 91 SOP. |
(4) | This option is scheduled to vest as follows (subject in each case to the named executive officer’s
continued employment through the applicable vesting date): |
| ● | With respect to 91,845 shares, in thirteen equal monthly
installments on the eighth day of each month through January 8, 2023. |
| ● | With respect to 88,301 shares, in twenty-five equal
monthly installments on the eighth day of each month through January 8, 2024. |
| ● | With respect to 130,697 shares, in thirty-seven equal
monthly installments on the eighth day of each month through January 8, 2025. |
| ● | With respect to 169,560 shares, in forty-eight equal
monthly installments beginning on January 8, 2022. |
(5) | This option is scheduled to vest as follows (subject in each case to the named executive officer’s
continued employment through the applicable vesting date): |
| ● | With respect to 155,538 shares, in twenty-seven equal
monthly installments on the eighth day of each month through March 16, 2024. |
| ● | With respect to 15,897 shares, in thirty equal monthly
installments on the eighth day of each month through Jun 26, 2024. |
| ● | With respect to 7,416 shares, in forty-two equal monthly
installments on the eighth day of each month through Jun 26, 2025. |
| ● | With respect to 4,239 shares, in forty-eight equal
monthly installments beginning on June 26, 2022. |
| ● | With respect to 4,239 shares, in forty-eight equal
monthly installments beginning on June 26, 2023. |
FF Global Equity Awards:
As described in “Partnership Program,”
certain members of FF management (including each of the named executive officers) 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 named executive officers as of December 31, 2021. FF Global
has informed FF that FF Global intends to amend its governance documents to, among other things, revise the voting provisions and certain
economic rights of the members.
| |
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(2) | |
| 6/10/2020 | | |
| 13,000,000 | | |
| — | | |
| 0.50 | | |
| 6/10/2030 | |
Chui Tin Mok(3) | |
| 6/25/2019 | | |
| 3,900,000 | | |
| — | | |
| 0.50 | | |
| 6/25/2029 | |
Yueting Jia | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
(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. |
(2) | In connection with Dr. Breitfeld stepping down from
FF Global on May 16, 2022, Dr. Breitfeld ceased participating in the FF Global Partnership
Group and forfeited his FF Global equity awards. |
| (3) | In May 2022, due to tax restructuring, Mr. Mok returned 3,120,000 of his equity awards to
FF Global. |
Description of Retirement Plans
FF maintains a defined contribution 401(k)
plan for the benefit of its full-time employees based in the United States, although none of the named executive officers participated
in the plan during 2021. 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, although
no reimbursements were made with respect to 2021.
Director Compensation Table — Fiscal 2021
The following table sets forth certain information
concerning compensation paid to each of FF’s non-employee directors during 2021. Dr. Breitfeld, Mr. Ye and Mr. Aydt also serve
as directors of FF; however, they did not receive any additional compensation for their service on the FF Board during 2021. Please see
the “Summary Compensation Table - Fiscal 2021” for the compensation received by Dr. Breitfeld during 2021.
Name | |
Fees Earned or Paid in
Cash ($) | | |
Stock Awards ($) | | |
Option Awards ($)(1)(2) | | |
Total ($) | |
Edwin Goh | |
| 99,665 | | |
| — | | |
| — | | |
| 99,665 | |
Brian Krolicki | |
| 143,538 | | |
| — | | |
| — | | |
| 143,538 | |
Lee Liu | |
| 147,140 | | |
| — | | |
| — | | |
| 147,140 | |
Sue Swenson | |
| 245,596 | | |
| — | | |
| — | | |
| 245,596 | |
Jordan Vogel | |
| 121,296 | | |
| — | | |
| — | | |
| 121,296 | |
Scott Vogel | |
| 198,126 | | |
| — | | |
| — | | |
| 198,126 | |
(1) | As of December 31, 2021, as a result of his service
on the FF Advisory Board from June 2019 through his appointment to the Legacy FF Board of
Directors in April 2020, Mr. Krolicki held options to acquire 103,618 shares of FF Class
A common stock. The options are fully vested as of December 31, 2021. |
Non-Employee Director Compensation Policy
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. In 2021, FF’s non-employee directors earned fees in excess of what it expects non-employee directors to
earn in a typical year for their service as directors as a result of the significant number of Board meetings that were held in 2021
(including meetings of the Special Committee). Effective May 1, 2022, the director compensation program was amended to decrease the meeting
fee that applies to every Board and Board committee meeting after the 15th meeting in a year from $2,000 to $1,500 per meeting and to
cap the monthly amount of such fees that may be paid to a director at $50,000.
| ● | Annual Board
Cash Retainer: $50,000 |
| ● | Annual Lead Independent Director Cash Retainer: $27,500 |
| ● | Annual Committee Member Cash Retainers: |
| o | Audit Committee:
$10,000 |
| o | Compensation Committee:
$6,250 |
| o | Nominating and Corporate
Governance Committee: $5,000 |
| o | Finance & Investments
Committee: $5,000 |
| ● | Annual Executive Chairperson and Committee Chair Cash Premiums: |
| o | Executive Chairperson:
$45,000 |
| o | Audit Committee:
$15,000 |
| o | Compensation Committee:
$10,000 |
| o | Nominating and Corporate
Governance Committee: $7,500 |
| o | Finance & Investments
Committee: $7,500 |
| ● | Annual Restricted Stock Unit Award: $150,000 |
| ● | Board Member Initial Year Restricted Stock Unit Premiums: |
| o | All Independent Directors:
$30,000 |
| o | First Year as Board
Chair: $45,000 or as otherwise determined by the Board |
| o | First Year as Committee
Chair: $15,000 |
| ● | Compensation for Additional Time: $1,500 per Board
or Board committee meeting for every meeting above 15 per year (measured from August 1, 2021
to July 31, 2022), up to a maximum of $50,000 per month and will repeat annually from August
1 through July 31 of each year. |
| ● | Special Committee Compensation: $25,000 per month per
Board Policy for Independent Members appointed to the Special Committee for the duration
of this Committee. |
Following the filing of the Company’s
Form S-8 Registration Statement, each non-employee member of the FF Board of Directors will receive a restricted stock unit award in
accordance with the program above, which will vest on the earlier to occur of the one-year anniversary of the grant date or the next
annual meeting of stockholders following the grant date.
On January 31, 2022, the Board appointed Ms.
Swenson to serve as Executive Chairperson. While serving as Executive Chairperson, Ms. Swenson will be entitled to receive a monthly
base salary of $75,000, which amount was reduced from $100,000 effective May 1, 2022 upon Ms. Swenson’s voluntary waiver of 25%
of her monthly base salary in connection with certain cost reduction measures taken by FF. In connection with her appointment as Executive
Chairperson, Ms. Swenson was also awarded stock options for a number of shares equal to $3,000,000 divided by the January 31, 2022 closing
stock price, (i) 50% of which will vest and become exercisable on January 31, 2023, subject to (x) Ms. Swenson having served not less
than ninety (90) days as Executive Chairperson and (y) Ms. Swenson having served on the Board through January 31, 2023, and (ii) 50%
of which will vest and become exercisable based on the achievement of certain stock price-based performance thresholds.
CERTAIN
RELATIONSHIPS AND RELATED PERSON 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 on July 21, 2021, Property Solutions Acquisition Sponsor, LLC (the “PSAC Sponsor”), EarlyBirdCapital,
Inc., FF Top Holding Ltd. and Season Smart Ltd. (“Season Smart”) (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 Class A Common Stock (and the shares of Class A Common Stock underlying outstanding
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 of the Business Combination, 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 of the Business Combination, 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 Class A Common Stock (and the shares of Class A Common Stock underlying outstanding 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 closing 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 has 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 (which consent shall not be unreasonably withheld,
conditioned or delayed) 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 also
has 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. Under the Shareholder
Agreement, FF and FF Top also agreed (a) to take all reasonably necessary action (subject to applicable Board fiduciary duties) to cause
the initial FF Board of Directors to be nominated for another one-year term at FF’s first annual meeting following the closing
of the Business Combination and (b) that Susan G. Swenson, Edwin Goh, Brian Krolicki and Lee Liu shall be deemed as the FF Top’s
designees for FF’s first and second annual meetings following the closing of the Business Combination.
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. certain holders of
Legacy FF notes payable and related party notes payable and certain warrant holders of Legacy FF, subject to certain limited exceptions,
such parties agree that with respect to (a) 33% of the shares of Class A Common Stock received by such Legacy FF stakeholders
in connection with the closing of 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 such closing (which expired on August 20, 2021), (b) 33% of the
shares of Class A Common Stock received by such Legacy FF stakeholders in connection with such closing (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 such closing, and (c) the remaining 33% 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 such closing. 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. The lock-up agreements expired as of January 17, 2022.
Sponsor Lockup Agreement
Under the Merger Agreement, as a condition
to Legacy FF’s obligation to close the Business Combination, 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 (or July 21, 2022), 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 (or July 21, 2022) 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 warrant (“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 and July 8, 2021 PSAC issued another unsecured promissory note to the PSAC Sponsor pursuant to which PSAC may borrow up a further
$200,000 and $100,000, respectively (the “Promissory Notes”). The Promissory Notes are non-interest bearing. At the closing
of the Business Combination, 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 use commercially reasonable efforts 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 Management Group (“RMG”) provided
consulting and advisory services in connection with the Business Combination in exchange for (i) $10.0 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 of the Business Combination, and (iii)
Class A Common Stock issued by FF immediately after the closing of the Business Combination having a value equal to $6.9 million, with
an attributed value of $10.00 per share of Class A Common Stock (the “Original RMG Agreement”). On July 18, 2021, PSAC entered
into an omnibus transaction services fee agreement and acknowledgement with the PSAC Sponsor, FF, RMG and Philip Kassin, Robert Mancini
and James Carpenter (each, a “Service Provider” and, collectively, the “Service Providers”), pursuant to which
(i) the Service Providers, together with such other service providers, who assisted the Service Providers as identified by the Service
Providers, replaced RMG as the recipients of the cash and share compensations under the Original RMG Agreement and (ii) the Company agreed
to issue 2,387,500 registered shares of Class A Common Stock to the parties upon effectiveness of the registration statement covering
these shares.
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% preferred
equity stake in Legacy FF 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) (the “Restructuring
Agreement”). In addition, the Restructuring Agreement provided 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 on January 27, 2021.
Borrowings from Related Parties
Related Party Notes Payable
Prior to the Business Combination, FF 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 notes payable and equity were significantly funded by entities controlled or previously controlled
by YT Jia, the founder and Chief Product and User Ecosystem Officer of the Company. As of December 31, 2021 and 2020 the outstanding
principal balance of FF’s related party notes payable was $13.7 million and $332.4 million, respectively.
Evergrande Note Payable
Pursuant to the Restructuring Agreement, an
affiliate of Evergrande provided a note payable in the principal amount of $10.0 million to Legacy FF, which was drawn 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. In conjunction with the closing of the Business Combination,
the Company settled the note payable by repaying the outstanding principal and accrued interest in full.
CYM Tech Holdings LLC Notes Payable
On March 30, 2018, Legacy FF issued: (a) a
note payable with an original principal amount of $212.0 million (“$212.0M Note”) to Faraday & Future (HK) Limited (“F&F
HK”), a private Hong Kong company previously controlled by YT Jia and currently owned and controlled by YT Jia’s cousin and
(b) a note payable with an original principal amount of $66.9 million (“$66.9M Note”) to Leview Mobile HK Limited (“Leview
HK”), a private Hong Kong company controlled by YT Jia. In addition, between December 2017 to July 2018, Legacy FF issued multiple
promissory notes in an original aggregate principal amount of $28.9 million (collectively, the “$28.9M Notes”) to Beijing
Bairui Culture Media Co., Ltd. (“Bairui”), an entity previously controlled by YT Jia. The $212.0M Note, $66.9M Note and $28.9M
Notes are collectively referred to as the “Notes” The Notes 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, (i) 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 (ii) 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”). On August 28, 2020 and immediately following
the $66.9M Note Transfer and the $28.9M Notes Transfer, F&F HK transferred all of its rights under the Notes to CYM Tech Holdings
LLC, a Delaware limited liability company and wholly-owned subsidiary of F&F HK (“CYM”) in exchange for CYM’s issuance
of a note covering an equivalent amount to F&F HK.
Matthias Aydt, an officer of the Company, and
Chaoying Deng, former Chief of Staff and Corporation Operations of the Company, each holds 50% of the issued and outstanding equity interests
of CYM of record for the benefit of F&F HK. They also serve as the sole managers of CYM. As of December 31, 2020, Legacy FF repaid
$67.2 million of the principal and $36.2 million of accrued interest under the Notes. On May 13, 2021, principal amounts of $90.9 million
and accrued interest of $43.5 million of the Notes, was converted into shares of Legacy FF convertible preferred stock and on July 21,
2021, such shares of Legacy FF convertible preferred stock were converted into 10,888,580 shares of Class A Common Stock in connection
with the closing of the Business Combination. On July 21, 2021 just prior to such closing, principal amounts of $130.5 million and accrued
interest of $29.9 million of the Notes, was converted into 11,566,196 shares of Class A Common Stock. Pursuant to the Business Combination,
the remaining $19.2 million principal amount was converted into 1,919,567 shares of Class A Common Stock.
Employee Notes Payable
On April 5, 2017, Legacy FF issued a note payable
with a principal amount of $0.7 million (the “$0.7M Note”) to Meng Wu, the former executive director of a wholly-owned subsidiary
of Legacy FF. 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 Company settled this note by converting the outstanding principal balance and accrued
interest into shares of Class A Common Stock.
In February 2020, Legacy FF borrowed $1.4 million
from Chaoying Deng. This loan accrued interest at 8.99%. At the closing of the Business Combination, the Company settled this note by
paying cash and converting the outstanding principal balance and accrued interest into shares of Class A Common Stock.
Pacific Technology Note Payable
Between November 2019 and August 2020, Legacy
FF borrowed $10.6 million from Pacific Technology Holding LLC (“Pacific Technology”), which indirectly holds approximately
36.2% of FF’s outstanding voting power on a fully-diluted basis as of the date hereof, which loans accrued interest at rates from
6.99% to 8%. At the closing of the Business Combination, the Company settled this note by paying cash and converting the outstanding
principal balance and accrued interest into shares of Class A Common Stock
Related Party Notes - NPA Tranche
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, U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The
principal amount of notes that may be issued under the Note Purchase Agreement was $200 million. The notes issued under the Note Purchase
Agreement bore interest at 10%, payable at the maturity date of the note. All notes issued 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
notes under the Note Purchase Agreement were subject to representations, warranties, and covenants and were initially scheduled to mature
on October 31, 2019. In October 2020, Legacy FF obtained an extension of the maturity date of the notes under the Note Purchase Agreement
to October 6, 2021. In connection with the Business Combination, the principal amount of the loans, amounting to $27.7 million, were
repaid in cash, with accrued interest and conversion premiums totaling $11.3 million converted into shares of Class A Common Stock.
One of the note purchasers party to the Note
Purchase Agreement was Royod LLC (“Royod”), an entity wholly owned by Raymond Dong, an employee in the User Ecosystem Strategy
and Ops department of FF, whose loan to Legacy FF was funded by Ocean View Drive, Inc. (“Ocean View”), an entity formerly
controlled by YT Jia and now wholly owned by the spouse of Ruokun Jia, who is the former Assistant Treasurer of the Company. In April
2019, Legacy FF executed a joinder agreement to the Note Purchase Agreement with Royod for a convertible note payable with total principal
of $8.6 million (the “Royod Note”). The convertible note payable originally matured on May 31, 2020. The interest rate, collateral,
and covenants were the same as the Note Purchase Agreement. Upon certain events, Royod may elect to convert all of the outstanding principal
and accrued interest of the note payable plus a 20% premium.
Another of the note purchasers party to the
Note Purchase Agreement was Warm Time Inc. (“Warm Time”), an entity that was previously a landlord of FF, and it serves as
the conduit for certain loans from Ocean View to Legacy FF. In May 2019, Legacy FF executed a joinder agreement to the Note Purchase
Agreement with Warm Time for a note payable with total principal of $0.9 million (the “Warm Time Note”). The note payable
originally matured on March 6, 2020. The interest rate, collateral, and covenants were the same as the Note Purchase Agreement.
Another of the note purchasers party to the
Note Purchase Agreement was Chui Tin Mok, Executive Vice President, Head of User Ecosystem of the Company. In May 2019, Legacy FF executed
a joinder agreement to the Note Purchase Agreement with Chui Tin Mok for a convertible note payable with total principal of $1.7 million
(the “Tin Mok Note”). The note payable matured on May 31, 2020 and the interest rate, collateral, and covenants are the same
as the Note Purchase Agreement. Upon certain events, Chui Tin Mok may elect to convert all of the outstanding principal and accrued interest
of the note payable plus a 20.00% premium into shares of stock.
Another of the note purchasers party to the
Note Purchase Agreement was Ever Trust LLC (“Ever Trust”), an entity wholly owned by Luetian Sun, an employee in the Global
Capital Markets department of FF. In July 2019, Legacy FF executed a joinder agreement to the Note Purchase Agreement with Ever Trust
for a convertible note payable with total principal of $16.5 million (the “Ever Trust Note”). The note payable originally
matured on May 31, 2020 and the interest rate, collateral, and covenants are the same as the Note Purchase Agreement. Upon certain events,
Ever Trust may elect to convert all of the outstanding principal and accrued interest of the note payable plus a 20.00% premium into
shares of stock. The note was funded by FF Global, who borrowed its funding from certain of its members, all of whom are active and former
executives or employees of the Company, and (i) all of these members (except for Chaoying Deng) in turn borrowed their fundings from
Dream Sunrise LLC, who in turn borrowed its funding from Capable Consulting and (ii) Chaoying Deng borrowed her funding from Grand Sky
Tech LLC, an entity wholly owned by her sister and on behalf of which she has full authority to sign and act. At the closing of the Business
Combination, the Company settled this note by paying the principal amount in cash and converting the interest accrued thereon into shares
of Class A Common Stock.
At the closing of the Business Combination,
the Company settled the Royod Note, the Warm Time Note, the Tin Mok Note, and the Ever Trust Note paying cash and converting the outstanding
principal balance and accrued interest into shares of Class A Common Stock.
Chinese Related Party Notes Payable
As of December 31, 2022, the related party
notes payable outstanding principal was $13.5 million, $9.3 million was due on demand to Chongqing Leshi Small Loan Co., Ltd. and bore
an annual interest rate of 18%. The remaining amounts 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.
Warm Time Note Payable
In March 2019, Legacy FF borrowed $1.5 million
through a note payable from Warm Time. The note was funded by FF Global, who borrowed its funding from certain of its members, who in
turn borrowed their fundings from Royod and who in turn borrowed its funding from Ocean View. The note originally matured on March 6,
2020, bore interest at 8.99% per annum, had no covenants and was unsecured. At the closing of the Business Combination, the Company settled
this note by converting the outstanding principal balance and accrued interest into shares of Class A Common Stock.
Ocean View Drive Notes Payable
From 2017 to 2020, Ocean View issued notes
payable with an aggregate original principal of $26.4 million to Legacy FF. These notes had a principal balance of $8.4 million immediately
prior to the closing of the Business Combination. At such closing, the Company settled these notes by converting the outstanding principal
balance and accrued interest into shares of Class A Common Stock.
Capable Consulting Notes Payable
In 2019, Legacy FF entered into a right of
first refusal arrangement for FF 91 vehicles with Capable Consulting LLC (“Capable Consulting”), an entity originally formed
and wholly owned by the brother-in-law of Ruokun Jia, pursuant to which Capable Consulting paid a deposit in the amount of $11.6 million.
In 2020, the deposit was converted into a note payable. At the closing of the Business Combination, the Company settled this note by
converting the outstanding principal balance and accrued interest into shares of Class A Common Stock.
Current
and Former Employees’ Transactions with Ocean View, Dream Sunrise LLC and Capable Consulting LLC
The following executives of the Company are
party to the following transactions with Ocean View:
| ● | YT Jia leases three real properties (including the Rancho
Palos Verdes Properties that he in turn subleased to Warm Time) from Ocean View by paying
a monthly rent of approximately $42.0 thousand and borrowed an aggregate of $3.0 million
from Ocean View in 2018 and 2019, which loans were subsequently transferred to Founding Future
Creditors Trust; |
| ● | Chui Tin Mok borrowed
$2.54 million from Ocean View in August 2018, which loan remains outstanding as of December
31, 2021; |
| ● | Chaoying
Deng borrowed $304.0 thousand from Ocean View in 2018, which loan remains outstanding as
of December 31, 2021; |
| ● | Ruokun
Jia loaned approximately $1.0 million to Ocean View in 2020, which loan remains outstanding
as of December 31, 2021; and |
| ● | Jiawei
Wang, former Vice President, Global Capital Markets of the Company and now President of FF
Global, had various loan transactions with Ocean View from 2017 through 2022, among which
the loans from Ocean View to Jiawei Wang remain outstanding as of December 31, 2021, and
Jiawei Wang and Ocean View also cross-guarantee loans borrowed by each other from third parties. |
Additionally, Chaoying Deng
borrowed $10,500 from Dream Sunrise in October 2020, which loan remains outstanding as of December 31, 2021 and Ruokun Jia has been providing
financial consulting services to Dream Sunrise LLC and Capable Consulting through his arrangement with a China based company since 2019.
Rancho Palos Verdes Real Property Leases
FF U.S. leased two real properties, located
at 7 Marguerite Drive, Rancho Palos Verdes, CA 90275 and 19 Marguerite Drive, Rancho Palos Verdes, CA 90275 (the “Rancho Palos
Verdes Properties”), from Warm Time from January 1, 2018 through March 31, 2022. Warm Time in turn leased the Rancho Palos Verdes
Properties from YT Jia. The Rancho Palos Verdes Properties were used by the Company to provide long-term or temporary housing to employees
of the Company (including Dr. Carsten Breitfeld, the Global Chief Executive Officer of the Company) and the Company paid Warm Time a
monthly amount of $71 thousand for rent and certain services, including catering, room services and organization of meetings, external
gatherings and events, for these two properties. The aggregate amount paid by Legacy FF to Warm Time for calendar years ended December
31, 2021, 2020 and 2019 were $1.7 million, $330 thousand and $639 thousand, respectively.
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 person 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, the Audit Committee will consider the relevant facts and circumstances to decide
whether to approve such transactions. In particular, the policy requires the Audit Committee to consider, among other factors it deems
appropriate:
| ● | the related person’s
relationship to FF and interest in the transaction; |
| ● | the
material facts of the proposed transaction, including the proposed aggregate value of the
transaction; |
| ● | 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; |
| ● | the
benefits to FF of the proposed transaction; |
| ● | if
applicable, the availability of other sources of comparable products or services; and |
| ● | 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. |
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.
PRINCIPAL STOCKHOLDERS
The following table and accompanying
footnotes set forth information with respect to the beneficial ownership of Common Stock, as of May 18, 2022, 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 May 18, 2022, there
were outstanding 238,276,213 shares of Class A Common Stock, 20,410,111 shares of Class A Common Stock to be issued upon submission of
paperwork to the transfer agent, 2,387,500 shares of Class A Common Stock to be issued upon the effectiveness of the registration statement
of which this prospectus forms a part, 64,000,588 shares of Class B Common Stock, and 28,196,377 outstanding warrants to purchase shares
of Class A Common Stock, consisting of 22,977,568 warrants (the “Public Warrants”) originally issued in the initial public
offering of PSAC, 674,551 Private Warrants, 3,874,166 warrants issued in a private placement on various dates in 2021 to ATW Partners,
LLC pursuant to a note purchase agreement with Legacy FF, and 670,092 warrants issued in a private placement on August 5, 2021 to
Ares Capital Corporation and affiliated entities pursuant to a note purchase agreement with Legacy FF.
The beneficial ownership
percentages set forth in the table below are based on 325,074,413 shares of Common Stock issued and outstanding as of May 18, 2022 (including,
for this purpose, 20,410,111 shares of Class A Common Stock issuable upon submission of paperwork to the transfer agent and 2,387,500
shares of Class A Common Stock issuable upon the effectiveness of our Registration Statement on Form S-1 (File No. 333-258993) as outstanding
shares as of May 18, 2022) and do not take into account the issuance of any shares of Class A Common Stock upon the exercise of warrants
to purchase up to 28,196,377 shares of Class A 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 May 18, 2022. 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) | |
| 117,705,569 | | |
| 36.2 | % |
Founding Future Creditors Trust (3) | |
| 19,901,731 | | |
| 6.1 | % |
Directors and Executive Officers | |
| | | |
| | |
Matthias Aydt (4) | |
| 361,273 | | |
| * | |
Dr. Carsten Breitfeld (5) | |
| 899,249 | | |
| * | |
Edwin Goh | |
| — | | |
| - | % |
Yueting Jia (YT Jia) | |
| 72,749 | | |
| * | |
Brian Krolicki (6) | |
| 103,618 | | |
| * | |
Robert A. Kruse Jr. (7) | |
| 133,503 | | |
| * | |
Lee Liu | |
| — | | |
| — | % |
Chui Tin Mok (8) | |
| 745,126 | | |
| * | |
Hong Rao (9) | |
| 403,103 | | |
| * | |
Becky Roof (10) | |
| — | | |
| - | % |
Susan G. Swenson | |
| — | | |
| - | % |
Jordan Vogel (11) | |
| 5,173,732 | | |
| 1.6 | % |
Scott D. Vogel | |
| — | | |
| — | % |
Qing Ye (12) | |
| 221,713 | | |
| * | |
All executive officers and directors as a group (14 individuals) | |
| 8,035,633 | | |
| 2.5 | % |
(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 of the shares held of record by Season Smart. |
(2) |
Based on information provided 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) 52,524,292 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,
(ii) 1,180,689 shares of Class A Common Stock held directly by Pacific Technology and (iii) 64,000,588 shares of Class B Common Stock
held directly by FF Top. Shares of Class B Common Stock are convertible into 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 an executive committee
(the “FF Global Executive Committee”) consisting of seven managers - YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant
Gulati, Chaoying Deng and Philip Bethell. A majority of the managers present at a meeting of the FF Global Executive Committee where
there is a quorum 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. YT Jia has significant influence over and may control the outcome of any actions taken by the FF Global
Executive Committee through a series of familial and personal relationships that he has with the other managers on the FF Global
Executive Committee. |
(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 the
Creditor Trust. |
(4) | Includes options to acquire 296,757 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(5) | Includes options to acquire 345,427 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(6) | Includes options to acquire 103,618 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(7) | Includes options to acquire 117,090 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(8) | Includes options to acquire 553,816 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(9) | Includes options to acquire 187,612 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
(10) | Ms. Roof was appointed interim Chief Financial Officer
effective March 1, 2022. |
(11) | 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 within 60 days of the July 21, 2021 closing of the Business
Combination held by the PSAC Sponsor, of which Jordan Vogel and Aaron Feldman are managing
members. Accordingly, all securities held by the PSAC Sponsor may ultimately be deemed to
be beneficially held by Jordan Vogel and Aaron 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. |
(12) | Includes options to acquire 201,706 shares of Class
A Common Stock that have vested or will vest within 60 days of May 18, 2022. |
+ Does not include shares held of record
by CYM Tech Holdings, LLC as a nominee for certain former lenders to FF. The managers of CYM Tech Holdings, LLC are Chaoying Deng
and Matthias Aydt.
SELLING
SECURITYHOLDERS
This
prospectus relates to the resale by the Selling Securityholders from time to time of up to 256,127,887 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 May 18, 2022 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 238,276,213 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 May 18, 2022, 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: | |
| | |
| | |
| | |
| | |
| | |
| |
Dr. Carsten Breitfeld (1) | |
| 899,249 | | |
| — | | |
| 576,746 | | |
| — | | |
| 322,503 | | |
| * | | |
| — | |
Matthias Aydt (2) | |
| 361,273 | | |
| — | | |
| 60,243 | | |
| — | | |
| 301,030 | | |
| * | | |
| — | |
Chui Tin Mok (3) | |
| 745,126 | | |
| — | | |
| 179,162 | | |
| — | | |
| 565,964 | | |
| * | | |
| — | |
Robert Allen Kruse Jr. (4) | |
| 133,503 | | |
| — | | |
| 11,170 | | |
| — | | |
| 122,333 | | |
| * | | |
| — | |
Hong Rao (5) | |
| 403,103 | | |
| — | | |
| 233,729 | | |
| — | | |
| 169,374 | | |
| * | | |
| — | |
Jordan Vogel (6) | |
| 5,173,732 | | |
| 563,420 | | |
| 5,173,732 | | |
| 563,420 | | |
| — | | |
| — | | |
| — | |
Brian Krolicki (7) | |
| 103,618 | | |
| — | | |
| — | | |
| — | | |
| 103,618 | | |
| * | | |
| — | |
Edwin Goh | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| * | | |
| — | |
Qing Ye (8) | |
| 221,713 | | |
| — | | |
| 17,333 | | |
| — | | |
| 204,380 | | |
| — | | |
| — | |
Becky Roof | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Lee Liu | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Susan G. Swenson | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Scott D. Vogel | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
PSAC Sponsor Investors: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Property Solutions Acquisition Sponsor, LLC (9) | |
| 5,173,732 | | |
| 563,420 | | |
| 5,173,732 | | |
| 563,420 | | |
| — | | |
| — | | |
| — | |
Aaron Feldman (9) | |
| 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. (10) | |
| 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 | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
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 | |
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 (11) | |
| 14,157 | | |
| — | | |
| 14,157 | | |
| — | | |
| — | | |
| — | | |
| — | |
Alpha Hills Investment Limited (12) | |
| 300,000 | | |
| — | | |
| 300,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Altium Growth Fund, LP (13) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Alyeska Master Fund, L.P. (14) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Anatole Partners Enhanced Master Fund, L.P. (15) | |
| 2,500,000 | | |
| — | | |
| 2,500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Anatole Partners Long Only Master Fund, L.P. (16) | |
| 267,088 | | |
| — | | |
| 267,088 | | |
| — | | |
| — | | |
| — | | |
| — | |
Anatole Partners Master Fund, L.P. (19) | |
| 3,232,912 | | |
| — | | |
| 3,232,912 | | |
| — | | |
| — | | |
| — | | |
| — | |
AP China Unicorn Fund SPC (18) | |
| 300,000 | | |
| — | | |
| 300,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Arena Capital Advisors as General Partner for the Funds (19) | |
| 2,000,000 | | |
| — | | |
| 2,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Athanor International Master Fund, LP (20) | |
| 1,359,900 | | |
| — | | |
| 1,359,900 | | |
| — | | |
| — | | |
| — | | |
| — | |
Athanor Master Fund, LP (21) | |
| 3,140,100 | | |
| — | | |
| 3,140,100 | | |
| — | | |
| — | | |
| — | | |
| — | |
Baoxin Investment Management Ltd. (22) | |
| 10,031,880 | | |
| — | | |
| 8,000,000 | | |
| — | | |
| 2,031,880 | | |
| * | | |
| — | |
| |
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 | |
BFAM Asian Opportunities Master Fund, LP (23) | |
| 3,000,000 | | |
| — | | |
| 3,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
BL
FFIE Fundco, LLC (24) | |
| 1,100,000 | | |
| — | | |
| 1,100,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Blackwell
Partners LLC – Series A (25) | |
| 58,822 | | |
| — | | |
| 58,822 | | |
| — | | |
| — | | |
| — | | |
| — | |
Blackwell Partners LLC – Series A (26) | |
| 707,700 | | |
| — | | |
| 707,700 | | |
| — | | |
| — | | |
| — | | |
| — | |
BNP Paribas Asset Management UK LTD on behalf of BNP Paribas
Funds Energy Transition (27) | |
| 4,000,000 | | |
| — | | |
| 4,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Boothbay Absolute Return Strategies, LP (28) | |
| 189,589 | | |
| — | | |
| 189,589 | | |
| — | | |
| — | | |
| — | | |
| — | |
Boothbay Diversified Alpha Master Fund, LP (29) | |
| 100,652 | | |
| — | | |
| 88,500 | | |
| — | | |
| 12,152 | | |
| * | | |
| — | |
Central China Asset Management Company Limited (30) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Citadel Multi-Strategy Equities Master Fund Ltd. (31) | |
| 2,600,000 | | |
| — | | |
| 2,600,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Chon-hon Hsu | |
| 50,000 | | |
| — | | |
| 50,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Corbin ERISA Opportunity Fund, Ltd. (32) | |
| 1,400,000 | | |
| — | | |
| 1,400,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Corbin
Hedged Equity Fund, L.P. (33) | |
| 100,000 | | |
| — | | |
| 100,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Corbin Opportunity Fund, L.P. (34) | |
| 400,000 | | |
| — | | |
| 400,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
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 | |
CVI Investments, Inc. (35) | |
| 1,027,120 | | |
| — | | |
| 1,000,000 | | |
| — | | |
| 27,120 | | |
| * | | |
| — | |
Davidson Kempner Institutional Partners, L.P. (36) | |
| 178,800 | | |
| — | | |
| 178,800 | | |
| — | | |
| — | | |
| — | | |
| — | |
Davidson Kempner International, Ltd. (37) | |
| 219,350 | | |
| — | | |
| 219,350 | | |
| — | | |
| — | | |
| — | | |
| — | |
Davidson Kempner Partners (38) | |
| 87,100 | | |
| — | | |
| 87,100 | | |
| — | | |
| — | | |
| — | | |
| — | |
DSG-Peony Fund SPC – DSG Global Markets SP (39) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Electron Global Master Fund, L.P. (40) | |
| 849,953 | | |
| — | | |
| 849,953 | | |
| — | | |
| — | | |
| — | | |
| — | |
Electron Infrastructure Master Fund, L.P. (41) | |
| 607,801 | | |
| — | | |
| 607,801 | | |
| — | | |
| — | | |
| — | | |
| — | |
Geely Symphony Finance Limited (42) | |
| 5,000,000 | | |
| — | | |
| 5,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Ghisallo Master Fund LP (43) | |
| 300,000 | | |
| — | | |
| 300,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Gratia Fortitude Fund, L.P. (44) | |
| 1,050,000 | | |
| — | | |
| 1,050,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
HS-QYNM Family Inc. (45) | |
| 100,000 | | |
| — | | |
| 100,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Integrated Core Strategies (US) LLC (46) | |
| 1,500,000 | | |
| — | | |
| 1,500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Owl Creek Investments III, LLC (47) | |
| 1,800,000 | | |
| — | | |
| 1,800,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
J. Yang & Family Foundation (48) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Jane Street Global Trading, LLC (49) | |
| 3,559,850 | | |
| — | | |
| 1,850,000 | | |
| — | | |
| 1,709,850 | | |
| * | | |
| — | |
Joint Power International Limited (50) | |
| 400,000 | | |
| — | | |
| 400,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
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 | |
June Asiralertsiri Lee and Jonathan Lee | |
| 100,000 | | |
| | | |
| 100,000 | | |
| | | |
| | | |
| | | |
| | |
Kepos Alpha Master Fund L.P. (51) | |
| 1,181,000 | | |
| — | | |
| 1,181,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Kepos Carbon Transition Master Fund L.P. (52) | |
| 69,000 | | |
| — | | |
| 69,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Kuos Investment II LLC (53) | |
| 90,000 | | |
| — | | |
| 90,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Linden Capital L.P. (54) | |
| 2,483,934 | | |
| | | |
| 2,000,000 | | |
| — | | |
| 483,934 | | |
| * | | |
| — | |
Luxor Capital Partners Long Offshore Master Fund, LP (55) | |
| 1,347 | | |
| — | | |
| 1,347 | | |
| — | | |
| — | | |
| — | | |
| — | |
Luxor Capital Partners Long, LP (56) | |
| 4,873 | | |
| — | | |
| 4,873 | | |
| — | | |
| — | | |
| — | | |
| — | |
Luxor
Capital Partners Offshore Master Fund, LP (57) | |
| 115,180 | | |
| — | | |
| 115,180 | | |
| — | | |
| — | | |
| — | | |
| — | |
Luxor Capital Partners, LP (58) | |
| 183,018 | | |
| — | | |
| 183,018 | | |
| — | | |
| — | | |
| — | | |
| — | |
Luxor Wavefront, LP (59) | |
| 95,582 | | |
| — | | |
| 95,582 | | |
| — | | |
| — | | |
| — | | |
| — | |
M.H. Davidson & Co. (60) | |
| 14,750 | | |
| — | | |
| 14,750 | | |
| — | | |
| — | | |
| — | | |
| — | |
Marshall Wace Investment Strategies – Eureka Fund (61) | |
| 260,326 | | |
| — | | |
| 237,833 | | |
| — | | |
| 22,493 | | |
| * | | |
| — | |
Marshall Wace Investment Strategies – Market Neutral
TOPS Fund (62) | |
| 142,908 | | |
| — | | |
| 130,358 | | |
| — | | |
| 12,550 | | |
| * | | |
| — | |
Marshall Wace Investment Strategies – Systematic Alpha
Plus Fund (63) | |
| 57,642 | | |
| — | | |
| 52,767 | | |
| — | | |
| 4,875 | | |
| * | | |
| — | |
| |
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 | |
Marshall Wace Investment Strategies – TOPS
Fund (64) | |
| 86,565 | | |
| — | | |
| 79,042 | | |
| — | | |
| 7,523 | | |
| * | | |
| — | |
Maso Capital Investments Limited (65) | |
| 233,700 | | |
| — | | |
| 233,700 | | |
| — | | |
| — | | |
| — | | |
| — | |
Millais Limited (66) | |
| 1,000,000 | | |
| — | | |
| 1,000,000 | | |
| — | | |
| — | | |
| * | | |
| — | |
MMCAP International Inc. SPC (67) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
MMF LT, LLC (68) | |
| 400,000 | | |
| — | | |
| 400,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
MS Autotech Co., Ltd. (69) | |
| 300,000 | | |
| — | | |
| 300,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Nantahala Capital Partners II Limited Partnership (24) | |
| 66,127 | | |
| — | | |
| 66,127 | | |
| — | | |
| — | | |
| — | | |
| — | |
Nantahala Capital Partners Limited Partnership (24) | |
| 22,531 | | |
| — | | |
| 22,531 | | |
| — | | |
| — | | |
| — | | |
| — | |
Nantahala Capital Partners SI, LP (24) | |
| 136,796 | | |
| — | | |
| 136,796 | | |
| — | | |
| — | | |
| — | | |
| — | |
NCP QR LP (24) | |
| 27,613 | | |
| — | | |
| 27,613 | | |
| — | | |
| — | | |
| — | | |
| — | |
NCP RFM LP (24) | |
| 24,698 | | |
| — | | |
| 24,698 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Overseas Opportunity Fund SPC – China New Economy
Growth Fund Segregated Portfolio (70) | |
| 200,000 | | |
| — | | |
| 200,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Overseas Opportunity Fund SPC – China Healthcare
Fund Segregated Portfolio (71) | |
| 100,000 | | |
| — | | |
| 100,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Overseas Opportunity Fund SPC – New China Stable
Return Segregated Portfolio (72) | |
| 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 Capital Management Limited (73) | |
| 500,000 | | |
| — | | |
| 500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 2 Segregated Portfolio (74) | |
| 250,000 | | |
| — | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 3 Segregated Portfolio (75) | |
| 250,000 | | |
| — | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 4 Segregated Portfolio (76) | |
| 250,000 | | |
| — | | |
| 250,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Multi-Strategy Fund SPC - New China Multi-Strategy
Fund 5 Segregated Portfolio (77) | |
| 350,000 | | |
| — | | |
| 350,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
New China Innovation Fund SPC - New China Innovation Fund 19
Segregated Portfolio (78) | |
| 5,000,000 | | |
| — | | |
| 5,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
| |
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 | |
Palantir Technologies Inc. (79) | |
| 2,500,000 | | |
| — | | |
| 2,500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Park West Investors Master Fund, Limited (80) | |
| 2,731,000 | | |
| — | | |
| 2,731,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Park West Partners International, Limited (81) | |
| 269,000 | | |
| — | | |
| 269,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Pinehurst Partners, L.P. (82) | |
| 400,000 | | |
| — | | |
| 400,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Polar Long/Short Master Fund (82) | |
| 579,235 | | |
| — | | |
| 579,235 | | |
| — | | |
| — | | |
| — | | |
| — | |
Polar Multi-Strategy Master Fund (83) | |
| 420,765 | | |
| — | | |
| 420,765 | | |
| — | | |
| — | | |
| — | | |
| — | |
Silver Creek CS SAV, L.L.C. (24) | |
| 13,413 | | |
| — | | |
| 13,413 | | |
| — | | |
| — | | |
| — | | |
| — | |
Star V Partners LLC (84) | |
| 308,600 | | |
| — | | |
| 308,600 | | |
| — | | |
| — | | |
| — | | |
| — | |
Tech Opportunities LLC (85) | |
| 1,500,000 | | |
| — | | |
| 1,500,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Tenor Opportunity Master Fund, Ltd. (86) | |
| 100,000 | | |
| — | | |
| 100,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
William Investment Group Ltd. (87) | |
| 1,000,000 | | |
| — | | |
| 1,000,000 | | |
| — | | |
| — | | |
| — | | |
| — | |
Other Selling Securityholders: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
FF Adventures SPV XVIII LLC (88) | |
| 12,200,000 | | |
| — | | |
| 4,600,000 | | |
| — | | |
| 7,600,000 | | |
| 2.4 | % | |
| — | |
FF Aventuras SPV XI LLC (89) | |
| 1,400,000 | | |
| — | | |
| 1,155,000 | | |
| — | | |
| 245,000 | | |
| * | | |
| — | |
FF
Ventures SPV IX LLC (90) | |
| 3,133,332 | | |
| — | | |
| 2,584,999 | | |
| — | | |
| 548,333 | | |
| * | | |
| — | |
FF Venturas SPV X LLC (91) | |
| 2,250,000 | | |
| — | | |
| 1,856,250 | | |
| — | | |
| 393,750 | | |
| * | | |
| — | |
| |
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 | |
FF Top Holding LLC (92) | |
| 117,705,569 | | |
| — | | |
| 71,831,588 | | |
| — | | |
| 45,873,981 | | |
| 14.2 | % | |
| — | |
Season Smart Limited (93) | |
| 66,494,117 | | |
| — | | |
| 79,831,617 | | |
| — | | |
| — | | |
| — | | |
| — | |
D. James Carpenter (94) | |
| 2,387,500 | | |
| — | | |
| 2,387,500 | | |
| — | | |
| — | | |
| — | | |
| — | |
Robert Mancini (94) | |
| 2,387,500 | | |
| — | | |
| 2,387,500 | | |
| — | | |
| — | | |
| — | | |
| — | |
Philip Kassin (94) | |
| 2,387,500 | | |
| — | | |
| 2,387,500 | | |
| — | | |
| — | | |
| — | | |
| — | |
Founding Future Creditors Trust (95) | |
| 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 May 18, 2022, and “Shares being
offered” includes 55,536 Earnout Shares not currently beneficially owned that Dr. Carsten Breitfeld has the contingent
right to receive pursuant to the Merger Agreement. |
(2) |
Common Stock beneficially owned includes options to acquire 234,787 shares of Class A Common
Stock that have vested within 60 days of May 18, 2022, and “Shares being offered” includes 4,350 Earnout Shares not
currently beneficially owned that Matthias Aydt has the contingent right to receive pursuant to the Merger
Agreement. |
(3) |
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 May 18, 2022, 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. |
(4) |
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 May 18, 2022. |
(5) |
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 May 18, 2022, 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. |
(6) |
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 of the Business
Combination held by the PSAC Sponsor, of which Jordan Vogel and Aaron Feldman are managing members. Accordingly, all securities held
by the PSAC 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. |
(7) |
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 May 18, 2022. |
(8) |
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 May 18, 2022. |
(9) |
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 PSAC Sponsor, of which Jordan Vogel and Aaron Feldman
are managing members. Accordingly, all securities held by PSAC 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) |
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. |
(11) |
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. |
(12) |
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. |
(13) |
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. |
(14) |
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. |
(15) |
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. |
(16) |
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. |
(17) |
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. |
(18) |
Hai Huang is the director and beneficial owner of AP China Unicorn Fund SPC. As such, Mr. Huang
may be deemed to beneficially own the shares held by AP China Unicorn Fund SPC. |
(19) |
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. |
(20) | Parvinder Thiara, located
at 142 W 57th Street, Suite 09-126, 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. |
(21) |
Parvinder Thiara, located at 142 W 57th Street, Suite 09-126, 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. |
(22) |
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. |
(23) |
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. |
(24) |
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. |
(25) |
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. |
(26) |
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. |
(27) |
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. |
(28) |
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. 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. |
(29) |
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 |
(30) |
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. |
(31) |
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. |
(32) |
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. |
(33) |
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. |
(34) |
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. |
(35) |
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. |
(36) |
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. |
(37) |
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. |
(38) |
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. |
(39) |
Zheming Lin is the Director of DSG-Peony Fund
SPC – DSG Global Markets SP. As such, Mr. Lin may be deemed to beneficially own the shares. |
(40) |
James Shaver is the Managing Member of the GP, Electron
GP, LLC. As such, Mr. Shaver may be deemed to beneficially own the shares. |
(41) |
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. |
(42) |
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. |
(43) |
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. |
(44) |
Steve Pei is the Managing Member of the General
Partner. As such, Mr. Pei may be deemed to beneficially own the shares. |
(45) |
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. |
(46) |
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 60,542 shares of the Company’s Class A Common Stock beneficially owned by ICS Opportunities, Ltd.,
an exempted company organized under the laws of the Cayman Islands (“ICS Opportunities”), 818,214 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 119,483 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, 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, ICS Opportunities II and Integrated
Assets and may be deemed to have shared voting control and investment discretion over securities owned by ICS Opportunities, 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, 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, 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, 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, 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, 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. |
(47) |
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. |
(48) |
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. |
(49) |
Common Stock beneficially owned prior to the offering
includes 76,981 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. |
(50) |
The beneficial owner is the GJ Family Trust (an
irrevocable discretionary trust). Rustem Limited is the director of Joint Power International Limited. |
(51) |
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. |
(52) |
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. |
(53) |
Wei Guo owns 100% of Kuos Investment II LLC. As
such, Mr. Guo may be deemed to beneficially own the shares. |
(54) |
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. |
(55) |
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. |
(56) |
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. |
(57) |
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. |
(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) |
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. |
(61) |
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. |
(62) |
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. |
(63) |
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. |
(64) |
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. |
(65) |
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. |
(66) |
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. |
(67) |
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. |
(68) |
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. |
(69) |
The Representative Director is Bum Jun Kim. As such,
Mr. Kim may be deemed to be the beneficial owner of the shares. |
(70) |
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. |
(71) |
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. |
(72) |
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. |
(73) |
Hongjun An, Quan Li and Shuqi Peng are the directors
of New China Capital Management Limited. |
(74) |
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. |
(75) |
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. |
(76) |
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. |
(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 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. |
(79) |
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. |
(80) |
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. |
(81) |
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. |
(82) |
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. |
(83) |
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. |
(84) |
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. |
(85) |
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. |
(86) |
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. |
(87) |
William Chen is the director of William Investment
Group Ltd. As such, Mr. Chen may be deemed to have beneficial ownership over the shares. |
(88) |
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. |
(89) |
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. |
(90) |
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. |
(91) |
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. |
(92) |
Includes (i) 52,524,292 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, (ii)
1,180,689 shares of Class A Common Stock held directly by Pacific Technology Holding LLC, and (iii) 64,000,588 shares of Class B Common
Stock held directly by FF Top Holding LLC. “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
shares of Class A Common Stock of the Company at any time. 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 seven managers – YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying Deng and Philip Bethell.
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, 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. |
(93) |
“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. |
(94) |
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. |
(95) |
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 seven managers: YT Jia, Matthias Aydt, Jiawei Wang, Tin Mok, Prashant Gulati, Chaoying
Deng and Philip Bethell. 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. |
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; or (ii) for certain converting debtholders and employee
stockholders, with respect to (A) 33% 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) 33% 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
33% 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. These lock-up agreements expired as of January 17, 2022.
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 of the Business Combination on July 21, 2021.
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 of the Business Combination, 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 of the Business Combination, 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 May 18, 2022, there were outstanding 238,276,213 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 June 6, 2022, 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,
| ● | at
any time while the Warrants are exercisable; |
| ● | 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 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 |
| ● | if,
and only if, there is a current registration statement in effect with respect to the shares
underlying such Warrants. |
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 June 6, 2022, 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 June 6, 2022, 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 June 6, 2022,
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 together 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 June 6, 2022, 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 June 6, 2022,
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 June 6, 2022,
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 June 6, 2022,
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:
| ● | an
individual citizen or resident of the United States; |
| ● | 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; |
| ● | an
estate the income of which is subject to United States federal income taxation regardless
of its source; or 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. |
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:
| ● | 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); |
| ● | 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 |
| ● | 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. |
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 256,127,887 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:
| ● | purchases
by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant
to this prospectus; |
|
● |
ordinary brokerage transactions and transactions in which the broker
solicits purchasers; |
|
● |
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; |
|
● |
an over-the-counter distribution in accordance with the rules of NASDAQ; |
|
● |
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; |
|
● |
to or through underwriters or broker-dealers; |
|
● |
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; |
|
● |
in privately negotiated transactions; |
|
● |
in options transactions; |
|
● |
through a combination of any of the above methods of
sale; or |
|
● |
any other method permitted pursuant to applicable law. |
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) 33% 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) 33% 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 33% 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.
The lock-up agreements in clauses (i) and (ii) above expired as of January 17, 2022.
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 as of December 31, 2021 and 2020 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 the Company’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.
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
Faraday
Future Intelligent Electric Inc.
Condensed
Consolidated Balance Sheets
(in thousands,
except share and per share data)
(Unaudited)
| |
March
31,
2022 | | |
December 31,
2021 | |
| |
| | |
| |
Assets | |
| | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 276,374 | | |
$ | 505,091 | |
Restricted cash | |
| 1,012 | | |
| 25,386 | |
Deposits | |
| 55,639 | | |
| 63,370 | |
Other
current assets | |
| 8,608 | | |
| 13,410 | |
Total current assets | |
| 341,633 | | |
| 607,257 | |
Property and equipment, net | |
| 338,877 | | |
| 293,135 | |
Right of use assets | |
| 18,701 | | |
| — | |
Other non-current assets | |
| 6,853 | | |
| 7,040 | |
Total
assets | |
$ | 706,064 | | |
$ | 907,432 | |
Liabilities, commitment to issue
Class A Common Stock and stockholders’ equity | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 45,400 | | |
$ | 37,773 | |
Accrued expenses and other
current liabilities | |
| 86,766 | | |
| 90,512 | |
Related party accrued interest | |
| 12,222 | | |
| 11,231 | |
Accrued interest | |
| 1,493 | | |
| 8,263 | |
Operating lease liabilities,
current portion | |
| 2,113 | | |
| — | |
Finance lease liabilities,
current portion | |
| 2,287 | | |
| — | |
Related party notes payable | |
| 13,636 | | |
| 13,655 | |
Notes
payable, current portion | |
| 78,865 | | |
| 132,372 | |
Total current liabilities | |
| 242,782 | | |
| 293,806 | |
Operating lease liabilities, less current portion | |
| 16,885 | | |
| — | |
Finance lease liabilities, less current portion | |
| 7,390 | | |
| 7,570 | |
Other liabilities, less current portion | |
| 3,785 | | |
| 3,720 | |
Notes payable, less current
portion | |
| — | | |
| 34,682 | |
Total
liabilities | |
| 270,842 | | |
| 339,778 | |
Commitments and contingencies (Note 11) | |
| | | |
| | |
Commitment to issue Class A Common Stock | |
| 32,900 | | |
| — | |
Stockholders’ equity | |
| | | |
| | |
Class A Common Stock, $0.0001 par value; 750,000,000 shares authorized; 238,197,018 and 168,693,323 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | |
| 24 | | |
| 17 | |
Class B Common Stock, $0.0001 par value; 75,000,000 shares authorized; 64,000,588 shares and no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | |
| 6 | | |
| — | |
Additional paid-in capital | |
| 3,487,415 | | |
| 3,482,226 | |
Accumulated other comprehensive loss | |
| (7,509 | ) | |
| (6,945 | ) |
Accumulated deficit | |
| (3,077,614 | ) | |
| (2,907,644 | ) |
Total
stockholders’ equity | |
| 402,322 | | |
| 567,654 | |
Total
liabilities, commitment to issue Class A Common Stock and stockholders’ equity | |
$ | 706,064 | | |
$ | 907,432 | |
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Faraday
Future Intelligent Electric Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
| |
Three
Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Operating expenses | |
| | |
| |
Research and development | |
$ | 114,935 | | |
$ | 6,721 | |
Sales and marketing | |
| 6,186 | | |
| 1,682 | |
General and administrative | |
| 27,880 | | |
| 10,993 | |
Total
operating expenses | |
| 149,001 | | |
| 19,396 | |
| |
| | | |
| | |
Loss from operations | |
| (149,001 | ) | |
| (19,396 | ) |
Change in fair value measurements | |
| 1,186 | | |
| (26,917 | ) |
Interest expense | |
| (3,746 | ) | |
| (19,174 | ) |
Related party interest expense | |
| (622 | ) | |
| (9,752 | ) |
Other expense, net | |
| (915 | ) | |
| (283 | ) |
Loss before income taxes | |
| (153,098 | ) | |
| (75,522 | ) |
Income tax provision | |
| — | | |
| (3 | ) |
Net
loss | |
$ | (153,098 | ) | |
$ | (75,525 | ) |
| |
| | | |
| | |
Per share information: | |
| | | |
| | |
Net loss per Common Stock – Class A
and Class B – basic and diluted | |
$ | (0.48 | ) | |
$ | (0.48 | ) |
Weighted average Common shares outstanding –
Class A and Class B – basic and diluted | |
| 322,211,392 | | |
| 158,088,382 | |
| |
| | | |
| | |
Total comprehensive loss: | |
| | | |
| | |
Net loss | |
$ | (153,098 | ) | |
$ | (75,525 | ) |
Change in foreign currency
translation adjustment | |
| (564 | ) | |
| 508 | |
Total
comprehensive loss | |
$ | (153,662 | ) | |
$ | (75,017 | ) |
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Faraday
Future Intelligent Electric Inc.
Condensed
Consolidated Statements of Commitment to Issue Class A Common Stock and Stockholders’ Equity (Deficit)
(in
thousands, except share and per share data)
(Unaudited)
| |
Commitment
to Issue | | |
Common
Stock | | |
Additional | | |
Accumulated
Other | | |
| | |
Total
Stockholders’ | |
| |
Class A Common Stock | | |
Class A | | |
Class B | | |
Paid-in | | |
Comprehensive | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Loss | | |
Deficit | | |
(Deficit) | |
Balance
as of December 31, 2021 | |
| — | | |
$ | — | | |
| 168,693,323 | | |
$ | 17 | | |
| — | | |
$ | — | | |
$ | 3,482,226 | | |
$ | (6,945 | ) | |
$ | (2,907,644 | ) | |
$ | 567,654 | |
Reclassification
of obligation to issue registered shares of Class A Common Stock upon adoption of ASU 2020-06 (Note 7) | |
| — | | |
| 32,900 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (20,265 | ) | |
| (20,265 | ) |
Reclassification
of deferred gain upon adoption of ASC 842 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,393 | | |
| 3,393 | |
Issuance of
shares pursuant to the commitment to issue Class A and Class B Common Stock (Note 3) | |
| — | | |
| — | | |
| 68,742,020 | | |
| 7 | | |
| 64,000,588 | | |
| 6 | | |
| (13 | ) | |
| — | | |
| — | | |
| — | |
Stock-based
compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,347 | | |
| — | | |
| — | | |
| 3,347 | |
Exercise of stock options | |
| — | | |
| — | | |
| 761,675 | | |
| — | | |
| — | | |
| — | | |
| 1,855 | | |
| — | | |
| — | | |
| 1,855 | |
Foreign currency
translation adjustment | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (564 | ) | |
| — | | |
| (564 | ) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (153,098 | ) | |
| (153,098 | ) |
Balance
as of March 31, 2022 | |
| — | | |
$ | 32,900 | | |
| 238,197,018 | | |
$ | 24 | | |
| 64,000,588 | | |
$ | 6 | | |
$ | 3,487,415 | | |
$ | (7,509 | ) | |
$ | (3,077,614 | ) | |
$ | 402,322 | |
| |
Common
Stock | | |
Additional | | |
Accumulated
Other | | |
| | |
Total
Stockholders’ | |
| |
Class A | | |
Class B | | |
Paid-in | | |
Comprehensive | | |
Accumulated | | |
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Loss | | |
Deficit | | |
(Deficit) | |
Balance
as of December 31, 2020 | |
| 93,099,596 | | |
$ | 9 | | |
| 64,000,588 | | |
$ | 6 | | |
$ | 1,817,760 | | |
$ | (5,974 | ) | |
$ | (2,391,139 | ) | |
$ | (579,338 | ) |
Conversion
of The9 Conditional Obligation | |
| 423,053 | | |
| — | | |
| — | | |
| — | | |
| 2,863 | | |
| — | | |
| — | | |
| 2,863 | |
Stock-based
compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,520 | | |
| — | | |
| — | | |
| 2,520 | |
Exercise of stock options | |
| 1,254,624 | | |
| — | | |
| — | | |
| — | | |
| 2,650 | | |
| — | | |
| — | | |
| 2,650 | |
Issuance of warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,988 | | |
| — | | |
| — | | |
| 1,988 | |
Foreign
currency translation adjustment | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 508 | | |
| — | | |
| 508 | |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (75,525 | ) | |
| (75,525 | ) |
Balance
as of March 31, 2021 | |
| 94,777,273 | | |
$ | 9 | | |
| 64,000,588 | | |
$ | 6 | | |
$ | 1,827,781 | | |
$ | (5,466 | ) | |
$ | (2,466,664 | ) | |
$ | (644,334 | ) |
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Faraday
Future Intelligent Electric Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| |
Three
Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Cash flows from operating activities | |
| | |
| |
Net loss | |
$ | (153,098 | ) | |
$ | (75,525 | ) |
Adjustments
to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Depreciation and amortization
expense | |
| 4,853 | | |
| 988 | |
Stock-based compensation | |
| 3,347 | | |
| 2,520 | |
Loss on disposal of property
and equipment | |
| — | | |
| 647 | |
Change in fair value measurements | |
| (1,186 | ) | |
| 26,917 | |
Loss (gain) on foreign exchange | |
| 894 | | |
| (831 | ) |
Non-cash interest expense | |
| 2,319 | | |
| 25,131 | |
Loss on extinguishment of related
party notes payable, notes payable and vendor payables in trust, net | |
| — | | |
| 1,309 | |
Other | |
| 108 | | |
| — | |
Changes in operating assets and
liabilities | |
| | | |
| | |
Deposits | |
| 6,840 | | |
| (1,025 | ) |
Other current and other non-current
assets | |
| 2,095 | | |
| (480 | ) |
Accounts payable | |
| 5,747 | | |
| (635 | ) |
Accrued expenses and other current
liabilities | |
| 14,527 | | |
| 665 | |
Operating lease liabilities | |
| (882 | ) | |
| — | |
Accrued
interest expense | |
| (7,928 | ) | |
| — | |
Net cash
used in operating activities | |
| (122,364 | ) | |
| (20,319 | ) |
Cash flows
from investing activities | |
| | | |
| | |
Payments
for property and equipment | |
| (44,398 | ) | |
| (711 | ) |
Net cash
used in investing activities | |
| (44,398 | ) | |
| (711 | ) |
Cash flows
from financing activities | |
| | | |
| | |
Proceeds from related party
notes payable | |
| — | | |
| 200 | |
Proceeds from notes payable,
net of original issuance discount | |
| — | | |
| 76,140 | |
Payments of related party notes
payable | |
| — | | |
| (1,528 | ) |
Payments of notes payable, including
Payment Premium | |
| (87,065 | ) | |
| (3,355 | ) |
Payments of finance lease obligations | |
| (466 | ) | |
| (1,110 | ) |
Proceeds
from exercise of stock options | |
| 1,855 | | |
| 2,650 | |
Net cash
(used in) provided by financing activities | |
| (85,676 | ) | |
| 72,997 | |
Effect
of exchange rate changes on cash and restricted cash | |
| (653 | ) | |
| (548 | ) |
Net (decrease) increase in cash
and restricted cash | |
| (253,091 | ) | |
| 51,419 | |
Cash
and restricted cash, beginning of period | |
| 530,477 | | |
| 1,827 | |
Cash and
restricted cash, end of period | |
$ | 277,386 | | |
$ | 53,246 | |
Faraday
Future Intelligent Electric Inc.
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:
| |
Three
Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Cash | |
$ | 505,091 | | |
$ | 1,124 | |
Restricted
cash | |
| 25,386 | | |
| 703 | |
Total cash
and restricted cash, beginning of period | |
$ | 530,477 | | |
$ | 1,827 | |
| |
| | | |
| | |
Cash | |
$ | 276,374 | | |
$ | 47,525 | |
Restricted
cash | |
| 1,012 | | |
| 5,721 | |
Total cash
and restricted cash, end of period | |
$ | 277,386 | | |
$ | 53,246 | |
| |
| | | |
| | |
Supplemental disclosure of noncash
investing and financing activities | |
| | | |
| | |
Recognition of operating right of use assets and lease
liabilities for new leases | |
$ | 8,206 | | |
$ | — | |
Additions of property and equipment included in accounts
payable and accrued expenses | |
| 1,881 | | |
| — | |
Conversion of The9 Conditional Obligation to equity | |
| — | | |
| 2,863 | |
| |
| | | |
| | |
Supplemental disclosure of cash
flow information | |
| | | |
| | |
Cash paid for interest | |
$ | 10,040 | | |
$ | 772 | |
The
accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
Faraday
Future Intelligent Electric Inc.
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
Faraday Future
Intelligent Electric Inc. (the “Company” or “FF”), a holding company incorporated in the State of Delaware on
February 11, 2020, conducts its operations through the subsidiaries of FF Intelligent Mobility Global Holdings Ltd. (“Legacy FF”),
founded in 2014 and headquartered in Los Angeles, California.
On July 21, 2021
(the “Closing”), the Company consummated a business combination pursuant to an Agreement and Plan of Merger dated January
27, 2021, by and among Property Solutions Acquisition Corp (“PSAC”). and Legacy FF (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.” Concurrently with the Closing of the Business Combination, the
Company entered into separate agreements with a number of investors (“PIPE Investors”) pursuant to which, on the Closing
Date, the PIPE Investors purchased, and the Company issued, an aggregate of 76,140,000 shares of Class A Common Stock, for a purchase
price of $10.00 per share with an aggregate purchase price of $761,400 (“PIPE Financing”). Shares sold and issued in the
PIPE Financing included registration rights.
The Company operates
in a single operating segment and designs and engineers next-generation, intelligent, electric 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.
Principles of Consolidation and
Basis of Presentation
The Company consolidates
the financial statements of all entities in which it 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 unaudited
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, 2021, included in the Company’s Form 10-K filed with Securities and Exchange Commission (“SEC”)
on May 13, 2022 (the “Form 10-K”). Accordingly, the Condensed Consolidated Balance Sheet as of December 31, 2021, has
been derived from the Company’s annual audited Consolidated Financial Statements but does not contain all of the footnote disclosures
from the annual financial statements.
In the opinion
of the Company, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring
adjustments, necessary for a fair statement of its financial position, its results of operations, and cash flows for the periods presented.
The accounting policies used in the preparation of these unaudited Condensed Consolidated Financial Statements are the same as those
disclosed in the audited Consolidated Financial Statements for the year ended December 31, 2021, included in the Form 10-K, except
as described below.
Reclassification
The Company reclassified
certain amounts in the Condensed Consolidated Financial Statements to conform to the current period's presentation.
Revision
As previously
disclosed in the Company’s annual financial statements for the fiscal year ended December 31, 2021, in connection with the
findings of the Special Committee investigation, the Company found misclassifications in the unaudited Condensed Consolidated Financial
Statements for the quarterly period ended March 31, 2021, resulting in an overstatement of interest expense and understatement of
related party interest expense of $682. The misstatements did not affect any subtotals or totals on the Condensed Consolidated Statements
of Operations and Comprehensive Loss for the quarterly period ended March 31, 2021. The Company concluded that such misstatements
were not material to the previously issued financial statements, however, the Condensed Consolidated Statements of Operations and Comprehensive
Loss for the quarterly period ended March 31, 2021 have been revised to correct for these misstatements.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
Use of Estimates
The preparation
of the financial statements in conformity with GAAP requires management to make estimates and assumptions, which affect the reported
amounts in the financial statements. Estimates are based on historical experience, where applicable, and other assumptions which management
believes are reasonable under the circumstances. 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; (v) estimated
useful lives and impairment of long-lived assets; (vi) fair value of options granted to employees and non-employees; (vii) fair value
of warrants, and (viii) incremental borrowing rate used to measure operating lease liabilities. 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.
As of the date
the Company’s unaudited Condensed Consolidated Financial Statements were issued, 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 condensed 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 material impact on the Company’s financial statements in future periods. Actual results could
differ from these estimates and any such differences may have a material impact on the Company’s Condensed Consolidated Financial
Statements.
Income Tax
The Company recorded
an income tax provision of $0 and $3 for the period ended March 31, 2022 and 2021, respectively, on the unaudited Condensed Consolidated
Statements of Operations and Comprehensive Loss. The difference in the Company’s effective tax rate from the federal statutory
rate of 21% is due to the ratio of domestic and international loss before taxes. The Company records a valuation allowance to reflect
limited benefits for income taxes in jurisdictions that historically reported losses and a provision for income taxes in jurisdictions
that are profitable. The income tax provision for each period was the combined calculated tax expenses/benefits for various jurisdictions.
The Company is
subject to taxation and files income tax returns with the U.S. federal government, California and China. As of March 31, 2022, the 2017
through 2021 federal returns and 2017 through 2021 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 2016 through 2021, are open under China tax law.
The Company did
not accrue any interest or penalties related to the Company's unrecognized tax benefits as of March 31, 2022, as the uncertain tax benefits
only reduced the net operating losses. The Company does not expect the uncertain tax benefits to have material impact on its Condenses
Consolidated Financial Statements within the next twelve months.
Recently Adopted Accounting Pronouncements
In February 2016,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases
(Topic 842) (“Topic 842”), which outlines a comprehensive lease accounting model that supersedes the previous lease guidance.
The guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms 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. The Company adopted the standard on January 1, 2022 using the
modified retrospective basis and recorded operating lease right-of-use assets (“ROU”) of $11,191 and operating lease liabilities
of $11,191 on that date. As part of this adoption, the Company reclassified the deferred gain related to a previous sale and leaseback
of $3,393 to accumulated deficit. The Company elected to apply the package of practical expedients permitted under the transition guidance
within ASC 842 which does not require reassessment of initial direct costs, reassessment of the classification of leases as operating
or financing, or reassessment of the definition of a lease (see Note 10, Leases). Finance lease liabilities and related property
and equipment assets did not change as a result of the adoption of this standard.
Faraday Future
Intelligent Electric Inc.
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 the 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 adopted the standard on January
1, 2022 on a modified retrospective basis and reclassified the Obligation to issue registered shares of Class A Common Stock of $12,635
from Accrued expenses and other current liabilities and reclassified $20,265 from Accumulated deficit to Commitment to issue Class A
Common Stock on the Condensed Consolidated Balance Sheets.
In May 2021,
the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options (“ASU 2021-04”). The ASU clarifies and reduces diversity in an issuer’s accounting for modifications
or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification
or exchange. The ASU made amendments to the earnings per share guidance in Topic 260 for an issuer’s accounting for modifications
or exchanges of freestanding equity-classified written call options. Further, the ASU made amendments to the Debt—Modifications
and Extinguishments guidance in Topic 470-50. The ASU also added references to revised guidance within Topic 505 and 718. Additionally,
the ASU made additions to Topic 815-40 related to the issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options. ASU 2021-04 is effective for interim and annual periods beginning after December 15, 2021, with early adoption
permitted. Adoption of the amendments in the ASU should be applied prospectively to modifications or exchanges occurring on or after
the effective date of the amendments. The Company adopted the standard as of January 1, 2022. There was an immaterial effect on the condensed
consolidated financial statements as a result of the adoption of ASU 2021-04.
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
are issued. Based on its recurring losses from operations since inception and continued cash outflows from operating activities (all
as described below), 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 unaudited Condensed Consolidated Financial Statements were issued.
The Company’s
business plan contemplates that it will launch the FF 91 for delivery to customers beginning in the third quarter of 2022, with testing,
validation, and certification complete in the third quarter of 2022. Since its formation, the Company has devoted substantial effort
and capital resources to strategic planning, engineering, design, and development of its electric vehicle platform, development of initial
electric vehicle models, and capital raising. Since inception, the Company has incurred cumulative losses from operations, negative cash
flows from operating activities, and has an accumulated deficit of $3,077,614 as of March 31, 2022. After the closing of the Business
Combination and the PIPE Financing on July 21, 2021, the Company received gross proceeds aggregating $990,983 which it used to settle
certain liabilities and the remainder of which management expects to use to finance the ongoing operations of the business.
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 (see Note 8, Related Party Notes Payable and Note 9, Notes Payable), the sale of
Preferred and Common Stock (see Note 12, Stockholders' Equity) and the net proceeds received from the Business Combination and
the PIPE Financing in the third quarter of 2021 (see Note 3, Business Combination).
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The Company’s
ongoing liquidity needs will depend on the extent to which the Company’s actual costs vary from the Company’s estimates and
the Company’s ability to control these costs, as well as the Company’s ability to raise additional funds. The Company is
exploring various funding and financing alternatives to fund its ongoing operations, including equipment leasing, construction financing
of the Hanford, California manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans, and equity
offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s assessment
of opportunities available in the marketplace and the circumstances of the business at the relevant time.
The timely 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, control and effectively
manage its costs, as well as factors outside of the Company’s control, including those related to global supply chain disruptions,
the rising prices of materials and potential impact of the COVID-19 pandemic. Refer to the section titled, “Risk Factors”
in the 2021 Form 10-K for a full discussion of the risks associated with the COVID-19 pandemic. The Company’s forecasts and projections
of working capital reflect significant judgment and estimates for which there are inherent risks and uncertainties. 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 funding 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 March 31,
2022, the Company was in default on a related party note payable with a principal amount of $9,451. In January 2022, the Company defaulted
on the Optional Notes (see Note 9, Notes Payable). The holders of the Optional Notes have waived the default.
The unaudited
Condensed Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly,
the unaudited Condensed Consolidated Financial Statements have been prepared on a basis that assumes 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.
3. Business Combination
On July 21,
2021, the Company consummated the Business Combination (the “Closing”). 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. Upon the consummation
of the Business Combination, the registrant changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent
Electric Inc.
Commitment to Issue Class A and
Class B Common Stock
As part of the
Closing of the Business Combination, former stockholders and noteholders of Legacy FF are required to submit a signed Company share letter
of transmittal or converting debt letter of transmittal along with a lockup agreement to the Company’s transfer agent in order
for shares of the Company to be issued in their name in exchange for their shares in, notes from, vendor trust or other supplier agreements
with, Legacy FF. As of March 31, 2022, 20,410,111 shares of Class A Common Stock remain unissued. Until the holder of the right
to receive shares of the Company’s Class A Common Stock is issued shares, that holder does not have any of the rights of a stockholder.
The Company determined
that the commitment to issue shares of Class A and Class B Common Stock is indexed to the Company’s own equity, within the meaning
in ASC 815-10-15-74 and met the scope exception to not be subject to derivative accounting under ASC 815-40-25. As such, the Company
classified the commitment to issue shares of Class A and Class B Common Stock in equity.
For purposes
of presentation of shares outstanding in the Company’s financial statements, the unaudited Condensed Consolidated Balance Sheets
and unaudited Condensed Consolidated Statements of Commitment to Issue Class A Common Stock and Stockholders’ Equity (Deficit)
present legally issued and outstanding shares.
Faraday
Future Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
For purposes
of presentation of basic and diluted net loss per share in the unaudited Condensed Consolidated Statements of Operations and Comprehensive
Loss, the Company includes shares to be issued in the denominator in accordance with ASC 710-10-54-4 and ASC 260-10-45-48 as if they
had been issued on the date of the merger, as such shares are non-contingent and are issuable for no consideration.
4. Deposits and Other Current
Assets
Deposits and
other current assets consist of the following:
Deposits: | |
March
31,
2022 | | |
December
31,
2021 | |
Deposits for research and development,
prototype parts, and other | |
$ | 47,259 | | |
$ | 54,990 | |
Deposits for “Future
Work” | |
| 8,380 | | |
| 8,380 | |
Total deposits | |
$ | 55,639 | | |
$ | 63,370 | |
| |
| | | |
| | |
Other current assets: | |
| | | |
| | |
Prepaid expenses | |
$ | 6,010 | | |
$ | 11,119 | |
Other current assets | |
| 2,598 | | |
| 2,291 | |
Total other current assets | |
$ | 8,608 | | |
$ | 13,410 | |
During the three
months ended March 31, 2022, the Company made deposits for research and development (“R&D”), prototype parts, and
other with its vendors, which support the Company’s ongoing R&D efforts and operations. The Company expenses deposits as the
services are provided and prototype parts are received.
Amortization
expense related to the Palantir hosting arrangement and other prepaid software subscriptions totaled $2,870 and $0 for the three months
ended March 31, 2022 and 2021, respectively.
5. Property and Equipment, Net
Property and
equipment, net, consists of the following:
| |
March
31, 2022 | | |
December
31, 2021 | |
Buildings | |
$ | 14,180 | | |
$ | 14,180 | |
Computer hardware | |
| 3,328 | | |
| 3,051 | |
Tooling, machinery, and equipment | |
| 8,868 | | |
| 8,868 | |
Vehicles | |
| 337 | | |
| 337 | |
Computer software | |
| 3,621 | | |
| 1,032 | |
Leasehold improvements | |
| 298 | | |
| 297 | |
Construction in process | |
| 318,713 | | |
| 275,048 | |
Less: Accumulated depreciation | |
| (10,468 | ) | |
| (9,678 | ) |
Total property and equipment,
net | |
$ | 338,877 | | |
$ | 293,135 | |
Depreciation
expense related to property and equipment totaled $790 and $825 for the three months ended March 31, 2022 and 2021, respectively.
Faraday
Future Intelligent Electric Inc.
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:
| |
March
31, 2022 | | |
December
31, 2021 | |
Accrued payroll and benefits | |
$ | 25,865 | | |
$ | 21,752 | |
Accrued legal contingencies | |
| 13,600 | | |
| 16,881 | |
Tooling, machinery and equipment received not invoiced | |
| — | | |
| 7,243 | |
Engineering, design and testing services received
not invoiced | |
| 20,750 | | |
| 6,620 | |
Deposits from customers | |
| 4,226 | | |
| 4,354 | |
Due to affiliates | |
| 7,075 | | |
| 6,673 | |
Obligation to issue registered shares of Class A Common
Stock (1) | |
| — | | |
| 12,635 | |
Other current liabilities | |
| 15,250 | | |
| 14,354 | |
Total accrued expenses and other
current liabilities | |
$ | 86,766 | | |
$ | 90,512 | |
| (1) | The obligation to issue registered shares of Class A Common Stock was reclassified to Commitment to issue Class A Common Stock upon the adoption of ASU 2020-06 (see Note 7, Fair Value of Financial Instruments). |
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. |
Fair value estimates
are made at a specific point in time based on relevant market information and information about the financial or nonfinancial asset or
liability.
The Company has
elected to apply the fair value option to certain notes payable with conversion features as discussed in Note 9, Notes Payable.
Fair value measurements associated with the warrant liabilities, and notes payable represent Level 3 valuations under the fair value
hierarchy.
Notes Payable at Fair Value
The Company has
elected to measure certain notes payable at fair value issued under the Notes Purchase Agreement, as amended (“NPA”) as they
contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 9, Notes Payable).
The Company used a binomial lattice model to value the notes payable issued on June 9, 2021 and August 10, 2021 to a US-based investment
firm. A binomial lattice model is widely used for valuing convertible notes. The significant assumptions used in the binomial lattice
model include the risk-free rate, annual dividend yield, expected life, and volatility of the Company's stock.
Faraday
Future Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The fair value
adjustments related to warrant liabilities and notes payables were recorded in Change in Fair Value Measurements on the unaudited Condensed
Consolidated Statements of Operations and Comprehensive Loss.
Commitment to Issue Class A Common
Stock
Upon the Closing
of the Business Combination, the Company assumed an obligation of PSAC to deliver 2,387,500 registered shares of Class A Common Stock
to an entity that provided consulting and advisory services in connection with the Business Combination to PSAC for no consideration.
As of March 31, 2022, the Company’s registration statement is not effective.
Prior to the
adoption of ASU 2020-06, the agreement with the service provider specified that the shares to be delivered are required to be registered,
which is considered to be outside of the control of the Company, and therefore this obligation failed to qualify for equity treatment
under ASC 815-40-25-10, and net cash settlement was assumed.
As a result,
in conjunction with recording the assets and liabilities of PSAC on the Closing of the Business Combination, the Company recorded a liability
of $32,900 for the Obligation to issue registered shares of Class A Common Stock in the Consolidated Balance Sheets during the year ended
December 31, 2021. As of December 31, 2021, the fair value of the liability was $12,635 resulting in a gain of $20,265 recorded in the
Change in Fair value measurements in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31,
2021.
On January 1,
2022, upon the adoption of ASU 2020-06, the requirement to consider whether settlement is required to be in registered shares is no longer
required to be considered in an entity’s evaluation of net cash settlement, however ASC 480-10-S99-3a was not amended in a similar
fashion and therefore the Company, as part of the adjustments due to the adoption of ASU 2020-06, reclassified the Obligation to issue
registered shares of Class A Common Stock from liabilities to the Commitment to issue Class A Common Stock within temporary equity in
the Condensed Consolidated Balance Sheets as of March 31, 2022.
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:
| |
March
31, 2022 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Liabilities: | |
| | |
| | |
| |
Notes payable | |
$ | — | | |
$ | — | | |
$ | 73,073 | |
Private Warrants | |
| — | | |
| — | | |
| 600 | |
| |
December
31, 2021 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Liabilities: | |
| | |
| | |
| |
Notes payable | |
$ | — | | |
$ | — | | |
$ | 161,282 | |
Private Warrants | |
| — | | |
| — | | |
| 642 | |
Obligation to issue registered
shares of Class A Common Stock | |
| — | | |
| — | | |
| 12,635 | |
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.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The following
table summarizes the activity of Level 3 fair value measurements:
| |
Notes
Payable at
Fair Value | | |
Private
Warrants | | |
Obligation
to
Issue
Registered
Shares | |
Balance as of December 31, 2021 | |
$ | 161,282 | | |
$ | 642 | | |
$ | 12,635 | |
Changes in fair value measurements | |
| (1,144 | ) | |
| (42 | ) | |
| — | |
Cash payments | |
| (87,065 | ) | |
| — | | |
| — | |
Reclassification of obligation
to issue registered shares of Class A Common Stock upon adoption of ASU 2020-06 | |
| — | | |
| — | | |
| (12,635 | ) |
Balance as of March 31, 2022 | |
$ | 73,073 | | |
$ | 600 | | |
$ | — | |
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 of employees,
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 March 31, 2022:
Note
Name | |
Contractual
Maturity
Date | |
Contractual
Interest
Rates | | |
Balance
as of
March 31,
2022 | | |
Interest
Expense for
the Three
Months Ended
March 31,
2022 | |
Related
party notes – China(1) | |
Due on Demand | |
| 18.00 | % | |
$ | 9,451 | | |
$ | 622 | |
Related party notes –
China various other | |
Due on Demand | |
| 0.00 | % | |
| 4,185 | | |
| — | |
| |
| |
| | | |
$ | 13,636 | | |
$ | 622 | |
| (1) | As of March 31, 2022, the Company was in default on a related party note with a principal value of $9,451. |
The estimated fair
value of the related party notes payable, which are not carried at fair value, using inputs from Level 3 under the fair value hierarchy,
was $12,999 and $13,337 as of March 31, 2022 and December 31, 2021, respectively.
9. Notes Payable
The Company has
entered into notes payable agreements with third parties, which consists of the following as of March 31, 2022:
| |
March
31, 2022 | |
| |
Note
Name | |
Contractual
Maturity Date | |
Contractual
Interest
Rates | | |
Unpaid
Principal
Balance | | |
Fair
Value
Measurement
Adjustments | | |
Original
issue
discount and
proceeds
allocated to
warrants | | |
Net
Carrying
Value | | |
Interest
Expense for the
Three Months
Ended
March 31,
2022 | |
June 9, 2021
Note 1 and Note 2 | |
December 9, 2022 | |
| 0.00 | % | |
$ | 40,000 | | |
$ | 8,697 | | |
$ | (9,522 | ) | |
$ | 39,175 | | |
$ | — | |
August 10, 2021 Optional
Notes | |
February 10, 2023 | |
| 15.00 | % | |
| 33,917 | | |
| 11,499 | | |
| (11,518 | ) | |
| 33,898 | | |
| 1,272 | |
Notes payable –
China various other | |
Due on Demand | |
| 0.00 | % | |
| 5,483 | | |
| — | | |
| — | | |
| 5,483 | | |
| — | |
PPP Loan | |
April 17, 2022 | |
| 1.00 | % | |
| 193 | | |
| — | | |
| — | | |
| 193 | | |
| — | |
Auto loans | |
Various | |
| Various | | |
| 116 | | |
| — | | |
| — | | |
| 116 | | |
| — | |
| |
| |
| | | |
$ | 79,709 | | |
$ | 20,196 | | |
$ | (21,040 | ) | |
$ | 78,865 | | |
$ | 1,272 | |
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The Company settled
certain notes payable during the three months ended March 31, 2022 as follows:
| |
Three
months ending March 31, 2022 |
Note Name | |
Contractual
Maturity Date | |
Contractual
Interest
Rates | | |
Net
carrying
value at
12/31/2021 | | |
Fair
Value
Measurement
Adjustments | | |
Payment
Premium | | |
Cash
Payment | |
March 1, 2021
Notes(1) | |
March 1, 2022 | |
| 14.00 | % | |
$ | 56,695 | | |
$ | (1,695 | ) | |
$ | — | | |
$ | (55,000 | ) |
August
26, 2021 Notes(1) | |
March 1, 2022 | |
| 14.00 | % | |
| 30,924 | | |
| (924 | ) | |
| 2,065 | | |
| (32,065 | ) |
| |
| |
| | | |
$ | 87,619 | | |
$ | (2,619 | ) | |
$ | 2,065 | | |
$ | (87,065 | ) |
| (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. The notes payable were collateralized by a first lien on virtually all tangible and intangible assets of the Company, bore interest at 14.0% per annum and matured on March 1, 2022. On February 25, 2022, the Company repaid the $55,000 principal amount of the March 1, 2021 Notes with accrued interest of $7,721. |
On August 26,
2021, the Company exercised its option under the March 1, 2021 notes payable agreement with Ares to draw an additional principal amount
of $30,000 which matured on March 1, 2022. As the August 26, 2021 Notes mature in less than one year, according to the terms of the amended
NPA, the Company expected to repay them with payment premium of 14.0% (“Payment Premium”). On February 25, 2022, the Company
repaid the $30,000 principal amount of the August 26, 2021 Notes, with accrued interest of $2,135 and Payment Premium of $2,065.
| |
March
31, 2022 | | |
December
31, 2021 | |
March 1, 2021 Notes | |
| | |
| |
Outstanding principal | |
$ | — | | |
$ | 55,000 | |
Accrued interest | |
| — | | |
| 6,455 | |
Interest expense for the three months ended March 31, 2022 | |
| 1,266 | | |
| — | |
Principal payments | |
| 55,000 | | |
| — | |
Interest payments | |
| 7,721 | | |
| — | |
| |
March
31, 2022 | | |
December
31, 2021 | |
August 26, 2021 Notes | |
| | |
| |
Outstanding principal | |
$ | — | | |
$ | 30,000 | |
Accrued interest | |
| — | | |
| 1,473 | |
Interest expense for the three months ended March 31, 2022 | |
| 662 | | |
| — | |
Principal payments | |
| 30,000 | | |
| — | |
Interest payments | |
| 2,135 | | |
| — | |
Payment Premium payments | |
| 2,065 | | |
| — | |
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 $5,472 and $5,350 as of March 31, 2022 and December 31, 2021, respectively.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
Schedule of Principal Maturities
of Notes Payable
The future scheduled
principal maturities of notes payable as of March 31, 2022 are as follows:
Due on
demand | | |
$ | 5,483 | |
2022 | | |
| 40,309 | |
2023 | | |
| 33,917 | |
| | |
$ | 79,709 | |
10. Leases
The Company determines
if an arrangement is a lease at its commencement if the Company is both able to identify an asset and conclude the Company has the right
to control the identified asset. Leases are classified as finance or operating based on the principle of whether or not the lease is
effectively a financed purchase by the lessee. An ROU asset represents the Company’s right to use an underlying asset for the lease
term and a lease liability represents the Company’s obligation to make lease payments related to the lease. The Company recognizes
operating and finance lease ROU assets and liabilities at the commencement date based on the present value of lease payments over the
lease term. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination
options. The Company’s leases do not provide an implicit rate therefore, the Company uses its incremental borrowing rate based
on information available at the commencement date to determine the present value of lease payments. The incremental borrowing rate used
is estimated based on what the Company would be required to pay for a collateralized loan for a similar asset over a similar term. The
Company’s leases do not include any residual value guarantees, bargain purchase options, or asset retirement obligations.
To
the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend
on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the
passage of time. Lease expense for both operating and finance leases is recognized on a straight-line basis over the lease term and is
recorded in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Interest expense incurred
on the finance lease liabilities is recorded in Interest expense on the Condensed Consolidated Statements of Operations and Comprehensive
Loss. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases
for any class of underlying asset. Additionally, the Company does not separate lease and non-lease components. Operating leases are included
in Right of use assets, Operating leases liabilities, current portion and Operating lease liabilities, less current portion in the Company's
Condensed Consolidated Balance Sheets. Finance leases are included in Property and equipment, net, Finance lease liabilities, current
portion, and Finance lease liabilities, less current portion in the Company's Condensed Consolidated Balance Sheets.
The Company’s
lease arrangements consist primarily of corporate office, store, equipment, and vehicle lease agreements. The leases expire at various
dates through 2032, some of which include options to extend the lease term for additional 5 years periods.
Total lease costs
for the three months ended March 31, 2022 were:
Finance lease cost | |
| |
Amortization of right-of-use assets | |
$ | 500 | |
Interest on lease liabilities | |
| 177 | |
Total finance lease cost | |
| 677 | |
| |
| | |
Operating lease cost | |
| 882 | |
Variable lease cost | |
| 134 | |
Total lease cost | |
$ | 1,693 | |
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
The following
table summarizes future lease payments as of March 31, 2022:
Fiscal
year | |
Operating
Leases | | |
Finance
Leases | |
2022 | |
$ | 3,833 | | |
$ | 1,940 | |
2023 | |
| 4,300 | | |
| 2,166 | |
2024 | |
| 4,257 | | |
| 1,757 | |
2025 | |
| 4,383 | | |
| 1,792 | |
2026 | |
| 4,514 | | |
| 1,828 | |
Thereafter | |
| 11,744 | | |
| 1,863 | |
Total | |
| 33,031 | | |
| 11,346 | |
Less: Imputed Interest | |
| (14,033 | ) | |
| (1,669 | ) |
Present value of net lease payments | |
$ | 18,998 | | |
$ | 9,677 | |
| |
| | | |
| | |
Lease liability, current portion | |
$ | 2,113 | | |
$ | 2,287 | |
Lease liability, net of current
portion | |
| 16,885 | | |
| 7,390 | |
Total lease liability | |
$ | 18,998 | | |
$ | 9,677 | |
Supplemental
information and non-cash activities related to operating and finance leases are as follows:
Cash paid for amounts included in the measurement of lease liabilities | |
| |
Operating cash flows from operating leases | |
$ | 833 | |
Operating cash flows from finance leases | |
| 177 | |
Financing cash flows
from finance leases | |
| 466 | |
| |
$ | 1,476 | |
Lease liabilities arising from new right-of-use assets | |
| | |
Operating leases | |
$ | 8,206 | |
Finance leases | |
| — | |
Weighted average remaining lease term (in years) | |
| |
Operating leases | |
| 7.2 | |
Finance leases | |
| 5.4 | |
| |
| | |
Weighted average discount rate | |
| | |
Operating leases | |
| 15.5 | % |
Finance leases | |
| 6.0 | % |
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
Disclosures Related to Periods
Prior to Adoption of the New Lease Standard:
The
Company recorded rent expense of $790 for the three months ended March 31, 2021.
The
minimum aggregate future obligations under noncancelable operating leases as of December 31, 2021 were as follows:
Year
ended December 31, | |
| |
2022 | |
$ | 2,384 | |
2023 | |
| 2,695 | |
2024 | |
| 2,775 | |
2025 | |
| 2,859 | |
2026 | |
| 2,944 | |
Thereafter | |
| 991 | |
| |
$ | 14,648 | |
The
Company has three capital leases, one in Hanford, California for its main production facility, and two equipment leases.
The
minimum aggregate future minimum lease payments under capital leases as of December 31, 2021 were as follows:
Year
ended December 31, | |
| |
2022 | |
$ | 2,574 | |
2023 | |
| 2,166 | |
2024 | |
| 1,757 | |
2025 | |
| 1,792 | |
2026 | |
| 1,840 | |
Thereafter | |
| 1,864 | |
| |
$ | 11,993 | |
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, the outcome
of any such claims and disputes cannot be predicted with certainty.
On December 23,
2021, a putative class action lawsuit alleging violations of the Securities Exchange Act of 1934 was filed in the United States District
Court, Central District of California, against the Company and its current Chief Executive Officer, its current Chief Product and User
Ecosystem Officer, as well as the two former CFOs of the Company (one of which is also the former CFO of Legacy FF), and the Co-CEOs
of PSAC. On March 7, 2022, the court appointed co-lead plaintiffs and co-lead counsel. Co-lead plaintiffs filed an amended complaint
on May 6, 2022. Defendants’ currently scheduled deadline to respond to the amended complaint is July 5, 2022. The Company believes
the suit is without merit and intends to vigorously defend the suit. Given the early stages of the legal proceedings, it is not possible
to predict the outcome of the claims.
On March 8, 2022
and March 21, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims
were filed in the United States District Court, Central District of California. On April 8, 2022, these two derivative lawsuits were
consolidated. Additionally, on April 11 and 25, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act
of 1934 and various common law claims were filed in the United States District Court, District of Delaware. These lawsuits purport to
assert claims on behalf of the Company against numerous current and former officers and directors of the Company. Given the early stages
of the legal proceedings, it is not possible to predict the outcome of the claims.
As of March 31,
2022 and December 31, 2021, the Company had accrued contingent liabilities of $13,600 and $16,881, respectively, within Accrued
expenses and other current liabilities on the unaudited Condensed Consolidated Balance Sheets for potential financial exposure related
to ongoing legal matters primarily related to breach of contracts and employment matters which are deemed both probable of loss and reasonably
estimable.
During the three
months ending March 31, 2022, the Company settled a legal dispute for breach of lease under which the Company was named a co-defendant,
in a civil action case with the plaintiff seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes
related to the lease for a total of $6,400. Pursuant to the settlement agreement, the Company agreed to pay $1,800 in cash in January
2022 and an additional $3,400 plus 5% interest in October 2022 and was liable for the remainder of the settlement, in the amount of $1,200,
in the event the Co-defendants failed to make the payment in January 2022. In January 2022, the Company made the initial settlement payment
of $1,800 and was relieved of the liability of $1,200.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
Special Committee Investigation
As previously
disclosed, on November 15, 2021, the Company’s Board of Directors (the “Board”) established a special committee of
independent directors (“Special Committee”) to investigate allegations of inaccurate Company disclosures, including those
made in an October 2021 short seller report and whistleblower allegations, which resulted in the Company being unable to timely file
its third quarterly report on Form 10-Q for the quarter ended September 30, 2021, its Annual Report on Form 10-K for the year ended December
31, 2021, and amended Registration Statement on Form S-1 (File No. 333-258993). The Special Committee engaged outside independent legal
counsel and a forensic accounting firm to assist with its review. On February 1, 2022, the Company announced that the Special Committee
completed its review. On April 14, 2022, the Company announced the completion of additional investigative work based on the Special Committee’s
findings, which were performed under the direction of the Executive Chairperson, reporting to the Audit Committee. In connection with
the Special Committee’s review and subsequent investigative work, the following findings were made:
| ● | In
connection with the Business Combination, statements made by certain Company employees to
certain investors describing the role of Yueting (“YT”) Jia, the Company’s
founder and former CEO, within the Company were inaccurate, and his involvement in the management
of the Company post-Business Combination was more significant than what had been represented
to certain investors. |
| ● | The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest. |
| ● | Consistent
with the Company’s previous public disclosures regarding identified material weaknesses
in its internal control over financial reporting, the Company’s internal control over
financial reporting requires an upgrade in personnel and systems. |
| ● | The
Company’s corporate culture failed to sufficiently prioritize compliance. |
| ● | Mr.
Jia’s role as an intermediary in leasing certain properties which were subsequently
leased to the Company was not disclosed in the Company’s corporate housing disclosures. |
| ● | In
preparing the Company’s related party transaction disclosures, the Company failed to
investigate and identify the sources of loans received from individuals and entities associated
with Company employees. |
In addition,
certain individuals failed to fully disclose to individuals involved in the preparation of the Company’s SEC filings their relationships
with certain related parties and affiliated entities in connection with, and following, the Business Combination, and failed to fully
disclose relevant information, including but not limited to, information in connection with related parties and corporate governance
to the Company’s independent registered public accounting firm PricewaterhouseCoopers LLP. Further, certain individuals failed
to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.
Based on the
results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of inaccurate
FF disclosures that it evaluated, were not supported by the evidence reviewed.
Based on the
results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial
actions:
| ● | certain
remedial actions designed to enhance oversight and corporate governance of the Company, namely
the following: |
| ● | the
appointment of Susan Swenson, a member of the Board, to the newly created position of Executive
Chairperson of FF; |
| ● | Dr. Carsten Breitfield, FF’s Chief Executive Officer, reporting directly to Ms. Swenson and receiving a 25% annual base salary reduction; |
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
| ● | the removal of Mr. Jia as an executive officer, although continuing in his position as Chief Product & User Ecosystem Officer of the Company and reporting directly to Ms. Swenson, receiving a 25% annual base salary reduction, and his role limited to focusing on (a) Product and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology; |
| ● | Matthias
Aydt, Senior Vice President, Business Development and Product Definition and a director of
the Company, being placed on probation as an executive officer for a six-month period, during
which period he will remain as a non-independent member of the Board; |
| ● | the
appointment of Jordan Vogel as Lead Independent Director; certain changes to the composition
of Board committees, including Brian Krolicki stepping down from his role as Chairman of
the Board and Chair of the Nominating and Corporate Governance Committee and becoming a member
of the Audit and Compensation Committees of the Board; Jordan Vogel stepping down from the
Nominating and Corporate Governance Committee; and Scott Vogel becoming the Chair of the
Audit Committee and the Nominating and Corporate Governance Committee of the Board; and |
| ● | the
suspension without pay of Jiawei (“Jerry”) Wang, the Company’s former Vice
President, Global Capital Markets, who subsequently notified the Board of his decision to
resign from FF on April 10, 2022; |
| ● | the
assessment and enhancement of FF’s policies and procedures regarding financial accounting
and reporting and the upgrading of FF’s internal control over financial accounting
and reporting, including by hiring additional financial reporting and accounting support,
in each case at the direction of the Audit Committee; |
| ● | the
implementation of enhanced controls around FF’s contracting and related party transactions,
including regular attestations by FF’s employees with authority to bind FF to contracts
and related party transactions, for purposes of enabling FF to make complete and accurate
disclosures regarding related party transactions; |
| ● | the
hiring of a Chief Compliance Officer, who reports on a dotted line to the Chair of the Audit
Committee, and assessing and enhancing FF’s compliance policies and procedures; |
| ● | the
implementation of a comprehensive training program for all directors and officers regarding,
among other things, internal FF policies; |
| ● | the
separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary; and |
| ● | certain
other disciplinary actions and terminations of employment with respect to other FF employees
(none of whom is an executive officer). |
SEC Investigation
Subsequent to
the Company announcing the completion of the Special Committee investigation on February 1, 2022, the Company, certain members of the
management team and employees of the Company received a notice of preservation and subpoena from the staff of the SEC stating that the
SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation. The Company,
which had previously voluntarily contacted the SEC in connection with the Special Committee investigation in October 2021, is cooperating
fully with the SEC’s investigation. The outcome of such an investigation is difficult to predict. The Company has incurred, and
may continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation.
At this stage, the Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the
SEC’s investigation or estimate the range of any potential loss.
Faraday
Future Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
12. Stockholders’ Equity
The number of
authorized, issued and outstanding stock, were as follows:
| |
March
31, 2022 | |
| |
Authorized
Shares | | |
Issued
Shares | | |
Shares
to be
Issued | | |
Total
Issued
and to be
Issued Shares | |
Preferred Stock | |
| 10,000,000 | | |
| — | | |
| — | | |
| — | |
Class A Common Stock | |
| 750,000,000 | | |
| 238,197,018 | | |
| 20,410,111 | | |
| 258,607,129 | |
Class B Common Stock | |
| 75,000,000 | | |
| 64,000,588 | | |
| — | | |
| 64,000,588 | |
| |
| 835,000,000 | | |
| 302,197,606 | | |
| 20,410,111 | | |
| 322,607,717 | |
| |
December
31, 2021 | |
| |
Authorized
Shares | | |
Issued
Shares | | |
Shares
to be
Issued | | |
Total
Issued
and to be
Issued Shares | |
Preferred Stock | |
| 10,000,000 | | |
| — | | |
| — | | |
| — | |
Class A Common Stock | |
| 750,000,000 | | |
| 168,693,323 | | |
| 89,152,130 | | |
| 257,845,453 | |
Class B Common Stock | |
| 75,000,000 | | |
| — | | |
| 64,000,588 | | |
| 64,000,588 | |
| |
| 835,000,000 | | |
| 168,693,323 | | |
| 153,152,718 | | |
| 321,846,041 | |
Warrants
The number of
outstanding warrants to purchase the Company’s Class A Common Stock as of March 31, 2022 and December 31, 2021 were as
follows:
| |
Number
of
Warrants | | |
Exercise
Price | | |
Expiration
Date |
Public Warrants | |
| 22,977,568 | | |
$ | 11.50 | | |
July 21, 2026 |
Private Warrants(1) | |
| 674,551 | | |
$ | 11.50 | | |
July 21, 2026 |
Other warrants | |
| 4,544,258 | | |
$ | 10.00 | | |
Various through August 10, 2028 |
Total | |
| 28,196,377 | | |
| | | |
|
| (1) | The Private Warrants are recorded in Other liabilities, less current portion in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021. |
13. Stock-Based Compensation
2021 SI Plan
In July 2021,
the Company adopted the 2021 Stock Incentive Plan (“2021 SI Plan”). The 2021 SI Plan allows the Board of Directors to grant
up to 49,573,570 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other
stock-based awards for the Company’s Class A Common Stock to employees, directors, and non-employees. The number of shares of Class
A Common Stock available under the 2021 SI Plan will increase annually on the first day of each calendar year, beginning with the calendar
year ending December 31, 2022, and continuing until (and including) the calendar year ending December 31, 2031. Annual increases are
equal to the lesser of (i) 5 percent of the number of shares of Class A Common Stock issued and outstanding on December 31 of the immediately
preceding fiscal year and (ii) an amount determined by the Board of Directors. As of the effective date of the 2021 SI Plan, no further
stock awards have been or will be granted under the EI Plan or STI Plan.
As of March 31,
2022, the Company had 45,226,078 shares of Class A Common Stock available for future issuance under its 2021 SI Plan.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
A summary of
the Company’s stock option activity under the SI 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, 2021 | |
| — | | |
| | | |
| | | |
| | |
Granted | |
| 4,347,492 | | |
| 5.15 | | |
| | | |
| | |
Exercised | |
| — | | |
| | | |
| | | |
| | |
Cancelled/forfeited | |
| — | | |
| | | |
| | | |
| | |
Outstanding as of March 31,
2022 | |
| 4,347,492 | | |
$ | 5.15 | | |
| 9.79 | | |
$ | 498 | |
The weighted-average
assumptions used in the Black-Scholes option pricing model for awards granted during the three months ended March 31, 2022 are as
follows:
Risk-free interest rate: | |
| 1.61 | % |
Expected term (in years): | |
| 7.01 | |
Expected volatility: | |
| 43.50 | % |
Dividend yield: | |
| 0.00 | % |
As of March 31,
2022, the total remaining stock-based compensation expense for unvested stock options was $6,287, which is expected to be recognized
over a weighted average period of 2.6 years.
EI Plan
On February 1,
2018, the Board of Directors adopted the Equity Incentive Plan (“EI Plan”), under which the Board of Directors authorized
the grant of up to 42,390,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units,
and other stock-based awards for Legacy FF’s 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, 2021 | |
| 31,962,921 | | |
$ | 2.81 | | |
| 7.77 | | |
$ | 86,075 | |
Granted | |
| — | | |
| | | |
| | | |
| | |
Exercised | |
| (268,702 | ) | |
| 2.50 | | |
| | | |
| 729 | |
Cancelled/forfeited | |
| (1,049,835 | ) | |
| 3.40 | | |
| | | |
| | |
Outstanding as of March 31,
2022 | |
| 30,644,384 | | |
$ | 2.79 | | |
| 7.34 | | |
$ | 73,051 | |
As of March 31,
2022, the total remaining stock-based compensation expense for unvested stock options was $10,813, which is expected to be recognized
over a weighted average period of 2.83 years.
STI Plan
The Special Talent
Incentive Plan (“STI Plan”) allows the Board of Directors to grant up to 14,130,000 incentive and nonqualified stock options,
restricted shares, unrestricted shares, restricted share units, and other stock-based awards for Legacy FF’s Class A Ordinary Stock
to employees, directors, and non-employees.
Faraday Future
Intelligent Electric Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data)
(Unaudited)
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.
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, 2021 | |
| 9,526,727 | | |
$ | 5.55 | | |
| 8.0 | | |
$ | 13,905 | |
Granted | |
| — | | |
| | | |
| | | |
| | |
Exercised | |
| (492,973 | ) | |
| 2.41 | | |
| | | |
| 1,037 | |
Cancelled/forfeited | |
| (243,815 | ) | |
| 8.02 | | |
| | | |
| | |
Outstanding as of March 31,
2022 | |
| 8,789,939 | | |
$ | 5.74 | | |
| 8.4 | | |
$ | 10,759 | |
As of March 31,
2022, the total remaining stock-based compensation expense for unvested stock options was $6,669, which is expected to be recognized
over a weighted average period of approximately 3.76 years.
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:
| |
Three
Months Ended
March 31, | |
| |
2022 | | |
2021 | |
Research and development | |
$ | 1,622 | | |
$ | 591 | |
Sales and marketing | |
| 374 | | |
| 199 | |
General and administrative | |
| 1,350 | | |
| 1,730 | |
| |
$ | 3,347 | | |
$ | 2,520 | |
14. Net Loss per Share
Net Loss Per Share Attributable
to Common Stockholders
Basic net loss
per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average
number of shares issued and shares to be issued under the commitment to issue shares, as these shares are issuable for no consideration.
Diluted net loss
per share attributable to common stockholders adjusts the basic net loss per share attributable to common stockholders and the weighted-average
number of shares issued and shares to be issued under the commitment to issue shares for potentially dilutive instruments.
For purposes
of presentation of basic and diluted net loss per share, the Company includes shares to be issued in the denominator in accordance with
ASC 710-10-54-4 and ASC 260-10-45-48 as if they had been issued on the date of the merger, as such shares are non-contingent and are
issuable for no consideration (see Note 3, Business Combination).
The net loss
per common share was the same for the Class A and Class B Common 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
months ended March 31, 2022 and 2021.
Because the Company
reported net losses for all periods presented, all potentially dilutive Common Stock equivalents were determined to be antidilutive for
those periods and have been excluded from the calculation of net loss per share.
Faraday Future
Intelligent Electric Inc.
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:
| |
March
31,
2022 | | |
March
31,
2021 | |
Stock-based compensation awards –
SI Plan | |
| 4,347,492 | | |
| — | |
Stock-based compensation awards – EI Plan | |
| 30,644,384 | | |
| 31,762,113 | |
Stock-based compensation awards – STI Plan | |
| 8,789,939 | | |
| 6,854,436 | |
Public Warrants | |
| 22,977,568 | | |
| — | |
Private Warrants | |
| 674,551 | | |
| — | |
Other warrants | |
| 4,544,258 | | |
| 1,857,175 | |
Convertible notes payable | |
| 9,009,210 | | |
| 4,409,167 | |
Total | |
| 80,987,402 | | |
| 44,882,891 | |
15. Subsequent Events
The Company did
not identify any subsequent events that would have required adjustment or disclosure in the unaudited Condensed Consolidated Financial
Statements.
Report
of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of Faraday Future Intelligent Electric Inc.
Opinion on the Financial Statements
We have audited
the accompanying consolidated balance sheets of Faraday Future Intelligent Electric Inc. and its subsidiaries (the “Company”)
as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of stockholders’
equity (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, 2021 and 2020, 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. Those standards require that we
plan and perform the audits 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
May 13, 2022
We have served as the Company’s
auditor since 2018.
Faraday
Future Intelligent Electric Inc.
Consolidated
Balance Sheets
December
31, 2021 and 2020
(in
thousands, except share and per share data)
| |
2021 | | |
2020 | |
Assets | |
| | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 505,091 | | |
$ | 1,124 | |
Restricted cash | |
| 25,386 | | |
| 703 | |
Deposits | |
| 63,370 | | |
| 6,412 | |
Other
current assets | |
| 13,410 | | |
| 6,200 | |
Total current assets | |
| 607,257 | | |
| 14,439 | |
Property and equipment, net | |
| 293,135 | | |
| 293,933 | |
Other non-current assets | |
| 7,040 | | |
| 8,010 | |
Total
assets | |
$ | 907,432 | | |
$ | 316,382 | |
Liabilities and stockholders’
equity (deficit) | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 37,773 | | |
$ | 86,601 | |
Accrued expenses and other
current liabilities | |
| 90,512 | | |
| 52,382 | |
Related party accrued interest | |
| 11,231 | | |
| 82,260 | |
Accrued interest | |
| 8,263 | | |
| 36,030 | |
Related party notes payable | |
| 13,655 | | |
| 332,355 | |
Notes payable, current portion | |
| 132,372 | | |
| 149,199 | |
Vendor
payables in trust | |
| — | | |
| 110,224 | |
Total current liabilities | |
| 293,806 | | |
| 849,051 | |
Capital leases, less current
portion | |
| 7,570 | | |
| 36,501 | |
Other liabilities, less current
portion | |
| 3,720 | | |
| 1,000 | |
Notes
payable, less current portion | |
| 34,682 | | |
| 9,168 | |
Total
liabilities | |
| 339,778 | | |
| 895,720 | |
Commitments and contingencies (Note 12) | |
| | | |
| | |
Stockholders’ equity (deficit) | |
| | | |
| | |
Class A Common Stock, $0.0001 par value; 750,000,000 shares authorized; 168,693,323 and 93,099,596 shares issued and outstanding as of December 31, 2021 and 2020, respectively | |
| 17 | | |
| 9 | |
Class B Common Stock, $0.0001 par value; 75,000,000 shares authorized as of December 31, 2021 and 2020; no shares and 64,000,588 shares issued and outstanding as of December 31, 2021 and 2020, respectively | |
| — | | |
| 6 | |
Additional paid-in capital | |
| 3,482,226 | | |
| 1,817,760 | |
Accumulated other comprehensive
loss | |
| (6,945 | ) | |
| (5,974 | ) |
Accumulated
deficit | |
| (2,907,644 | ) | |
| (2,391,139 | ) |
Total
stockholders’ equity (deficit) | |
| 567,654 | | |
| (579,338 | ) |
Total
liabilities and stockholders’ equity (deficit) | |
$ | 907,432 | | |
$ | 316,382 | |
The accompanying
notes are an integral part of these consolidated financial statements.
Faraday
Future Intelligent Electric Inc.
Consolidated
Statements of Operations and Comprehensive Loss
Years
Ended December 31, 2021 and 2020
(in
thousands, except share and per share data)
| |
2021 | | |
2020 | |
Operating expenses | |
| | |
| |
Research and development | |
$ | 174,935 | | |
$ | 20,186 | |
Sales and marketing | |
| 17,118 | | |
| 3,672 | |
General and administrative | |
| 97,905 | | |
| 41,071 | |
Loss on disposal of property
and equipment | |
| 64,191 | | |
| 10 | |
Total
operating expenses | |
| 354,149 | | |
| 64,939 | |
| |
| | | |
| | |
Loss from operations | |
| (354,149 | ) | |
| (64,939 | ) |
Change in fair value measurements | |
| (22,700 | ) | |
| (5,076 | ) |
Interest expense | |
| (30,181 | ) | |
| (32,173 | ) |
Related party interest expense | |
| (16,663 | ) | |
| (41,546 | ) |
Other expense, net | |
| (5,668 | ) | |
| (5,455 | ) |
(Loss) gain at settlement of
related party notes payable, notes payable, and vendor payables in trust, net | |
| (86,904 | ) | |
| 2,107 | |
Loss before income taxes | |
| (516,265 | ) | |
| (147,082 | ) |
Income tax provision | |
| (240 | ) | |
| (3 | ) |
Net
loss | |
$ | (516,505 | ) | |
$ | (147,085 | ) |
| |
| | | |
| | |
Per share information (Note 16): | |
| | | |
| | |
Net loss per Common Stock – Class A
and Class B – basic and diluted | |
$ | (2.21 | ) | |
$ | (0.94 | ) |
Weighted average Common Stock outstanding –
Class A and Class B – basic and diluted | |
| 233,390,675 | | |
| 157,063,103 | |
| |
| | | |
| | |
Total comprehensive loss | |
| | | |
| | |
Net loss | |
$ | (516,505 | ) | |
$ | (147,085 | ) |
Change in foreign currency
translation adjustment | |
| (971 | ) | |
| (2,690 | ) |
Total
comprehensive loss | |
$ | (517,476 | ) | |
$ | (149,775 | ) |
The accompanying
notes are an integral part of these consolidated financial statements.
Faraday
Future Intelligent Electric Inc.
Consolidated
Statements of Stockholders’ Equity (Deficit)
Years
Ended December 31, 2021 and 2020
(in
thousands, except share data)
| |
Convertible
Preferred Stock | | |
Ordinary
Stock | | |
Common
Stock | | |
| | |
Accumulated | | |
| | |
Total | |
| |
Redeemable Preference | | |
Class B | | |
Class
A | | |
Class A | | |
Class B | | |
Additional
Paid-in | | |
Other
Comprehensive | | |
Accumulated | | |
Stockholder’s
Equity | |
| |
Shares(1) | | |
Amount | | |
Shares(1) | | |
Amount | | |
Shares(1) | | |
Amount | | |
Shares(1) | | |
Amount | | |
Shares(1) | | |
Amount | | |
Capital | | |
Loss | | |
Deficit | | |
(Deficit) | |
Balance
as of December 31, 2019, as previously reported | |
| 470,588,235 | | |
$ | 724,823 | | |
| 600,000,000 | | |
$ | 924,149 | | |
| 40,879,124 | | |
$ | — | | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
$ | 158,704 | | |
$ | (3,284 | ) | |
$ | (2,244,054 | ) | |
$ | (2,088,634 | ) |
Retroactive
application of recapitalization (Note 3) | |
| (470,588,235 | ) | |
| (724,823 | ) | |
| (600,000,000 | ) | |
| (924,149 | ) | |
| (40,879,124 | ) | |
| — | | |
| 72,269,976 | | |
| 7 | | |
| 84,780,000 | | |
| 8 | | |
| 1,648,957 | | |
| — | | |
| — | | |
| 1,648,972 | |
Balance as of December
31, 2019, effect of reverse recapitalization
| |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 72,269,976 | | |
| 7 | | |
| 84,780,000 | | |
| 8 | | |
| 1,807,661 | | |
| (3,284 | ) | |
| (2,244,054 | ) | |
| (439,662 | ) |
Conversion of
Class B Common Stock into Class A Common Stock (see Note 13) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 20,779,412 | | |
| 2 | | |
| (20,779,412 | ) | |
| (2 | ) | |
| — | | |
| — | | |
| — | | |
| — | |
Stock-based compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 9,505 | | |
| — | | |
| — | | |
| 9,505 | |
Exercise of stock options | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| | | |
| 54,259 | | |
| — | | |
| — | | |
| — | | |
| 115 | | |
| — | | |
| — | | |
| 115 | |
Issuance of warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 490 | | |
| — | | |
| — | | |
| 490 | |
Purchase of common
stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (4,051 | ) | |
| — | | |
| — | | |
| — | | |
| (11 | ) | |
| — | | |
| — | | |
| (11 | ) |
Foreign currency
translation | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,690 | ) | |
| — | | |
| (2,690 | ) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| | | |
| | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (147,085 | ) | |
| (147,085 | ) |
Balance
as of December 31, 2020, as recast | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| — | | |
$ | — | | |
| 93,099,596 | | |
$ | 9 | | |
| 64,000,588 | | |
$ | 6 | | |
$ | 1,817,760 | | |
$ | (5,974 | ) | |
$ | (2,391,139 | ) | |
$ | (579,338 | ) |
| (1) | The
shares of the Company’s common stock prior to the Business Combination (as defined
in Note 1) have been retrospectively recast to reflect the change in the capital structure
as a result of the Business Combination as described in Note 3. |
The accompanying
notes are an integral part of these consolidated financial statements.
Faraday Future
Intelligent Electric Inc.
Consolidated
Statements of Stockholders’ Equity (Deficit)
Years Ended
December 31, 2021 and 2020
(in thousands,
except share data)
| |
Common
Stock | | |
Additional | | |
Accumulated
Other | | |
| | |
Total Stockholder’s | |
| |
Class A | | |
Class B | | |
Paid-in | | |
Comprehensive | | |
Accumulated | | |
Equity | |
| |
Shares(1) | | |
Amount | | |
Shares(1) | | |
Amount | | |
Capital | | |
Loss | | |
Deficit | | |
(Deficit) | |
Balance
as of December 31, 2020, as recast | |
| 93,099,596 | | |
$ | 9 | | |
| 64,000,588 | | |
$ | 6 | | |
$ | 1,817,760 | | |
$ | (5,974 | ) | |
$ | (2,391,139 | ) | |
$ | (579,338 | ) |
Conversion of
The9 Conditional Obligation | |
| 423,053 | | |
| — | | |
| — | | |
| — | | |
| 2,863 | | |
| — | | |
| — | | |
| 2,863 | |
Conversion of
related party notes payable into Class A Common Stock (Note 9) | |
| 22,454,776 | | |
| 2 | | |
| — | | |
| — | | |
| 294,794 | | |
| — | | |
| — | | |
| 294,796 | |
Conversion of
notes payable into Class A Common Stock (Note 10) | |
| 7,688,153 | | |
| 1 | | |
| — | | |
| — | | |
| 98,374 | | |
| — | | |
| — | | |
| 98,375 | |
Issuance of
Class A Common Stock in the Business Combination, net of transaction costs (Note 3) | |
| 27,798,411 | | |
| 3 | | |
| — | | |
| — | | |
| 170,111 | | |
| — | | |
| — | | |
| 170,114 | |
Conversion of
assumed PSAC convertible and promissory notes payable into Class A Common Stock (Note 9) | |
| 80,000 | | |
| — | | |
| — | | |
| — | | |
| 790 | | |
| — | | |
| — | | |
| 790 | |
Conversion of
liabilities into Class A Common Stock in the Business Combination (Note 3) | |
| 22,586,392 | | |
| 3 | | |
| — | | |
| — | | |
| 311,795 | | |
| — | | |
| — | | |
| 311,798 | |
Conversion of
liabilities into the commitment to issue Class A Common Stock in the Business Combination (Note 3) | |
| — | | |
| — | | |
| — | | |
| — | | |
| 25,877 | | |
| — | | |
| — | | |
| 25,877 | |
Legacy FF Ordinary
Stock exchanged in the Business Combination for a commitment to issue Class A and Class B Common Stock (Note 3) | |
| (87,273,528 | ) | |
| (9 | ) | |
| (64,000,588 | ) | |
| (6 | ) | |
| 15 | | |
| — | | |
| — | | |
| — | |
Issuance of
Class A Common Stock in the PIPE Financing, net of transaction costs (Note 3) | |
| 76,140,000 | | |
| 8 | | |
| — | | |
| — | | |
| 692,397 | | |
| — | | |
| — | | |
| 692,405 | |
Settlement of
lawsuit with issuance of vested stock options (Note 12) | |
| — | | |
| — | | |
| — | | |
| — | | |
| 8,459 | | |
| — | | |
| — | | |
| 8,459 | |
Settlement of
accrued rent with issuance of vested stock options | |
| — | | |
| — | | |
| — | | |
| — | | |
| 951 | | |
| — | | |
| — | | |
| 951 | |
Vesting of restricted
stock award for employee bonus | |
| 1,350,970 | | |
| — | | |
| — | | |
| — | | |
| 18,617 | | |
| — | | |
| — | | |
| 18,617 | |
Stock-based
compensation | |
| — | | |
| — | | |
| — | | |
| — | | |
| 11,345 | | |
| — | | |
| — | | |
| 11,345 | |
Exercise of stock options | |
| 4,388,596 | | |
| — | | |
| — | | |
| — | | |
| 10,587 | | |
| — | | |
| — | | |
| 10,587 | |
Settlement of
receivables through receipt of Class A Common Stock | |
| (43,096 | ) | |
| — | | |
| — | | |
| — | | |
| (105 | ) | |
| — | | |
| — | | |
| (105 | ) |
Issuance of warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| 17,596 | | |
| — | | |
| — | | |
| 17,596 | |
Foreign currency
translation | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (971 | ) | |
| — | | |
| (971 | ) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (516,505 | ) | |
| (516,505 | ) |
Balance
as of December 31, 2021 | |
| 168,693,323 | | |
$ | 17 | | |
| — | | |
$ | — | | |
$ | 3,482,226 | | |
$ | (6,945 | ) | |
$ | (2,907,644 | ) | |
$ | 567,654 | |
| (1) | The shares of the Company’s common stock prior to the Business Combination (as defined in Note 1) have been retrospectively recast to reflect the change in the capital structure as a result of the Business Combination as described in Note 3. |
The accompanying
notes are an integral part of these consolidated financial statements.
Faraday
Future Intelligent Electric Inc.
Consolidated
Statements of Cash Flows — (Continued)
Years
Ended December 31, 2021 and 2020
(in
thousands)
| |
2021 | | |
2020 | |
Cash flows from operating activities | |
| | |
| |
Net loss | |
$ | (516,505 | ) | |
$ | (147,085 | ) |
Adjustments to reconcile net
loss to net cash used in operating activities | |
| | | |
| | |
Depreciation and amortization
expense | |
| 8,158 | | |
| 3,517 | |
Stock-based compensation | |
| 11,345 | | |
| 9,505 | |
Vesting of restricted stock
awards for employee bonus | |
| 18,617 | | |
| — | |
Loss on disposal of property
and equipment | |
| 64,191 | | |
| 10 | |
Change in fair value measurements | |
| 22,700 | | |
| 5,076 | |
Loss upon cancellation of a
lease | |
| — | | |
| 206 | |
(Gain) loss on foreign exchange | |
| (845 | ) | |
| 4,108 | |
Gain on forgiveness of accounts
payable and loss on write-off of vendor deposits, net | |
| (7,005 | ) | |
| — | |
Non-cash interest expense | |
| 41,014 | | |
| 66,020 | |
Loss
(gain) at settlement of related party notes payable, notes payable, and vendor payables in trust, net | |
| 86,904 | | |
| (2,107 | ) |
Gain on forgiveness of vendor
payables in trust | |
| (1,731 | ) | |
| — | |
Reserve for unrecoverable value
added taxes | |
| 6,404 | | |
| — | |
Other | |
| 842 | | |
| — | |
Changes in operating assets
and liabilities | |
| | | |
| | |
Deposits | |
| (48,503 | ) | |
| — | |
Other current and non-current
assets | |
| (21,717 | ) | |
| (3,347 | ) |
Accounts payable | |
| (36,625 | ) | |
| 11,500 | |
Accrued expenses and other current
liabilities | |
| 31,824 | | |
| 11,606 | |
Transfers
between vendor payables in trust and accounts payable | |
| 1,167 | | |
| (174 | ) |
Net cash
used in operating activities | |
| (339,765 | ) | |
| (41,165 | ) |
Cash flows from investing activities | |
| | | |
| | |
Payments for property and equipment | |
| (95,681 | ) | |
| (607 | ) |
Proceeds
from payments on notes receivable | |
| — | | |
| 3,600 | |
Net
cash (used in) provided by investing activities | |
| (95,681 | ) | |
| 2,993 | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from issuance of Class
A Common Stock in the Business Combination | |
| 229,583 | | |
| — | |
Proceeds from issuance of Class
A Common Stock pursuant to the PIPE Financing | |
| 761,400 | | |
| — | |
Transaction costs paid in connection
with the Business Combination | |
| (23,148 | ) | |
| — | |
Transaction costs paid in connection
with the PIPE Financing | |
| (61,130 | ) | |
| — | |
Proceeds from related party
notes payable | |
| 200 | | |
| 10,556 | |
Proceeds from notes payable,
net of original issuance discount | |
| 172,031 | | |
| 40,595 | |
Payments of related party notes
payable | |
| (38,217 | ) | |
| (3,589 | ) |
Payments of notes payable, including
liquidation premiums | |
| (48,210 | ) | |
| (32 | ) |
Payments of notes payable issuance
costs | |
| (3,355 | ) | |
| (4,562 | ) |
Payment of payables in vendor
payables in trust | |
| (27,722 | ) | |
| (4,500 | ) |
Transfers between vendor payables
in trust and accounts payable | |
| (1,167 | ) | |
| 174 | |
Payments of capital lease obligations | |
| (3,212 | ) | |
| (1,926 | ) |
Proceeds from exercise of stock
options | |
| 10,587 | | |
| 115 | |
Payments
of stock issuance costs | |
| (1,071 | ) | |
| — | |
Net
cash provided by financing activities | |
| 966,569 | | |
| 36,831 | |
Effect
of exchange rate changes on cash and restricted cash | |
| (2,473 | ) | |
| (186 | ) |
Net increase (decrease) in cash
and restricted cash | |
| 528,650 | | |
| (1,527 | ) |
Cash
and restricted cash, beginning of period | |
| 1,827 | | |
| 3,354 | |
Cash and
restricted cash, end of period | |
$ | 530,477 | | |
$ | 1,827 | |
Faraday Future
Intelligent Electric Inc.
Consolidated
Statements of Cash Flows — (Continued)
Years Ended
December 31, 2021 and 2020
(in
thousands)
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:
| |
2021 | | |
2020 | |
Cash | |
$ | 1,124 | | |
$ | 2,221 | |
Restricted
cash | |
| 703 | | |
| 1,133 | |
Total cash
and restricted cash, beginning of period | |
$ | 1,827 | | |
$ | 3,354 | |
| |
| | | |
| | |
Cash | |
$ | 505,091 | | |
$ | 1,124 | |
Restricted
cash | |
| 25,386 | | |
| 703 | |
Total cash
and restricted cash, end of period | |
$ | 530,477 | | |
$ | 1,827 | |
| |
| | | |
| | |
Supplemental disclosure of noncash
investing and financing activities | |
| | | |
| | |
Conversion
of related party notes payable and related party accrued interest to Class A Common Stock | |
$ | 294,796 | | |
$ | — | |
Conversion of notes payable and accrued interest to
Class A Common Stock | |
| 98,375 | | |
| — | |
Issuance of warrants | |
| 17,596 | | |
| 490 | |
Conversion
of assumed convertible and promissory notes payable to Class A Common Stock and Private Warrants | |
| 1,080 | | |
| — | |
Conversion of The9 Conditional Obligation to Class
A Common Stock | |
| 2,863 | | |
| — | |
Additions of property and equipment included in accounts
payable and accrued expenses | |
| 863 | | |
| 3,817 | |
Conversion of related party customer deposit to related
party notes payable | |
| — | | |
| 11,635 | |
| |
| | | |
| | |
Supplemental disclosure of noncash
investing and financing activities related to the Business Combination | |
| | | |
| | |
Exchange
of Legacy FF redeemable preference stock for a commitment to issue Class A Common Stock | |
$ | 859,182 | | |
$ | — | |
Exchange
of Legacy FF convertible preferred stock for a commitment to issue Class B Common Stock | |
| 697,611 | | |
| — | |
Settlement
of notes payable and accrued interest for a commitment to issue Class A Common Stock | |
| 68,541 | | |
| — | |
Settlement
of related party notes payable and related party accrued interest for a commitment to issue Class A Common Stock | |
| 69,218 | | |
| — | |
Settlement of vendor payable in trust to a commitment
to issue Class A Common Stock | |
| 96,186 | | |
| — | |
Reclassification
of deferred transaction costs paid in prior periods against the proceeds received in the Business Combination | |
| 7,865 | | |
| — | |
| |
| | | |
| | |
Supplemental disclosure of cash
flow information | |
| | | |
| | |
Cash paid for interest | |
$ | 6,317 | | |
$ | 3,137 | |
The accompanying
notes are an integral part of these consolidated financial statements.
Faraday
Future Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
1. Nature
of Business and Organization, Basis of Presentation and Summary of Significant Accounting Policies
Nature of Business and Organization
Faraday Future
Intelligent Electric Inc. (the “Company” or “FF”), formerly known as Property Solutions Acquisition Corp. (“PSAC”),
a holding company incorporated in the State of Delaware on February 11, 2020, conducts its operations through the subsidiaries of FF
Intelligent Mobility Global Holdings Ltd. (“Legacy FF”), founded in 2014 and is headquartered in Los Angeles, California.
Legacy FF had previously changed its name from Smart King Ltd. to FF Intelligent Mobility Global Holdings Ltd. on February 14, 2020.
On July 21, 2021
(the “Closing Date”), the Company consummated a business combination pursuant to an Agreement and Plan of Merger dated 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 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.” For more information regarding the Business Combination, see Note 3, Business Combination.
The Company operates
in a single operating segment and designs and engineers next-generation, intelligent, connected, electric 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 intends to commercially launch the FF 91 series in the third quarter of 2022.
Principles of Consolidation
and Basis of Presentation
The Consolidated
Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include
the accounts of the Company, its wholly-owned subsidiaries and joint ventures for which the Company is the primary beneficiary. All intercompany
transactions and balances have been eliminated upon consolidation.
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 (“CYN”).
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’ equity (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 and currency translation adjustments have been immaterial for the years ended December 31, 2021
and 2020.
Use of Estimates
The preparation
of the financial statements in conformity with GAAP requires management to make estimates and assumptions which affect the reported amounts
in the Consolidated Financial Statements.
Estimates are based
on historical experience, where applicable, and other assumptions which management believes are reasonable under the circumstances. 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; (v) estimated useful lives and impairment
of long-lived assets; (vi) fair value of options granted to employees and non-employees; and (vii) fair value of 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.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
Given the global
economic climate, unpredictable nature and unknown duration of the COVID-19 pandemic, estimates are subject to additional volatility.
As of the date the Company’s Consolidated Financial Statements were issued, the Company is not aware of any specific event or circumstance
that would require an update to 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 material 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 Consolidated Financial Statements.
Summary of Significant Accounting
Policies
Cash and Cash Equivalents
The Company considers
all highly liquid instruments with an original maturity of 90 days or less from the date of purchase to be cash equivalents.
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 at the measurement date. 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. When determining
the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company
considers the principal or most advantageous market in which the Company would transact and assumptions that market participants would
use when pricing the asset or liability.
The accounting
guidance for fair value measurement requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence
surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement.
The fair value
hierarchy is 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. |
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
Fair value estimates
are made at a specific point in time based on relevant market information and information about the financial or nonfinancial asset or
liability.
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 8, Fair Value of Financial Instruments.
Concentration of Risk
Financial instruments,
which subject the Company to concentrations of credit risk, consist primarily of cash, restricted cash, notes receivables, 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 (CNY 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 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.
The Company has
notes receivable of $0 and $40 and deposits of $63,370 and $6,412 as of December 31, 2021 and 2020, respectively.
The Company receives
certain components from sole suppliers. The inability of a supplier to fulfill the Company’s supply requirements could materially
impact future operating results.
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 assets lives, are charged to operating expense as incurred. Upon
sale or disposition, the cost and related accumulated depreciation or amortization are removed from the Consolidated Balance Sheets 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 and
for leasehold improvements, over the term of the lease, if shorter.
| |
Useful
Life
(in years) | |
Buildings | |
| 39 | |
Building improvements | |
| 15 | |
Computer hardware | |
| 5 | |
Tooling, machinery, and equipment | |
| 5 to 10 | |
Vehicles | |
| 5 | |
Computer software | |
| 3 | |
Leasehold
improvements | |
| Shorter of 15 years or term of the lease | |
Construction in
progress (“CIP”) consists of the construction activities related to the Company’s Hanford, California plant and tooling,
machinery and equipment being built to serve the manufacturing of production vehicles. These assets are capitalized and depreciated once
put into service.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
The amounts capitalized
in CIP that are held at vendor sites relate to the completed portion of work-in-progress of tooling, machinery and equipment built based
on the Company’s specific 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, net 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 an assets (or asset groups) 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 the assets carrying values. 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, 2021 and 2020. See Note 6, Property and Equipment,
Net for a discussion of disposals of Construction in process during the year ended December 31, 2021.
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 Consolidated Statements of Stockholders’ Equity (Deficit) and consists
of equity-related foreign currency translation adjustments, which are presented in the Consolidated Statements of Operations and Comprehensive
Loss.
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, license fees, and depreciation
and amortization. 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 items and
services related to R&D activities have been classified as Deposits on the Consolidated Balance Sheets and are included in operating
activities on the Company’s Consolidated Statements of Cash Flows. The Company expenses deposits as the services are provided and
prototype parts are received.
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 FF 91 to the market. The Company expenses advertising costs as incurred. Advertising costs were immaterial
for the years ended December 31, 2021 and 2020.
Stock-Based Compensation
The Company’s
stock-based compensation awards consist of stock options granted to employees, directors and non-employees for the purchase of common
stock. 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. For options with service conditions, the value of the award
is recognized as expense over the requisite service period on a straight-line basis. For performance-based awards, stock-based compensation
expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each
individual performance milestone becomes probable.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
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. The Company uses the contractual
term for non-employee awards.
Expected volatility
— The Company determines the expected volatility based on the historical average volatilities of publicly traded industry peers.
The Company 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 the Company’s own common stock price becomes available, unless circumstances
change such that the identified companies are no longer similar to the Company, in which case more suitable companies whose stock prices
are publicly available would be utilized in the calculation.
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 for the foreseeable
future.
Forfeiture rate —
Stock-based compensation expense is reduced for forfeitures, which the Company estimates 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.
Fair value of
common stock — Prior to the close of the Business Combination, there was no public market for Legacy FF’s Class A Ordinary
Stock. Therefore, Legacy FF’s Board of Directors (“Board”) determined the fair value of Legacy FF’s Class A 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 stock
was 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 granted stock options with exercise prices equal to the fair value of Legacy FF’s Class A Ordinary Stock on the date
of grant. After the Closing of the Business Combination, the closing price of the Company’s Class A Common Stock on the NASDAQ
is used as the fair value of the common stock.
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. As of December 31, 2021 and
2020, the Company had recorded a full valuation allowance on net deferred tax assets because the Company expects it is more likely than
not that the net deferred tax assets will not 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.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
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, 2021 and 2020.
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 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 guidance requires lessees to recognize lease liabilities and corresponding right-of-use
assets for all leases with lease terms 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
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 plans to adopt the standard on January
1, 2022 using the modified retrospective transition method, according to the adoption date afforded to emerging growth companies by Section
102(b)(1) of the JOBS Act. The Company will adopt Topic 842 using the Package of Practical Expedients as well as the practical expedients
relating to combining lease and non-lease components and not recording short-term leases. At the adoption date, the Company had three
capital leases, one in Hanford, California for its main production facility and two equipment leases, and multiple operating leases,
the main one in Gardena, California, for its corporate headquarters, which would be subject to the evaluation of the impact of the adoption
of Topic 842. The effects of the adoption on the Company’s financial statements is expected to be immaterial.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December
31, 2021 and 2020
(in
thousands, except share and per share data)
1. Nature
of Business and Organization, and Summary of Significant Accounting Policies (cont.)
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 the 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
for all entities other than public business entities that are SEC filers and are not eligible to be smaller reporting companies. Adoption
of the ASU can either be on a modified retrospective or full retrospective basis. The Company plans to adopt the standard on January
1, 2022 using the modified retrospective method. As discussed in Note 10, Notes Payable (2), the Company’s Optional Notes
entitle their holders to conversion rights that are required to be evaluated as part of the adoption impact of this standard. As discussed
in Note 8, Fair Value of Financial Instruments, the Company’s obligation to issue registered shares failed to qualify for
equity treatment prescribed in ASC 815-40-25-10 and 25-14 based on their registration rights, and is required to be evaluated as part
of the adoption impact of this standard. The effects of the adoption on the Company’s financial statements is expected to affect
the classification of the obligation to issue registered shares of Class A Common Stock from a liability to mezzanine equity upon adoption.
In May 2021, the
FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options. The ASU clarifies issuer’s accounting for modifications or exchanges of freestanding equity-classified written
call options (for example, warrants) that remain equity classified after modification or exchange. The ASU specifies the cost of a modification
or exchange of these written call options is the difference between the fair value of the modified or exchanged written call option and
the fair value of that written call option immediately before it was modified or exchanged. This cost shall be recognized based on the
substance of the transaction; as equity issuance cost if a financing transaction to raise equity, as debt issuance cost if a financing
transaction to raise debt, or other modifications not related to financing or compensation shall be recognized as a dividend. This ASU
is effective for fiscal years beginning after December 15, 2021 and is applied prospectively to modifications or exchanges occurring
after the effective date. The effects of the adoption of this standard on the Company’s financial statements is expected to be
immaterial.
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. Based on
its recurring losses from operations since inception and continued cash outflows from operating activities (all as described below),
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 were issued.
The Company’s
business plan contemplates that it will launch the FF 91 for delivery to customers beginning in Q3 2022, with testing, validation, and
certification complete in Q3 2022.
Since its formation,
the Company has devoted substantial effort and capital resources to strategic planning, engineering, design, and development of its electric
vehicle platform, development of initial electric vehicle models, and capital raising. Since inception, the Company has incurred cumulative
losses from operations, negative cash flows from operating activities, and has an accumulated deficit of $2,907,644 as of December 31,
2021. After the closing of the Business Combination and the PIPE Financing on July 21, 2021, the Company received gross proceeds aggregating
$990,983, which it used to pay $84,278 in transaction costs and $139,557 to settle certain liabilities. The Company expects to use the
remaining net proceeds of $767,148 to finance the ongoing operations of the business.
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 (see Note 9, Related Party Notes Payable and Note 10, Notes Payable), the sale of
Preferred and Common Stock (see Note 13, Stockholders' Equity (Deficit)), and the net proceeds received from the Business Combination
and the PIPE Financing (see Note 3, Business Combination).
The Company’s
ongoing liquidity needs will depend on the extent to which the Company’s actual costs vary from the Company’s estimates and
the Company’s ability to control these costs, as well as the Company’s ability to raise additional funds. The Company is
exploring various funding and financing alternatives to fund its ongoing operations, including equipment leasing, construction financing
of the Hanford, California manufacturing facility, secured syndicated debt financing, convertible notes, working capital loans, and equity
offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on the Company’s assessment
of opportunities available in the marketplace and the circumstances of the business at the relevant time.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
2. Liquidity
and Capital Resources and Going Concern (cont.)
The timely 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, control and effectively
manage its costs, as well as factors outside of the Company’s control, including those related to global supply chain disruptions,
the rising prices of materials and potential impact of the COVID-19 pandemic. Refer to the section titled, “Risk Factors”
for a full discussion of the risks associated with the COVID-19 pandemic. The Company’s forecasts and projections of working capital
reflect significant judgment and estimates for which there are inherent risks and uncertainties.
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 funding 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 December 31,
2021, the Company was in default on a related party note payable with a principal amount of $9,411. Subsequent to the balance sheet date,
in January 2022, the Company defaulted on the Optional Notes (see Note 10, Notes Payable). The holders of the Optional Notes have
waived the default.
The 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. 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. While the stay-at-home orders were lifted on June 15, 2021,
the Company continues to operate under various return-to-work protocols and must continue to follow certain safety and COVID-19 protocols.
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, including the Company’s supply chain, and on the 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.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business
Combination
On July 21, 2021,
the Company consummated the Business Combination. 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. Upon the consummation of the Business Combination,
the Company changed its name from Property Solutions Acquisition Corp. to Faraday Future Intelligent Electric Inc.
On the Closing
Date, and in accordance with the terms and conditions of the Merger Agreement, all issued and outstanding Legacy FF Ordinary Stock and
Convertible Preferred Stock were cancelled and converted into the holder’s right to receive shares of the Company’s Common
Stock at the exchange ratio of 0.14130 (“Exchange Ratio”). Gross proceeds from the PSAC trust account were $229,583, out
of which the Company received $206,435 in cash, after netting PSAC’s transaction costs related to the Business Combination, and
redemptions of $206. Each non-redeemed outstanding share of Common Stock of PSAC was converted into one share of Class A Common Stock
of the Company. The shares of Legacy FF held by Legacy FF shareholders were converted into the right to receive 127,949,403 shares of
the Company’s Class A Common Stock and 64,000,588 shares of the Company’s Class B Common Stock. The conversion of the right
to receive shares in the Company into Class A Common Stock or Class B Common Stock is subject to the shareholders executing and delivering
certain customary documents to the Company’s transfer agent (see Note 13, Stockholders Equity (Deficit)).
Commitment to Issue Class A and
Class B Common Stock
As part of the
Closing of the Business Combination, former stockholders and noteholders of Legacy FF are required to submit a signed Company share letter
of transmittal or converting debt letter of transmittal along with a lock-up agreement to the Company’s transfer agent in order
for shares of the Company to be issued in their name in exchange for their shares in, notes from, vendor trust or other supplier agreements
with, Legacy FF. As of December 31, 2021, the Company’s transfer agent issued 167,280,677 legally outstanding shares of Class
A Common Stock out of 320,433,395 shares of Class A and Class B Common Stock the Company is obligated to issue as part of the Business
Combination, including the conversion of certain notes payable, related party notes payable and Vendor Trust obligations which the Company
determined were legally settled upon the Closing pursuant to the terms of the agreements executed with those parties. Until the holder
of the right to receive shares of the Company’s Class A and Class B Common Stock is issued shares, that holder does not have any
of the rights of a stockholder.
The Company determined
that the obligation to issue shares of Class A and Class B Common Stock is indexed to the Company’s own equity, within the meaning
in ASC 815-10-15-74 and met the scope exception to not be subject to derivative accounting under ASC 815-40-25. As such, the Company
classified the obligation to issue shares of Class A and Class B Common Stock in equity.
For purposes
of presentation of shares outstanding in the Company’s financial statements, the Consolidated Balance Sheets and Consolidated Statements
of Stockholders’ Equity (Deficit) present legally issued and outstanding shares.
For purposes
of presentation of basic and diluted net loss per share in the Consolidated Statements of Operations and Comprehensive Loss, the Company
includes shares to be issued in the denominator in accordance with ASC 710-10-54-4 and ASC 260-10-45-48 as if they had been issued on
the date of the merger, as such shares are non-contingent and are issuable for no consideration.
Earnout Shares
Legacy FF shareholders,
as of the Closing Date of the Business Combination until its fifth anniversary, are entitled to 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
(“Earnout Shares”). The earnout triggering events and related Earnout Shares as defined in the Merger Agreement are:
| ● | The minimum earnout of 12,500,000 additional shares is triggered if the 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 (“Minimum Target Shares”); |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business Combination (cont.)
| ● | The maximum earnout of an additional 12,500,000 additional shares is triggered if the Class A Common Stock VWAP is greater than $15.50 per share 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 Company recognized
the Earnout Shares at fair value upon the closing of the Business Combination and classified them in Stockholders’ Equity (Deficit)
since the Earnout Shares were determined to be indexed to the Company’s own stock and meet the requirements for equity classification
in accordance with ASC 815-40. The Company treated the issuance of the Earnout Shares as a deemed dividend as the Business Combination
was accounted for as a reverse recapitalization. Since it had a deficit of retained earnings, the Company recorded the issuance of the
Earnout Shares in additional paid-in capital (“APIC”), where it had a net-nil impact on the APIC balance. The Company determined
that the fair value of the Earnout Shares at the Closing Date was $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.
Public and Private Warrants
In connection with
the Business Combination, the Company assumed 22,977,568 public warrants (“Public Warrants”) and 594,551 private warrants
(“Private Warrants”) previously issued by PSAC, each with an exercise price of $11.50 per share. The Public Warrants and
the Private Warrants are exercisable into Class A Common Stock within a period of five years from the Closing Date. The Company determined
that the Public Warrants were indexed to its own stock and met the requirements for equity classification in accordance with ASC 815-40.
The Company determined that the Private Warrants failed to meet the equity scope exception because the settlement provisions vary based
on the holder of the warrant, which is not an input into a fixed-for-fixed option pricing model. The Company recorded the Private Warrants
as a derivative liability measured at fair value within Other Liabilities, less Current Portion on the Consolidated Balance Sheets. The
fair value of the Private Warrants was $2,152 and $642 upon the Closing of the Business Combination and as of December 31, 2021,
respectively.
Reverse Recapitalization
While the legal
acquirer in the Business Combination was PSAC, for accounting and financial reporting purposes under GAAP, Legacy FF was determined to
be the accounting acquirer and the Business Combination was accounted for as a “reverse recapitalization” based on the facts
and circumstances, including the following:
| ● | Legacy
FF’s former shareholders hold a majority ownership interest in the combined company; |
| ● | Legacy
FF’s existing senior management team comprise senior management of the combined company; |
| ● | Legacy
FF is the larger of the companies based on historical operating activity and employee base;
and |
| ● | Legacy
FF’s operations comprise the ongoing operations of the combined company. |
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. Under this method of accounting, PSAC was treated as the “acquired” entity. Accordingly, the consolidated
assets, liabilities, and results of operations of Legacy FF became the historical financial statements of the Company, and PSAC’s
assets and liabilities were consolidated with Legacy FF’s on July 21, 2021. Operations of Legacy FF prior to the Business Combination
will be presented as those of the Company in future reports. The net assets of PSAC, as well as assumed transaction costs related to
the Business Combination, were recognized at their carrying value immediately prior to the Closing Date with no goodwill or other intangible
assets recorded and were as follows, net of transaction costs:
| |
PSAC Balances as of July
21, 2021 | |
Cash in the PSAC trust account at the Closing of the Business Combination | |
$ | 229,583 | |
Other current assets | |
| 36 | |
Accounts payable, accrued expenses, and other current liabilities | |
| (225 | ) |
Accrued transaction costs | |
| (5,108 | ) |
PSAC transaction costs assumed as part of the Business Combination | |
| (18,040 | ) |
Related party notes payable | |
| (1,080 | ) |
Private Warrants liability | |
| (2,152 | ) |
Obligation to issue registered shares
of Class A Common Stock assumed as part of the Business Combination | |
| (32,900 | ) |
Net assets acquired | |
$ | 170,114 | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business Combination (cont.)
Pursuant to the
terms of the Merger Agreement, immediately prior to the Closing, all of the issued and outstanding Class B Convertible Preferred Stock
held by FF Top Holding LLC (“FF Top”) converted into Legacy FF Class B Ordinary Stock at a ratio of 1:1. Upon the consummation
of the merger, these shares were cancelled and converted into the holder’s right to receive 64,000,588 shares of Class B Common
Stock using the Exchange Ratio. Similarly, immediately prior to the Closing, all other outstanding shares of Legacy FF converted into
Legacy FF Class A Ordinary Stock at a ratio of 1:1. Upon the consummation of the merger, these shares were cancelled and converted into
the holder’s right to receive 127,949,403 shares of Class A Common Stock using the Exchange Ratio. Each of the Company’s
options that were outstanding immediately prior to the closing of the Business Combination remained outstanding and converted into the
right to purchase Class A Common Stock equal to the number of original Legacy FF’s Ordinary Stock, subject to such options, multiplied
by the Exchange Ratio at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange
Ratio for aggregate outstanding options of 42,193,512 under the EI Plan and the STI Plan (defined under Note 14, Stock-Based Compensation)
as of the Closing. The outstanding warrants issued to a US-based investment firm were adjusted to increase the shares allowed to be purchased
to 2,687,083 shares of Class A Common Stock at an exercise price of $10.00 per share, in accordance with a down-round provision included
in the warrant agreements (see Note 10, Notes Payable). The aggregate amount of shares of Class A Common Stock issuable upon exercise
of these outstanding options and warrants is 44,880,595.
PIPE Financing
Concurrently with
the execution of the Merger Agreement, the Company entered into separate Subscription Agreements with a number of investors (“PIPE
Investors”) pursuant to which, on the Closing Date, the PIPE Investors purchased, and the Company issued, an aggregate of 76,140,000
shares of Class A Common Stock, for a purchase price of $10.00 per share with an aggregate purchase price of $761,400 (“PIPE Financing”).
Shares sold and issued in the PIPE Financing included registration rights. The closing of the Private Placement occurred immediately
prior to the Closing Date.
Settlement of Liabilities and
Commitment to Issue Shares
In conjunction
with the closing of the Business Combination, the Company paid $139,557 in cash and committed to issue 24,464,994 shares of Class A Common
Stock at a value of $10.00 per share to settle liabilities of the Company and to compensate current and former employees, including:
(i) notes payable principal amounts of $85,202 and accrued interest of $7,436; (ii) related party notes payable principal amounts of
$91,420 and accrued interest of $13,581; (iii) interests in the Vendor Trust of $124,671, including payables of $102,950 and purchase
orders in the amount of $8,380 related to goods and services yet to be received, and accrued interest thereon of $13,341; (iv) $19,791
of amounts due to vendors; and (v) $9,592 to current and former employees as a bonus. In addition, the Company issued 1,350,970 restricted
stock awards, net of forfeitures, to current employees as a bonus (see Note 14, Stock-Based Compensation).
In connection with
the Business Combination, the Company converted certain related party notes payable, notes payable, and beneficial interests in the Vendor
Trust into the right to receive Class A Common Stock at $10.00 per share which was below the fair value of the Class A Common Stock on
the date of conversion. The conversion resulted in the Company recording a loss upon settlement of the related party notes payable, notes
payables, Vendor Trust, and amounts due to vendors (including accrued interest thereon) of $94,727 in the Consolidated Statements of
Operations and Comprehensive Loss for the year ended December 31, 2021.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business Combination (cont.)
The
number of shares of Common Stock the Company committed to issue upon the Closing of the Business
Combination were as follows:
| |
Number
of shares | |
Class A and B Ordinary Stock outstanding
on July 1, 2021 | |
|
| 30,276,958 | |
Class
A Ordinary Stock issued through option exercises between July 1, 2021 and July 21, 2021, net of share repurchases | |
|
| 1,035,399 | |
Ordinary Stock outstanding prior
to the Business Combination | |
|
| 31,312,357 | |
Conversion of
Redeemable Preference Stock and Class B, Class A-1, Class A-2, and Class A-3 Convertible Preferred Stock into Class A and B Common
Stock | |
160,637,633 |
| | |
Issuance of Class A Common Stock in the Business Combination | |
27,798,411 |
| | |
Conversion of assumed convertible
notes into Class A Common Stock | |
80,000 |
| | |
Total note conversion and share
issuance pursuant to the reverse recapitalization* | |
|
| 188,516,044 | |
Conversion of liabilities into
Class A Common Stock in the Business Combination** | |
|
| 24,464,994 | |
Shares attributable to reverse
recapitalization | |
|
| 244,293,395 | |
Issuance of Class A Common
Stock attributable to PIPE Financing | |
|
| 76,140,000 | |
Total
shares of Class A and Class B Common Stock as of the closing of the Business Combination and related transactions | |
|
| 320,433,395 | |
| * | The corresponding adjustment to APIC relates to the reverse recapitalization. The adjustment is comprised of (i) $170,114 which represents the fair value of the consideration transferred in the Business Combination, less the excess of the fair value of the shares issued over the value of the net monetary assets of PSAC, net of transaction costs related to the business combination (ii) $1,815,637 which represents the conversion of the Redeemable Preference Stock and Convertible Preferred Stock into Ordinary Stock and, (iii) $800 to settle an aggregate principal amount of related party convertible notes of PSAC into Class A Common Stock. |
| ** | The Company committed to issue 6,921,814 shares of Class A Common Stock to convert related party notes payable (see Note 9, Related Party Notes Payable), 6,854,013 shares of Class A Common Stock to convert notes payable (see Note 10, Notes Payable), 9,618,542 shares of Class A Common Stock to convert liabilities in the Vendor Trust (see Note 11, Vendor Payables in Trust), 838,040 shares of Class A Common Stock to convert Future Work, and 232,585 shares of Class A Common Stock to settle other vendor liabilities. |
Subsequent to the
closing of the Business Combination, the Company issued 80,000 shares of Class A Common Stock and 80,000 Private Warrants to settle related
party notes of PSAC with an aggregate principal amount of $800 (see Note 9, Related Party Notes Payable).
Reconciliation of transaction
costs
Total direct and
incremental transaction costs aggregated to $125,943, of which $900 were expensed and the remaining $125,043 were recorded as a reduction
to APIC as equity transaction costs.
Below is a reconciliation
of the transaction costs related to the Business Combination and the PIPE Financing that were recorded as a reduction to APIC as equity
transaction costs:
| |
Reconciliation
at
the Closing Date | |
Consolidated Statements of Stockholders’ Equity
(Deficit) | |
| |
Proceeds from issuance of Class A Common
Stock in the Business Combination | |
$ | 229,583 | |
Transaction costs paid in connection
with the Business Combination | |
| (23,148 | ) |
Net proceeds
from issuance of Class A Common Stock in the Business Combination | |
| 206,435 | |
Net assets acquired
and liabilities assumed in the Business Combination, exclusive of cash and accrued transaction costs | |
| (3,421 | ) |
Obligation to issue registered
shares of Class A Common Stock for transaction services | |
| (32,900 | ) |
Net assets and liabilities acquired
in the Business Combination | |
$ | 170,114 | |
| |
| | |
Proceeds from issuance of Class A Common Stock in
the PIPE Financing | |
$ | 761,400 | |
Transaction
costs paid in connection with the issuance of Class A Common Stock in the PIPE Financing | |
| (61,130 | ) |
Reclassification
of deferred transaction costs paid in prior periods against proceeds received in the Business Combination | |
| (7,865 | ) |
Net proceeds from issuance of
Class A Common Stock in the PIPE Financing | |
$ | 692,405 | |
| |
| | |
Transaction costs paid in connection with the Business
Combination | |
$ | (23,148 | ) |
Transaction costs paid in connection with the PIPE
Financing | |
| (61,130 | ) |
Reclassification
of deferred transaction costs paid in prior periods against proceeds received in the Business Combination | |
| (7,865 | ) |
Obligation
to issue registered shares of Class A Common Stock for transaction services | |
| (32,900 | ) |
Total
transaction costs in connection with the Business Combination and the PIPE Financing | |
$ | (125,043 | ) |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business Combination (cont.)
Retroactive Application of Reverse
Recapitalization
As discussed above,
the Business Combination is accounted for as a reverse recapitalization of the Company’s equity structure. Pursuant to GAAP, the
Company recast its Consolidated Statements of Stockholders’ Equity (Deficit) from December 31, 2019, to the Closing Date,
the total stockholders’ equity (deficit) within the Company’s Consolidated Balance Sheet as of December 31, 2020, and
the weighted average Common Stock outstanding, and Class A and Class B, basic and diluted earnings per share for the year ended December 31,
2020, by applying the recapitalization retroactively.
The classes of
capital stock; authorized, issued, and outstanding amounts of stock; exercise prices of stock options and warrants; and conversion rates
of related party notes payable and notes payable are presented as recast throughout the Consolidated Financial Statements.
Retroactive Application of Reverse
Recapitalization to the Consolidated Statements of Stockholders’ Equity (Deficit)
Pursuant to the
terms of the Merger Agreement, as part of the closing of the Business Combination, all of the issued and outstanding shares of Class
B Convertible Preferred Stock of Legacy FF and all other issued and outstanding shares of Legacy FF Redeemable Preference Stock and Class
A-1, Class A-2, and Class A-3 Convertible Preferred Stock and Class A and Class B Ordinary Stock converted into either Legacy FF Class
B Ordinary Stock or Legacy FF Class A Ordinary Stock in an amount calculated by dividing them by the Exchange Ratio into a commitment
to issue 64,000,588 shares of Class B Common Stock and a commitment to issue 127,949,403 shares of Class A Common Stock.
|
|
Legacy
FF Capital Structure |
|
|
|
|
|
New
Capital Structure |
|
|
|
Outstanding Shares
Immediately Before Conversion on |
|
|
Exchange |
|
|
The
Commitment to issue the Company’s Common Stock |
|
|
|
Closing
Date |
|
|
Ratio |
|
|
Class
A |
|
|
Class
B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preference Stock |
|
|
470,588,235 |
|
|
|
0.14130 |
|
|
|
66,494,117 |
|
|
|
|
|
Class B Convertible Preferred Stock |
|
|
452,941,177 |
|
|
|
0.14130 |
|
|
|
|
|
|
|
64,000,588 |
|
Class A-1 Convertible Preferred Stock |
|
|
73,306,184 |
|
|
|
0.14130 |
|
|
|
10,358,162 |
|
|
|
|
|
Class A-2 Convertible Preferred Stock |
|
|
138,737,629 |
|
|
|
0.14130 |
|
|
|
19,603,624 |
|
|
|
|
|
Class
A-3 Convertible Preferred Stock(1) |
|
|
1,281,976 |
|
|
|
0.14130 |
|
|
|
181,143 |
|
|
|
|
|
Class A Ordinary Stock |
|
|
71,551,672 |
|
|
|
0.14130 |
|
|
|
10,109,892 |
|
|
|
|
|
Class B Ordinary Stock |
|
|
150,052,834 |
|
|
|
0.14130 |
|
|
|
21,202,465 |
|
|
|
|
|
|
|
|
1,358,459,707 |
|
|
|
|
|
|
|
127,949,403 |
|
|
|
64,000,588 |
|
| (1) | The
Company issued Convertible Preferred Stock Class A-3 immediately prior to the Closing of
the Business Combination to settle certain notes payable (see Note 10, Notes Payable).
These shares converted into a commitment to issue Class A Common Stock upon the Closing. |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
3. Business Combination (cont.)
Retroactive Application of Reverse
Recapitalization to the Consolidated Statements of Operations and Comprehensive Loss
Based on the retroactive
application of the reverse recapitalization to the Company’s Consolidated Statements of Stockholders’ Equity (Deficit), the
Company recalculated the weighted average shares for the years ended December 31, 2021 and 2020. The redeemable preference stock
and convertible preferred stock was converted to Legacy FF Ordinary Stock as of December 31, 2019, and combined with the basic and
diluted weighted-average Legacy FF Ordinary Stock which was retroactively converted to the Company’s Class A Common Stock using
the Exchange Ratio to conform to the recast Consolidated Statements of Stockholders’ Equity (Deficit) (see Note 16, Net Loss
per Share).
Retroactive Application of Reverse
Recapitalization to the Consolidated Balance Sheets
To conform to the
retroactive application of recapitalization of the Company’s Consolidated Statements of Stockholders’ Equity (Deficit), the
Company reclassified $724,823 of Legacy FF Redeemable Preference Stock and $697,643 of Legacy FF Class B Convertible Preferred Stock
to APIC, less amounts attributable to the par value of the common stock, as recast, as of December 31, 2020. Pursuant to the terms
of the Merger Agreement, as part of the closing of the Business Combination, the Company reclassified Convertible Preferred Stock Classes
A-1, A-2, and A-3 in the amounts of $119,047, $271,925 and $2,199, respectively, to APIC less amounts attributable to the par value of
Class A Common Stock.
4. 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 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. As such, LeSEE is consolidated by the Company within the Consolidated Financial
Statements.
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 had 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 represented a Level 3 financial instrument under the fair value
hierarchy (see Note 8, Fair Value of Financial Instruments). The fair value of The9 Conditional Obligation was $1,128 as of December 31,
2020 and was recorded in Current Liabilities on the Consolidated Balance Sheets. On November 22, 2020, the parties entered into an agreement
to convert the initial deposit into 423,053 shares of Class A Common Stock of the Company, which were issued on February 23, 2021. Neither
the Company nor The9 have made contributions to the joint venture as of December 31, 2021, and it has yet to commence business activities.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
4. Variable
Interest Entities and Joint Ventures (cont.)
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”),
which was also a subscriber in the PIPE Financing, pursuant to which the parties contemplate 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 (“Geely License”) 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 Geely License may
be terminated if the parties fail to enter into the joint venture definitive agreement.
On September 7,
2021, the Company paid Liankong Technologies Co., Ltd. (“Liankong”), a subsidiary of Geely Holding, which was 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, a one-time amount of $50,000 for a non-exclusive, perpetual, irrevocable, and sublicensable license to use a platform, the Geely
License. The Geely platform is an electric automotive chassis that the Company plans to use in the development of future electric vehicle
models. As the Company intends to use the license in the design, construction, and testing of pre-production prototypes and models of
future electric vehicles and the license has no alternative future use, the total cost to acquire the license has been expensed as incurred
as research and development within operating expenses in the Consolidated Statements of Operations and Comprehensive Loss for the year
ended December 31, 2021.
5. Deposits
and Other Current Assets
Deposits and other
current assets consists of the following as of December 31:
| |
2021 | | |
2020 | |
Deposits | |
| | |
| |
Deposits for research and development,
prototype parts and other | |
$ | 54,990 | | |
$ | 6,412 | |
Deposits for Future Work | |
| 8,380 | | |
| — | |
Total deposits | |
$ | 63,370 | | |
$ | 6,412 | |
| |
| | | |
| | |
Other current assets | |
| | | |
| | |
Prepaid expenses | |
$ | 11,119 | | |
$ | 762 | |
Other current assets | |
| 2,291 | | |
| 3,364 | |
Notes receivable | |
| — | | |
| 40 | |
Due from affiliate | |
| — | | |
| 2,034 | |
Total other current assets | |
$ | 13,410 | | |
$ | 6,200 | |
During the years
ended December 31, 2021 and 2020, the Company made deposits for R&D services, prototype parts, and other with its vendors, which
support the Company’s ongoing R&D efforts and operations. The Company expenses deposits as the services are provided and prototype
parts are received. The deposits also include $8,380 as of December 31, 2021 related to goods and services yet to be received (“Future
Work”) from the settlement of interests in the Vendor Trust. No goods and services were received against Future Work as of December
31, 2021 and 2020 (see Note 11, Vendor Payables in Trust).
During year ended
December 31, 2021, the Company entered into a hosting arrangement with Palantir Technologies Inc. (“Palantir”), which
was also a subscriber in the PIPE Financing. Unamortized hosting costs prepaid to Palantir are included in prepaid expenses as of December 31,
2021. Amortization expense related to the Palantir hosting arrangement and other prepaid software subscriptions totaled $4,597 and $745
for the years ended December 31, 2021 and 2020, respectively.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
6. Property
and Equipment, Net
Property and equipment,
net, consists of the following as of December 31:
| |
2021 | | |
2020 | |
Land | |
$ | — | | |
$ | 13,043 | |
Buildings | |
| 14,180 | | |
| 21,899 | |
Building improvements | |
| — | | |
| 8,940 | |
Computer hardware | |
| 3,051 | | |
| 4,058 | |
Tooling, machinery and equipment | |
| 8,868 | | |
| 5,451 | |
Vehicles | |
| 337 | | |
| 583 | |
Computer software | |
| 1,032 | | |
| 7,095 | |
Leasehold improvements | |
| 297 | | |
| 298 | |
Construction in process | |
| 275,048 | | |
| 251,633 | |
Less: Accumulated depreciation | |
| (9,678 | ) | |
| (19,067 | ) |
Total property and equipment,
net | |
$ | 293,135 | | |
$ | 293,933 | |
The Company’s
construction in process (“CIP”) 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 $275,048 and $251,633 of CIP,
$43,496 and $42,734 is held at Company facilities and $231,552 and $208,899 is held at vendor locations as of December 31, 2021
and 2020, respectively.
Depreciation and
amortization expense totaled $8,158 and $3,517 for the years ended December 31, 2021 and 2020, respectively.
On February 4,
2019, the Company entered into a Purchase and Sale Agreement (“PSA”) for the Company’s headquarters (“HQ”)
with Atlas Capital Investors V, LP (“Atlas”) for a sale price of $29,000. In March 2019, the Company entered into an agreement
to lease its headquarters back from Atlas for a term of three years, with an option to repurchase the property 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 agreement. Due to the inclusion of the purchase option in the lease agreement, the Company was considered to have continuing
involvement and, thus, accounted for the transaction as a failed sale leaseback, with the HQ assets subject to the sale leaseback remaining
on the balance sheet and the sale proceeds recorded as a liability in accordance with the financing method. The Company recognized a
$29,000 financing obligation recorded in Accrued expenses and other current liabilities and Capital leases, less current portion on the
Consolidated Balance Sheets as of December 31, 2020. No gain or loss was record on the failed sale-leaseback. The Company continued
to capitalize and depreciate the HQ asset. The ongoing lease payments to Atlas were recorded as reductions to the finance obligation
and Interest Expense in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and
2020. The Company recorded interest expense of $1,464 and $1,760 and during the years ended December 31, 2021 and 2020, respectively.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
6. Property
and Equipment, Net (cont.)
On October 29,
2021, the purchase option for the Gardena headquarters expired. Accordingly, the Company removed from its Consolidated Balance Sheets
the HQ asset, net and finance obligation in the amounts of $25,381 and $28,880, respectively, resulting in a gain of $3,499. The Company
recognized the gain using the installment method, deferring the gain and recognizing it over the remaining lease term of five years by
applying the percentage of profit inherent in the transaction to the remaining lease payments.
Capital leases
of $14,180 and $43,882 have been capitalized within property and equipment as of December 31, 2021 and 2020, respectively. The Company
has three capital leases, one in Gardena, California for its headquarters and two equipment leases.
Due to the build
out of the Company’s manufacturing facility in Hanford, California, the Company established an asset retirement obligation (“ARO”)
of $2,974 during the year ended December 31, 2021. The Company recorded an ARO liability and a corresponding ARO asset, within tooling,
machinery, and equipment. The ARO asset is depreciated to operating expense over the remaining term of the lease through December 2027.
During 2021, the
Company disposed of $72,055 of CIP relating to the abandonment of certain FF 91 program assets, primarily vendor tooling, machinery and
equipment, due to the redesign of the related FF 91 components and implementation of the Company’s cost reduction program. Disposals
of CIP of $64,191 were charged to operating expenses in the Consolidated Statements of Operations and Comprehensive Loss during the year
ended December 31, 2021. In addition, there were disposals of CIP of $7,864, which reduced Accounts Payable in the Consolidated Balance
Sheets as of December 31, 2021.
7. Accrued
Expenses and Other Current Liabilities
Accrued expenses
and other current liabilities consist of the following as of December 31:
| |
2021 | | |
2020 | |
Accrued expenses and other current liabilities | |
| | |
| |
Accrued payroll and benefits | |
$ | 21,752 | | |
$ | 19,180 | |
Accrued legal contingencies | |
| 16,881 | | |
| 5,025 | |
Capital lease, current portion | |
| 2,574 | | |
| 4,396 | |
Tooling, machinery, and equipment received not invoiced | |
| 7,243 | | |
| 509 | |
Engineering, design, and testing services received
not invoiced | |
| 6,620 | | |
| — | |
Deposits from customers | |
| 4,354 | | |
| 3,523 | |
Due to affiliates | |
| 6,673 | | |
| 5,123 | |
Obligation to issue registered shares of Class A Common
Stock | |
| 12,635 | | |
| — | |
Other current liabilities | |
| 11,780 | | |
| 14,626 | |
Total accrued expenses and other
current liabilities | |
$ | 90,512 | | |
$ | 52,382 | |
8. Fair
Value of Financial Instruments
Cash Equivalents
The fair value
of the Company’s money market funds is based on the closing price of these assets as of the reporting date, which are included
in cash equivalents. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are
valued using quoted prices for identical instruments in active markets. The Company had no cash equivalents at December 31, 2021 and
2020.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
8. Fair
Value of Financial Instruments (cont.)
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 they contain embedded liquidation premiums with conversion rights that represent embedded derivatives
(see Note 9, Related Party Notes Payable and Note 10, Notes Payable). Except for notes payable issued on June 9, 2021,
and August 10, 2021, 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 Company used a binomial lattice model to value the notes payable issued on June 9, 2021,
and August 10, 2021 to a US-based investment firm as described under Note 10, Notes Payable. A binomial lattice model is widely
used for valuing convertible notes. The significant assumptions used in the binomial lattice model include the risk-free rate, annual
dividend yield, expected life, and volatility of the Company's stock. Fair value measurements associated with related party notes payable
and notes payable represent Level 3 valuations under the fair value hierarchy.
The fair value
adjustments related to related party notes payables and notes payables were recorded in Change in Fair Value Measurements on the 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 (see Note 10, Notes
Payable (1)), the Company agreed to issue warrants to purchase a variable number of the Company’s shares (“Ares Warrants”).
The commitment to issue the Ares Warrants initially met the definition of a derivative and did not meet the equity scope exception in
ASC 815-40 as the warrants were not considered indexed to the entity’s own equity given the variable number of underlying shares
and exercise prices, and the fair value was recorded as a liability. 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. Upon issuance of the Ares Warrants on August 5, 2021,
the number of shares underlying the Ares Warrants and exercise price were fixed at 670,092 and $10.00 per share, respectively, and the
Ares Warrants met all other requirements of the equity scope exception under ASC 815-40. The issuance of the warrants satisfied the commitment
to issue warrants. As such, the Ares Warrants were determined to be equity classified and were recorded in APIC. The Company determined
that the fair value of the Ares Warrants as of August 5, 2021 was $2,507.
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 underlying stock price,
and the volatility of the underlying stock price.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
8. Fair
Value of Financial Instruments (cont.)
In conjunction
with notes payable issued under the NPA (see Note 10, Notes Payable (10)), on various dates in September 2020, January 2021 and
March 2021, the Company issued warrants to a US-based investment firm to purchase an aggregate of 1,187,083 shares of Class A Common
Stock with exercise price of $10.00 per share and expiration dates 7 years from the dates of issuance, which were adjusted for down-round
provisions in the original warrant agreements. The fair value of the warrants was recorded in APIC because the warrants met the derivative
accounting scope exception in ASC 815-40 for certain contracts involving an entity’s own stock. The Company estimated the fair
value of warrants issued in January 2021 and March 2021 to be $1,988 and the fair value of the warrants issued in September 2020 to be
$490, which are included in APIC on the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. The Company
utilized the Black-Scholes valuation model to value the September 2020, January 2021, and March 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 underlying
stock price, and the volatility of the underlying stock price. On August 10, 2021, these warrants were replaced with the issuance of
warrants with the rights to purchase 1,187,083 shares of Class A Common Stock at an exercise price of $10.00 per share and with the same
expiration dates as the previous warrants. The number of shares and exercise prices were adjusted for down-round provisions in the original
warrant agreements.
In conjunction
with the issuance of additional notes payable to the same US-based investment firm on June 9, 2021 (see Note 10, Notes Payable),
the Company issued warrants to purchase up to 1,500,000 of Class A Common Stock with an exercise price of $10.00 per share and an expiration
date 7 years from the date of issuance, which were adjusted for down-round provisions in the original warrant agreements. The Company
determined the warrants are indexed to the Company’s own stock and, as such, meet the scope exception in accordance with ASC 815-40.
Upon their issuance, the Company estimated the fair value of the warrants to be $5,125, which is recorded in APIC on the Consolidated
Balance Sheets as of December 31, 2021. The Company utilized the Black-Scholes valuation model to value the warrants.
In conjunction
with the issuance of the Optional Notes on August 10, 2021 (see Note 10, Notes Payable,(2)), the Company issued warrants to purchase
up to 1,187,083 shares of Class A Common Stock with an exercise price of $10.00 per share and an expiration date of August 10, 2028.
The fair value of the warrants was recorded in equity because the warrants meet the derivative accounting scope exception in ASC 815-40
for certain contracts involving an entity’s own stock. The Company estimated the fair value of the warrants to be $7,976, which
is included in APIC on the Consolidated Balance Sheets as of December 31, 2021. The Company utilized a Black-Scholes valuation model
to value the August 10, 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 underlying stock price, and the volatility of the underlying stock price.
Upon the Closing
of the Business Combination, the Company assumed 22,977,568 Public Warrants and 594,551 Private Warrants from PSAC. The Company also
issued 80,000 Private Warrants to settle related party notes of PSAC (see Note 3, Business Combination). The Public Warrants are
indexed to the Company’s own stock and, as such, meet the scope exception in accordance with ASC 815-40 to be classified in equity.
The Private Warrants are classified as liabilities and the fair value is included in Other Liabilities, Less Current Portion on the Consolidated
Balance Sheets. The Company valued the Private Warrants using a binomial lattice model. Inherent in a binomial lattice model are assumptions
related to risk free rate, annual dividend yield, expected warrant life, and volatility of the Company's stock. The Company estimated
the fair value of the Private Warrants to be $2,152 upon their assumption from PSAC on July 21, 2021 and $642 as of December 31,
2021. Changes in the fair value of the Private Warrants are recorded in Change in Fair Value Measurements in the Company’s Consolidated
Statements of Operations and Comprehensive Loss.
Fair value measurements
associated with the Private Warrants liabilities represent Level 3 valuations under the fair value hierarchy.
Obligation to Issue Registered
Shares of Class A Common Stock
PSAC entered
into a transaction services agreement, dated as of October 13, 2020 (and amended on October 28, 2020), pursuant to which Riverside Management
Group (“RMG”) provided consulting and advisory services in connection with the Business Combination in exchange for (i) $10,000
in cash from PSAC at the closing of the Business Combination, (ii) 1,697,500 unregistered 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) 690,000 unregistered shares of Class A Common Stock issued by the Company in conjunction with the closing of the Business Combination
having a value equal to $6,900 and an attributed value of $10.00 per share.
On July 18, 2021,
the Company entered into an omnibus transaction services fee agreement and acknowledgement (“Agreement and Acknowledgement”)
with RMG. Pursuant to the Agreement and Acknowledgement, the Company will issue 2,387,500 registered shares of Class A Common Stock to
the parties upon effectiveness of the registration statement covering these shares. As of December 31, 2021, the Company’s
registration statement is not effective.
As the Agreement
and Acknowledgement specified that delivery of these shares will occur upon effectiveness of a registration statement covering the shares,
which is considered to be outside of the control of the Company, this obligation failed to qualify for equity treatment under ASC 815-40-25-10
and 25-14, and net cash settlement is assumed.
As a result,
in conjunction with recording the assets and liabilities of PSAC on the closing of the Business Combination, the Company recorded a liability
of $32,900 to issue registered shares of Class A Common Stock, with a corresponding amount recorded in APIC as transaction costs in the
Consolidated Balance Sheets. As of December 31, 2021, the fair value of the liability was $12,635 resulting in a gain of $20,265 recorded
in the Change in Fair Value Measurements in the Consolidated Statements of Operations and Comprehensive Loss (see Note 13, Stockholders'
Equity (Deficit)).
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
8. Fair
Value of Financial Instruments (cont.)
The Company used
the probability-weighted expected return method (“PWERM”) to determine the fair value of the obligation to issue registered
shares. The PWERM framework is a scenario-based methodology that estimates the fair value of the obligation based upon an analysis of
future values of the settlement of the obligation to issue shares, assuming various outcomes. The probability weightings assigned to
certain potential scenarios were based on management’s assessment of the probability of settlement of the liability in cash or
shares and an assessment of the timing of settlement. In the equity settlement scenario, the obligation valuation was based on the Company’s
share price as of each valuation date. In the cash settlement scenario, the obligation valuation was based the cash payment that equates
to the share price times total shares to be issued, discounted to each valuation date.
Fair value measurements
associated with the obligation to issue shares 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:
| |
December
31, 2021 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Liabilities: | |
| | |
| | |
| |
Notes payable | |
$ | — | | |
$ | — | | |
$ | 161,282 | |
Private Warrants | |
| — | | |
| — | | |
| 642 | |
Obligation to issue registered
shares of Class A Common Stock | |
| — | | |
| — | | |
| 12,635 | |
| |
December
31, 2020 | |
| |
Level
1 | | |
Level
2 | | |
Level
3 | |
Liabilities: | |
| | |
| | |
| |
Related party notes
payable | |
$ | — | | |
$ | — | | |
$ | 32,949 | |
Notes payable | |
| — | | |
| — | | |
| 59,742 | |
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.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
8. Fair
Value of Financial Instruments (cont.)
The following
table summarizes financial instruments carried at fair value:
|
|
Related
Party Notes
Payable at
Fair Value |
|
|
Notes
Payable at
Fair Value |
|
|
The9
Conditional
Obligation |
|
|
Private
Warrants |
|
|
Obligation
to issue
Registered
Shares of
Class A
Common Stock |
|
Balance as of December 31, 2019 |
|
$ |
31,418 |
|
|
$ |
22,326 |
|
|
$ |
5,000 |
|
|
$ |
— |
|
|
$ |
— |
|
Proceeds |
|
|
— |
|
|
|
30,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Changes in fair value |
|
|
1,531 |
|
|
|
7,416 |
|
|
|
(3,872 |
) |
|
|
— |
|
|
|
— |
|
Balance as of December 31, 2020 |
|
$ |
32,949 |
|
|
$ |
59,742 |
|
|
$ |
1,128 |
|
|
$ |
— |
|
|
$ |
— |
|
Proceeds, net or original issuance discount |
|
|
— |
|
|
|
171,929 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Original issue
discount (1) |
|
|
— |
|
|
|
11,860 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Proceeds allocated to equity classified warrants |
|
|
— |
|
|
|
(17,596 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of warrant
liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
290 |
|
|
|
— |
|
Transaction costs
and consent fees charged to interest expense |
|
|
— |
|
|
|
5,022 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Private warrant
liability and obligation to issue registered shares assumed in Business Combination |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,152 |
|
|
|
32,900 |
|
Repayment of principal and liquidation premium |
|
|
(27,593 |
) |
|
|
(48,210 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion to equity |
|
|
(5,519 |
) |
|
|
(52,473 |
) |
|
|
(2,863 |
) |
|
|
— |
|
|
|
— |
|
Changes in fair value measurements |
|
|
163 |
|
|
|
31,008 |
|
|
|
1,735 |
|
|
|
(1,800 |
) |
|
|
(20,265 |
) |
Balance as of December 31, 2021 |
|
$ |
— |
|
|
$ |
161,282 |
|
|
$ |
— |
|
|
$ |
642 |
|
|
$ |
12,635 |
|
| (1) | Original issue discount represents the amount withheld by the note payable holder upon issuance of the note which will be paid, in addition to the full note payable principal, to the lender upon maturity of the notes payable. The original issue discount is included in Change in Fair Value Measurements on the Consolidated Statements of Operations and Comprehensive Loss. |
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
9. 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 of employees
and affiliates and other companies controlled or previously controlled by the Company’s founder and former CEO.
In connection
with the findings of the Special Committee investigation (see Note 17, Subsequent Events), the Company found misclassifications
in its Consolidated Financial Statements as of and for the year ended December 31, 2020, resulting in an understatement of related party
notes payable and overstatement of notes payable by $32,952, an overstatement of accrued interest and understatement of related party
accrued interest of $3,677, and an overstatement of interest expense and understatement of related party interest expense of $2,552.
This also resulted in an understatement of payments of related party notes payable and overstatement of payments of notes payable of
$1,652, an understatement of proceeds from related party notes payable and overstatement of proceeds from notes payable of $300 within
financing cash flows for the year ended December 31, 2020, and an inappropriate caption of the line item Conversion of customer deposit
to notes payable that should have been referred to as Conversion of related party customer deposit to related party notes payable in
the supplemental disclosure of non-cash financing activities for the same period. The effects of the misstatement also resulted in the
understatement of the disclosure of the changes in fair value of related party notes payable and overstatement of change in fair value
of notes payable of $1,425 in Note 8, Fair Value of Financial Instruments. The misstatements did not affect any subtotals or totals
on the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive Loss and Cash Flows
for the year ended December 31, 2020. The Company concluded that such misstatements were not material to the previously issued financial
statements, however, the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive
Loss and Cash Flows for the year ended December 31, 2020 have been revised to correct for these misstatements
Related party
notes payable consists of the following as of December 31, 2021:
| |
December
31, 2021 |
Note Name | |
Contractual
Maturity Date | |
Contractual
Interest Rates | | |
Unpaid
Balance | | |
Net
Carrying
Value at 12/31/21 | |
Related
party notes - China(1) | |
Due on Demand | |
| 18.00 | % | |
$ | 9,411 | | |
$ | 9,411 | |
Related
party notes - China various other(2) | |
Due on Demand | |
| 0.00 | % | |
| 4,244 | | |
| 4,244 | |
Total related
party notes payable | |
| |
| | | |
$ | 13,655 | | |
$ | 13,655 | |
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
9. Related
Party Notes Payable (cont.)
Related party
notes payable consists of the following as of December 31, 2020:
|
|
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 at
12/31/2020 |
|
Related
party note (3) |
|
June 30, 2021 |
|
|
12.00% |
|
|
$ |
240,543 |
|
|
$ |
— |
|
|
$ |
(861 |
) |
|
$ |
204 |
|
|
$ |
239,886 |
|
Related
party note (4) |
|
Due on Demand |
|
|
15.00% |
|
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,000 |
|
Related
party notes – NPA tranche (5) |
|
October 6, 2021 |
|
|
10.00% |
|
|
|
27,593 |
|
|
|
5,356 |
|
|
|
— |
|
|
|
— |
|
|
|
32,949 |
|
Related
party notes – China (1) |
|
Due on Demand |
|
|
18.00% |
|
|
|
9,196 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,196 |
|
Related
party notes – China various other (2)(6) |
|
Due on Demand |
|
|
0% coupon,
10.00% imputed |
|
|
|
6,548 |
|
|
|
— |
|
|
|
(190 |
) |
|
|
(22 |
) |
|
|
6,336 |
|
Related
party notes – China various other (6) |
|
Due on Demand |
|
|
8.99% |
|
|
|
1,410 |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
1,407 |
|
Related
party notes – Other (7) |
|
Due on Demand |
|
|
0.00% |
|
|
|
424 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
424 |
|
Related
party notes – Other (8) |
|
June 30, 2021 |
|
|
6.99% |
|
|
|
4,160 |
|
|
|
— |
|
|
|
— |
|
|
|
(50 |
) |
|
|
4,110 |
|
Related
party notes – Other (9) |
|
June 30, 2021 |
|
|
8.00% |
|
|
|
6,452 |
|
|
|
— |
|
|
|
— |
|
|
|
(35 |
) |
|
|
6,417 |
|
Related
party notes - Other (10) |
|
June 30, 2021 |
|
|
1.52%, 8.99%, 8.00%, 2.86% |
|
|
|
8,440 |
|
|
|
— |
|
|
|
— |
|
|
|
(137 |
) |
|
|
8,303 |
|
Related
party notes – Other (11) |
|
Due on Demand, June 30, 2021 |
|
|
8.99%, 6.99% |
|
|
|
1,760 |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
1,749 |
|
Related
party notes – Other (12) |
|
June 30, 2021 |
|
|
8.00% |
|
|
|
11,635 |
|
|
|
— |
|
|
|
— |
|
|
|
(57 |
) |
|
|
11,578 |
|
Total
related party notes payable |
|
|
|
|
|
|
|
$ |
328,161 |
|
|
$ |
5,356 |
|
|
$ |
(1,051 |
) |
|
$ |
(111 |
) |
|
$ |
332,355 |
|
| (1) | 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, 2021 and 2020, the outstanding balance is subject to an 18.00% compounding interest rate per annum. |
| |
As
of and for the Year Ended
December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 9,411 | | |
$ | 9,196 | |
Accrued interest | |
| 11,231 | | |
| 7,646 | |
Interest expense | |
| 3,369 | | |
| 2,641 | |
Foreign exchange (gain) loss on principal | |
| 810 | | |
| 595 | |
Foreign exchange (gain) loss on accrued interest | |
| 679 | | |
| 463 | |
| (2) | The Company issued the following notes with various related parties in China. |
In 2018, the Company entered
into a $700 note payable with an employee. The note was payable on demand and bears interest at 0% per year. The note had no covenants
and was 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, 2021 and 2020,
the Company recognized interest expense of $16 and $34, respectively, related to the accretion of the debt discount. As of December 31,
2020, the unamortized debt discount was $16. The Company reclassified the $730 carrying value of this loan from related party notes payable
to notes payable during the year ended December 31, 2021 when the employee left the employment of the Company.
Faraday
Future Intelligent Electric Inc.
Notes
to Consolidated Financial Statements
December 31,
2021 and 2020
(in
thousands, except share and per share data)
9. Related
Party Notes Payable (cont.)
| |
As
of and for the Year Ended
December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 737 | |
Interest expense | |
| 16 | | |
| 34 | |
Foreign exchange (gain) loss on principal | |
| 30 | | |
| 48 | |
Reclassification to notes payable | |
| 730 | | |
| — | |
The Company has various
other unsecured related party borrowings totaling $4,244 at December 31, 2021. These borrowings do not have stated terms or a stated
maturity date.
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, 2021 and 2020, the
Company recognized interest expense of $141 and $310, respectively, related to the accretion of the debt discount. The unamortized debt
discount was immaterial for the years ended December 31, 2021 and 2020. The Company made principal payments of $900 during the year
ended December 31, 2021.
| |
As
of and for the Year Ended
December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 4,244 | | |
$ | 5,045 | |
Interest expense | |
| 141 | | |
| 310 | |
Foreign exchange (gain) loss on principal | |
| 99 | | |
| 326 | |
Principal payments in cash | |
| 900 | | |
| — | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
The Company settled
select related party notes payable during the year ended December 31, 2021 through the conversion of related party notes payable and
accrued interest into Class A Common Stock just prior to the Business Combination and with a combination of cash payments and commitment
to issue Class A Common Stock in settlement of outstanding principal plus accrued interest and conversion premiums pursuant to the Closing
of the Business Combination, as follows:
| |
December
31, 2021 |
Note Name | |
Contractual
Maturity Date | |
Contractual
Interest Rates | | |
Net
Carrying Value at 12/31/2020 | | |
Amortization
of Discounts & Fair Value Adjustments | | |
Accrued
Interest at Settlement | | |
Borrowing | | |
Cash
Payments of Principal and Interest | | |
Equity
Settlements of Principal and Interest | | |
Net Carrying
Value at 12/31/2021 | | |
Loss (Gain)
at Settlement | |
Settlement prior to the Business Combination: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Related
party note(3) | |
June 30, 2021 | |
| 12.00% | | |
$ | 220,690 | | |
$ | 657 | | |
$ | 73,448 | | |
$ | — | | |
$ | — | | |
$ | (294,795 | ) | |
$ | — | | |
$ | — | |
Settlement
in the Business Combination: | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Related
party note(3) | |
June 30, 2021 | |
| 12.00% | | |
| 19,196 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (19,196 | ) | |
| | | |
| 7,256 | |
Related
party note(4) | |
Due on Demand | |
| 15.00% | | |
| 10,000 | | |
| — | | |
| 3,708 | | |
| — | | |
| (13,708 | ) | |
| — | | |
| — | | |
| — | |
Related
party notes – NPA tranche(5) | |
October 9, 2021 | |
| 10.00% | | |
| 32,949 | | |
| 163 | | |
| 5,728 | | |
| — | | |
| (27,593 | ) | |
| (11,247 | ) | |
| — | | |
| 4,257 | |
Related
party notes – China various other(6) | |
Due on Demand | |
| 0% coupon, 10.00% imputed | | |
| 774 | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (774 | ) | |
| — | | |
| 292 | |
Related
party notes – China other(6) | |
Due on Demand | |
| 8.99% | | |
| 1,407 | | |
| 3 | | |
| 44 | | |
| — | | |
| — | | |
| (1,454 | ) | |
| — | | |
| 550 | |
Related
party notes – Other(7) | |
Due on Demand | |
| 0.00% | | |
| 424 | | |
| — | | |
| — | | |
| 200 | | |
| (624 | ) | |
| — | | |
| — | | |
| — | |
Related
party notes – Other(8) | |
June 30, 2021 | |
| 6.99% | | |
| 4,110 | | |
| 50 | | |
| — | | |
| — | | |
| — | | |
| (4,160 | ) | |
| — | | |
| 1,572 | |
Related
party notes – Other(9) | |
June 30, 2021 | |
| 8.00% | | |
| 6,417 | | |
| 35 | | |
| 1,195 | | |
| — | | |
| — | | |
| (7,647 | ) | |
| — | | |
| 2,891 | |
Related
party notes – Other(10) | |
June 30, 2021 | |
| 1.52%,8.99%, 8.00%, 2.86% | | |
| 8,303 | | |
| 137 | | |
| 819 | | |
| — | | |
| — | | |
| (9,259 | ) | |
| — | | |
| 3,500 | |
Related
party notes – Other(11) | |
Due on Demand, June 30, 2021 | |
| 8.99%, 6.99% | | |
| 1,749 | | |
| 11 | | |
| 378 | | |
| — | | |
| — | | |
| (2,138 | ) | |
| — | | |
| 808 | |
Related
party notes – Other(12) | |
June 30, 2021 | |
| 8.00% | | |
| 11,578 | | |
| 57 | | |
| 1,693 | | |
| — | | |
| — | | |
| (13,328 | ) | |
| — | | |
| 5,038 | |
Subtotal
settlements in the Business Combination | |
| 96,907 | | |
| 456 | | |
| 13,565 | | |
| 200 | | |
| (41,925 | ) | |
| (69,203 | ) | |
| — | | |
| 26,164 | |
Total | |
| |
| | | |
$ | 317,597 | | |
$ | 1,113 | | |
$ | 87,013 | | |
$ | 200 | | |
$ | (41,925 | ) | |
$ | (363,998 | ) | |
$ | — | | |
$ | 26,164 | |
Closing of the Business Combination
As described
in Note 3, Business Combination, in conjunction with the Closing of the Business Combination, the Company paid $41,925 in cash
and a commitment to issue 6,921,814 shares of Class A Common Stock to settle related party notes payable principal amounts of $91,420,
net carrying amounts of $96,907 and accrued interest of $13,565. Where the Company converted related party notes payable into Class A
Common Stock, the Company recorded a loss at settlement of the related party notes payable of $26,164 in the Consolidated Statements
of Operations and Comprehensive Loss for the year ended December 31, 2021 due to converting the related party notes payable at $10.00
per share which was below the fair value of the stock on the date of conversion.
(3) | 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. |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
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.
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.
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 were unsecured and
there were 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.
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 increase 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 was accounted for as an extinguishment with a loss on
extinguishment of $314 recorded in (Loss) Gain at Settlement 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 $657 and $2,586 was recorded in Interest Expense during the years ended December 31, 2021 and 2020, respectively, related to
the unamortized discount.
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 members of management.
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 was accounted
for as a troubled debt restructuring because the Company was 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.
On April 9, 2021, the Company
executed agreements with CYM Tech Holdings LLC to convert their notes with principal amounts of $194,810 and accrued interest of $71,764
into the commitment to issue Class A Common Stock. Under the agreements, the notes ceased to accrue interest on March 31, 2021. On May
13, 2021, principal amounts of $90,869 and accrued interest of $43,490 were converted into shares of Legacy FF convertible preferred
stock and on July 21, 2021, were converted into Class A Common Stock upon the closing of the Business Combination.
Prior to Closing of the
Business Combination, the Company converted principal amounts of $130,479 and accrued interest of $29,958 into Class A Common Stock.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the remaining principal of $19,196.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 240,543 | |
Accrued interest | |
| — | | |
| 64,827 | |
Interest expense | |
| 8,801 | | |
| 10,134 | |
Principal settled with equity | |
| 240,543 | | |
| — | |
Interest settled with equity | |
| 73,448 | | |
| — | |
| (4) | In 2019, the Company borrowed $10,000 from Evergrande Health Industry Group Limited (“China Evergrande”). China Evergrande is an affiliate of a significant shareholder of the Company. The note payable matured on June 30, 2019. The note payable bore interest at an annual rate of 10.00% if repaid through June 30, 2019 and increased to 15.00% per annum thereafter. The note payable was unsecured and there were no covenants associated with this note payable. |
In conjunction with the
Closing of the Business Combination, the Company paid cash to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 10,000 | |
Accrued interest | |
| — | | |
| 2,839 | |
Interest expense | |
| 869 | | |
| 1,611 | |
Principal payments in cash | |
| 10,000 | | |
| — | |
Interest payments in cash | |
| 3,708 | | |
| — | |
| (5) | The Company issued 10% interest notes with various related parties through the Note Purchase Agreements (“NPA”). |
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 was $200,000.
All obligations due under
the NPA bore 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.
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.
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 8, Fair Value of Financial
Instruments. The fair value of the note payable was $1,970 as of December 31, 2020.
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
8, Fair Value of Financial Instruments. The fair value of the note payable was $19,657 as of December 31, 2020.
In conjunction with the
Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 18,112 | |
Accrued interest | |
| — | | |
| 2,635 | |
Interest expense | |
| 1,064 | | |
| 1,840 | |
Principal and conversion premium settled with equity | |
| 3,622 | | |
| — | |
Interest settled with equity | |
| 3,638 | | |
| — | |
Principal payments in cash | |
| 18,112 | | |
| — | |
Interest payments in cash | |
| 62 | | |
| 62 | |
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 were 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. The Company
elected the fair value option for these notes payable. The note payable is collateralized by virtually all tangible and intangible assets
of the Company.
In conjunction with the
Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 8,581 | |
Accrued interest | |
| — | | |
| 1,418 | |
Interest expense | |
| 496 | | |
| 861 | |
Principal conversion premium settled with equity | |
| 1,716 | | |
| — | |
Interest payments settled with equity | |
| 1,914 | | |
| — | |
Principal payments in cash | |
| 8,581 | | |
| — | |
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. In conjunction with the Closing of the Business Combination, the Company paid cash and issued
Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 900 | |
Accrued interest | |
| — | | |
| 143 | |
Interest expense | |
| 50 | | |
| 90 | |
Principal conversion premium settled with equity | |
| 180 | | |
| — | |
Interest payments settled with equity | |
| 193 | | |
| — | |
Principal payments in cash | |
| 900 | | |
| — | |
| (6) | The Company issued the following notes with various related parties in China. |
In April 2017, the Company
entered into a $728 note payable with an employee. The note originally matured on October 2, 2017 and bore interest at 0% per year. The
note had no covenants and was unsecured.
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.
On September 25, 2020,
the notes 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 was 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
an immaterial gain on extinguishment and immaterial accretion of discount in the Consolidated Statements of Operations and Comprehensive
Loss during the years ended December 31, 2021 and 2020.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 766 | |
Accrued interest | |
| — | | |
| — | |
Interest expense | |
| 55 | | |
| 72 | |
Principal settled with equity | |
| 774 | | |
| — | |
Foreign exchange (gain) loss on principal | |
| 46 | | |
| 49 | |
In February 2020, the Company
borrowed $1,410 through a note payable from an employee. The note originally matured on August 14, 2020, bore interest at 8.99% per annum,
had no covenants and was unsecured.
As a result of the September
2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of that discount in the Consolidated
Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 1,410 | |
Accrued interest | |
| — | | |
| 69 | |
Interest expense | |
| 41 | | |
| 111 | |
Principal settled with equity | |
| 1,410 | | |
| — | |
Interest settled with equity | |
| 44 | | |
| — | |
Interest payments in cash | |
| 63 | | |
| 42 | |
Proceeds | |
| — | | |
| 1,410 | |
| (7) | In December 2020, the Company entered into two notes payable for a total of $424. The notes payable did not have a stated maturity or bear interest. The notes had no covenants and were unsecured. In March 2021, the Company received a $200 bridge loan. The two notes payable totaling $424 and the $200 bridge loan were repaid in cash during the year ended December 31, 2021. |
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 424 | |
Principal payments in cash | |
| 624 | | |
| — | |
Proceeds | |
| 200 | | |
| 424 | |
| (8) | 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 bore interest at 6.99%. |
As a result of the September
2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated
Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 4,160 | |
Accrued interest | |
| — | | |
| 313 | |
Interest expense | |
| 211 | | |
| 293 | |
Principal settled with equity | |
| 4,160 | | |
| — | |
Interest settled with equity | |
| 474 | | |
| — | |
| (9) | 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 bore interest at 8%. The notes had no covenants and were unsecured. |
As a result of the September
2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of discount in the Consolidated
Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 6,452 | |
Accrued interest | |
| — | | |
| 435 | |
Interest expense | |
| 321 | | |
| 435 | |
Principal settled with equity | |
| 6,452 | | |
| — | |
Interest settled with equity | |
| 721 | | |
| — | |
Principal payments in cash | |
| — | | |
| 1,969 | |
Proceeds | |
| — | | |
| 8,422 | |
| (10) | The Company issued the following notes with a related party. |
In July 2017, the Company
borrowed $22,400 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally
matured on December 31, 2019, bore interest at 1.52% per annum, had no covenants, and was unsecured. During 2017 and 2018, there
were a total of $18,000 of principal payments. In conjunction with the Closing of the Business Combination, the Company issued Class
A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 4,400 | |
Accrued interest | |
| — | | |
| 314 | |
Interest expense | |
| 37 | | |
| 84 | |
Principal settled with equity | |
| 4,400 | | |
| — | |
Interest settled with equity | |
| 351 | | |
| — | |
In December 2020, the Company
borrowed an additional $2,240 through a note payable from an entity formerly controlled by the Company’s founder and former CEO.
The note originally matured on July 1, 2020, bore interest at 8.99% per annum, had no covenants, and was unsecured. In conjunction
with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note
payable.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 2,240 | |
Accrued interest | |
| — | | |
| 202 | |
Interest expense | |
| 111 | | |
| 185 | |
Principal settled with equity | |
| 2,240 | | |
| — | |
Interest settled with equity | |
| 313 | | |
| — | |
In January 2020, the Company
borrowed an additional $300 through a note payable from an entity formerly controlled by the Company’s founder and former CEO.
The note originally matured on June 30, 2020, bore interest at 8% per annum, had no covenants, and was unsecured. In conjunction
with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 300 | |
Accrued interest | |
| — | | |
| 23 | |
Interest expense | |
| 13 | | |
| 23 | |
Principal settled with equity | |
| 300 | | |
| — | |
Interest settled with equity | |
| 36 | | |
| — | |
Proceeds | |
| — | | |
| 300 | |
In October 2018, the Company
borrowed $1,500 through a note payable from an entity formerly controlled by the Company’s founder and former CEO. The note originally
matured on December 31, 2019, bore interest at 2.86% per annum, had no covenants, and was unsecured. In conjunction with the Closing
of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 1,500 | |
Accrued interest | |
| — | | |
| 95 | |
Interest expense | |
| 24 | | |
| 43 | |
Principal settled with equity | |
| 1,500 | | |
| — | |
Interest settled with equity | |
| 119 | | |
| — | |
As a result of the September
2020 Modification of notes with principal amounts of $4,400, $2,240, $300, and $1,500, the Company recorded an immaterial gain on extinguishment
and immaterial accretion of debt discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended
December 31, 2021 and 2020.
| (11) | The Company issued the following notes with a related party. |
In March 2019, the Company
borrowed $1,500 through a note payable from a related party. The note originally matured on March 6, 2020, bore interest at 8.99%
per annum, had no covenants and was unsecured. Principal repayments of $1,000 were made in 2019 and $120 in 2020. In conjunction with
the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 380 | |
Accrued interest | |
| — | | |
| 99 | |
Interest expense | |
| 21 | | |
| 45 | |
Principal settled with equity | |
| 380 | | |
| — | |
Interest settled with equity | |
| 118 | | |
| — | |
Principal payments in cash | |
| — | | |
| 120 | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
In June 2019, the Company
borrowed $3,600 through a note payable from a related party, which was repaid in 2019. The note matured on July 5, 2019, bore interest
at 2.99% per annum, had no covenants and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued
Class A Common Stock to settle the related party note payable.
| |
As of and for the Year Ended
December 31, | |
| |
2021 | | |
2020 | |
Accrued interest | |
| — | | |
| 4 | |
Interest settled with equity | |
| 4 | | |
| — | |
In September 2019, the
Company borrowed $180 through a note payable from a related party. The note originally matured December 1, 2019, bore interest at
6.99% per annum, had no covenants, and was unsecured. In conjunction with the Closing of the Business Combination, the Company issued
Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 180 | |
Accrued interest | |
| — | | |
| 10 | |
Interest expense | |
| 8 | | |
| 6 | |
Principal settled with equity | |
| 180 | | |
| — | |
Interest settled with equity | |
| 17 | | |
| — | |
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, bore interest
at 6.99% per annum, had no covenants, and was unsecured. Principal payments of $1,500 were made in 2020. In conjunction with the Closing
of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the related party note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 1,200 | |
Accrued interest | |
| — | | |
| 192 | |
Interest expense | |
| 55 | | |
| 171 | |
Principal settled with equity | |
| 1,200 | | |
| — | |
Interest settled with equity | |
| 239 | | |
| — | |
Principal payments in cash | |
| — | | |
| 1,500 | |
Interest payments in cash | |
| — | | |
| 5 | |
As a result of the September
2020 Modification of the $380 notes, the $180 notes and the $1,200 notes, the Company recorded an immaterial gain on extinguishment and
immaterial accretion of the debt discount in the Consolidated Statements of Operations and Comprehensive Loss during the years ended
December 31, 2021 and 2020.
| (12) | The Company issued the following notes with a related party. |
During 2019, a U.S. corporation
controlled by a related party of the Company made deposits of $11,635 with the Company as a right of first refusal to lease 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 related party notes payable as of December 31, 2020. The note matured on December 31,
2020, bore interest at 8.0% per annum, had no covenants, and was unsecured.
As a result of the September
2020 Modification, the Company recorded an immaterial gain on extinguishment and immaterial accretion of debt discount in the Consolidated
Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the related party note payable.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
9.
Related Party Notes Payable (cont.)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 11,635 | |
Accrued interest | |
| — | | |
| 1,177 | |
Interest expense | |
| 515 | | |
| 933 | |
Principal settled with equity | |
| 11,635 | | |
| — | |
Interest settled with equity | |
| 1,692 | | |
| — | |
Assumed Related Party Notes Payable
in the Business Combination
As part of the
Business Combination, the Company assumed related party promissory notes of $500 and related party convertible notes of $300, which PSAC
issued to certain related parties during 2021. The promissory note was non-interest bearing and due on the date on which the Company
consummates a Business Combination and was unsecured. The convertible note was non-interest bearing and due on the date on which the
Company consummates a Business Combination and was unsecured. The convertible related party notes were fair valued at $580 at the Closing
Date. As part of the Closing of the Business Combination, the Company issued Class A Common Stock and 80,000 Private Warrants to settle
related party notes of PSAC with an aggregate principal amount of $800.
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 is $13,337 and $287,183 as of December 31, 2021 and 2020, respectively.
Schedule of Principal Maturities
of Related Party Notes Payable
The future scheduled
principal maturities of related party notes payable as of December 31, 2021 were as follows:
Years ended December 31, | |
| |
Due on demand | |
$ | 13,655 | |
10.
Notes Payable
Notes payable consists
of the following as of December 31, 2021:
| |
December
31, 2021 |
Note
Name | |
Contractual
Maturity Date | |
Contractual
Interest Rates | | |
Unpaid
Balance | | |
Fair
Value Measurement Adjustments | | |
Original issue
discount and proceeds allocated to warrants | | |
Net
Carrying Value | |
March
1, 2021 Notes(1) | |
March 1, 2022 | |
| 14.00 | % | |
$ | 55,000 | | |
$ | 7,692 | | |
$ | (5,997 | ) | |
$ | 56,695 | |
August
26, 2021 Notes(1) | |
March 1, 2022 | |
| 14.00 | % | |
| 30,000 | | |
| 1,011 | | |
| (87 | ) | |
| 30,924 | |
June
9, 2021 Note 1 and Note 2(2) | |
December 9, 2022 | |
| — | % | |
| 40,000 | | |
| 8,503 | | |
| (9,522 | ) | |
| 38,981 | |
August
10, 2021 Optional Notes(2) | |
February 10, 2023 | |
| 15.00 | % | |
| 33,917 | | |
| 12,283 | | |
| (11,518 | ) | |
| 34,682 | |
Notes
payable - China various other(3) | |
Due on demand | |
| — | % | |
| 5,458 | | |
| — | | |
| — | | |
| 5,458 | |
Notes payable(4) | |
April 17, 2022 | |
| 1.00 | % | |
| 193 | | |
| — | | |
| — | | |
| 193 | |
Auto
loans | |
Various | |
| Various | | |
| 121 | | |
| — | | |
| — | | |
| 121 | |
| |
| |
| | | |
$ | 164,689 | | |
$ | 29,489 | | |
$ | (27,124 | ) | |
$ | 167,054 | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
Notes payable consists
of the following as of December 31, 2020:
| |
December 31, 2020 |
|
Note Name | |
Contractual Maturity Date | |
Contractual Interest
Rates | | |
Unpaid Balance | | |
Fair Value Measurement
Adjustments | | |
Loss(Gain) on Extinguish-
ments | | |
Net Carrying Value | |
Note payable(5) | |
Contingent | |
| 12.00 | % | |
$ | 57,293 | | |
$ | — | | |
$ | — | | |
$ | 57,293 | |
Notes payable –
NPA tranche(6) | |
October 6, 2021 | |
| 10.00 | % | |
| 17,637 | | |
| 3,422 | | |
| — | | |
| 21,059 | |
Notes payable(7) | |
June 30, 2021 | |
| 12.00 | % | |
| 19,100 | | |
| — | | |
| — | | |
| 19,100 | |
Notes payable –
China various other(8) | |
Due on Demand | |
| 9.00 | % | |
| 3,677 | | |
| — | | |
| (18 | ) | |
| 3,659 | |
Notes payable –
China various other(8) | |
Various Dates 2021 | |
| 6.00 | % | |
| 4,869 | | |
| — | | |
| (62 | ) | |
| 4,807 | |
Notes payable –
China various other(3) | |
Due on Demand | |
| — | % | |
| 4,597 | | |
| — | | |
| — | | |
| 4,597 | |
Note payable(9) | |
March 9, 2021 | |
| — | % | |
| 15,000 | | |
| 2,712 | | |
| — | | |
| 17,712 | |
Note payable(10) | |
October 6, 2021 | |
| 12.75 | % | |
| 15,000 | | |
| 5,972 | | |
| — | | |
| 20,972 | |
Notes payable(4) | |
April 17, 2022 | |
| 1.00 | % | |
| 9,168 | | |
| — | | |
| — | | |
| 9,168 | |
| |
| |
| | | |
$ | 146,341 | | |
$ | 12,106 | | |
$ | (80 | ) | |
$ | 158,367 | |
| (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 March 1, 2022. |
In addition, in conjunction
with the issuance of the notes payable, the Company committed to issue the Ares Warrants to the lender to purchase the Company’s
Class A Common Stock no later than August 11, 2021, or if earlier, 15 days after consummation of the Business Combination. The warrants
have a term of six years, be equal to 0.20% of the fully diluted capitalization of FFIE’s Class A Common Stock and have an exercise
price of $10.00 per share. The commitment to issue the warrants meets the definition of a derivative, was accounted for as a liability,
and will be marked to fair value at the end of each reporting period with changes in fair market value recorded in the 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 (see Note 8, Fair Value of Financial
Instruments).
On August 5, 2021, the
Company issued Ares warrants to purchase 670,092 shares of Class A Common Stock at an exercise price of $10.00 per share. The warrants
are exercisable at any time within 6 years of the issuance date. Upon their issuance, the warrants met all requirements for equity classification
under the equity scope exception in ASC 815-40 as the number of shares underlying the warrants and their exercise price were fixed. Accordingly,
the Company determined the fair value of the Ares Warrants to be $2,507 on August 5, 2021 and recorded the value as a discount to the
Notes Payable and an increase in APIC in the Consolidated Balance Sheets as of December 31, 2021.
On August 26, 2021, the
Company exercised its option under the March 1, 2021 notes payable agreement with Ares to draw an additional principal amount of $30,000,
receiving net proceeds of $29,913, inclusive of $87 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 and mature on March
1, 2022. As the August 26, 2021 Notes mature in less than one year, according to the terms of the amended NPA, the Company expects to
repay them with a payment premium of 14% (“Payment Premium”). The Company has elected the fair value option to value the
notes as the notes include features, such as a contingently exercisable put option, which meet the definition of an embedded derivative.
Upon the Closing of the
Business Combination, the cash requirement prescribed in the NPA increased from $5,000 to $25,000. The Company has classified $25,000
as Restricted Cash on its Consolidated Balance Sheet as of December 31, 2021.
On February 25, 2022, the
Company paid $96,921 in cash to settle the March 1, 2021 Notes and the August 26, 2021 Notes with principal amount of $85,000, accrued
interest of $9,856 and Payment Premium of $2,065.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
March 1, 2021 Notes | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 55,000 | | |
$ | — | |
Accrued interest | |
| 6,455 | | |
| — | |
Interest expense | |
| 6,455 | | |
| — | |
Original issue discount | |
| 3,490 | | |
| — | |
Proceeds | |
| 51,510 | | |
| — | |
August 26, 2021 Notes | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 30,000 | | |
$ | — | |
Accrued interest | |
| 1,473 | | |
| — | |
Interest expense | |
| 1,473 | | |
| — | |
Original issue discount | |
| 87 | | |
| — | |
Proceeds | |
| 29,913 | | |
| — | |
| (2) | 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 Company received net proceeds of $35,603 as part of the June 2021 Notes inclusive of $4,200 of original issuance discount and $197 of debt issuance costs paid by the lender. The June 2021 Notes are subordinate to the notes payable issued to Ares on March 1, 2021 and August 26, 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. One of the June 2021 Notes with a principal amount of $20,000 contains a conversion premium that, within a year of a Qualified SPAC Merger, the then outstanding principal and accrued interest of the notes playable plus a 30% premium may convert into Class A Common Stock of the Company, at the election of the US-based investment firm. |
In conjunction with the
issuance of the June 2021 Notes, the Company issued warrants to the US-based investment firm to purchase up to 1,500,000 shares of the
Company’s Class A Common Stock for $10.00 per share and an expiration date of June 9, 2028, which were adjusted for down-round
provisions in the original warrant agreements. The fair value of the warrants of $5,125 upon issuance was recorded in APIC (see Note
8, Fair Value of Financial Instruments).
As part of the amendment
to the NPA from June 9, 2021, 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 and if drawn, would be subject to similar original issue discounts, warrant
provisions, and conversion premiums as the June 2021 Notes. The warrants issued with the June 2021 Notes and the Optional Notes, along
with the notes previously issued to the same lender, are provided with anti-dilution protection. The US-based investment firm has not
elected to convert the Optional Notes to Class A Common Stock and they are outstanding as of December 31, 2021.
On August 10, 2021, in
accordance with the NPA, the US-based investment firm exercised its option to purchase optional notes (“Optional Notes”)
with principal of $33,917, whose option was in conjunction with the original September 9, 2020, January 13, 2021 and March 12, 2021 notes
payable. The Company received net proceeds of $30,375, which is the total principal amount of $33,917 net of 8% original issue discount
and $828 of issuance costs. The Optional Notes bear interest at 15% beginning December 2021, and have a maturity date of February 10,
2023. The Optional Notes are convertible at the option of the holder with a conversion price of $10.00 per share. The Optional Notes
contain a conversion premium, effective until August 10, 2022, according to which the outstanding principal and accrued interest of the
notes payable at the time of liquidation plus a 30% premium are convertible into shares of Class A Common Stock. The Company elected
the fair value option to measure the Optional Notes (see Note 8, Fair Value of Financial Instruments).
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 Class
A Common Stock with an exercise price of $10.00 per share. The warrants are exercisable within seven years of their original issuance
dates. The fair value of the warrants of $7,976 upon issuance was recorded in APIC (see Note 8, Fair Value of Financial Instruments).
Subsequent to the balance
sheet date, in January 2022, the Company defaulted on the June 2021 Notes and the Optional Notes. The holders of the Optional Notes have
waived the default.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
June 9, 2021 Note 1 | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 20,000 | | |
$ | — | |
Original issue discount and debt issuance costs | |
| 1,797 | | |
| — | |
Proceeds | |
| 18,203 | | |
| — | |
June 9, 2021 Note 2 | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 20,000 | | |
$ | — | |
Original issue discount and debt issuance costs | |
| 2,600 | | |
| — | |
Proceeds | |
| 17,400 | | |
| — | |
August 10, 2021 Optional Notes | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 33,917 | | |
$ | — | |
Accrued interest | |
| 183 | | |
| — | |
Interest expense | |
| 183 | | |
| — | |
Original issue discount and debt issuance costs | |
| 3,542 | | |
| — | |
Proceeds | |
| 30,375 | | |
| — | |
| (3) | The Company issued notes with various third parties through its operations in China. |
In 2017 and 2018, the Company
borrowed $4,371 through notes payable from various Chinese lenders. As a result of the September 2020 Modification of the notes payable,
the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated Statements of
Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In 2019, the Company entered
into a $700 note payable with an employee. The Company reclassified the $730 carrying value of this loan from related party notes payable
to notes payable when the employee left the employment of the Company. The notes payable are payable on demand by the lenders, do not
have a stated interest rate, have no covenants, and are unsecured. The notes payable remain outstanding at December 31, 2021.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 5,458 | | |
$ | 4,597 | |
Foreign exchange (gain) loss on principal | |
| 133 | | |
| 297 | |
Reclassification from related party notes payable | |
| 730 | | |
| — | |
| (4) | On April 17, 2020, the Company received loan proceeds from East West Bank of $9,168 under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and provided for loans to qualifying businesses. The loans and accrued interest are forgivable so 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 note matured on April 17, 2022, had no covenants, and was unsecured. |
The Company was notified
by East West Bank that a principal amount of $8,975 as well as accrued interest of $155 relating to the PPP Loan had been forgiven by
the Small Business Administration as of December 31, 2021. The Company recorded the forgiveness of the principal and interest in
(Loss) Gain at Settlement of Related Party Notes Payable, Notes Payable, and Vendor Payables in trust, net in the Consolidated Statements
of Operations and Comprehensive Loss for the year ended December 31, 2021. The Company paid the remaining principal and accrued interest
in an aggregate amount of $195 in April 2022.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | 193 | | |
$ | 9,168 | |
Accrued interest | |
| 2 | | |
| 65 | |
Interest expense | |
| 92 | | |
| 65 | |
Payroll Protection Program principal forgiveness | |
| 8,975 | | |
| — | |
Payroll Protection Program interest forgiveness | |
| 155 | | |
| — | |
Proceeds | |
| — | | |
| 9,168 | |
The Company settled
select notes payable through the conversion of notes payable into Class A Common Stock just prior to the Business Combination and a combination
of cash payments and the commitment to issue Class A Common Stock in settlement of outstanding principal plus accrued interest and conversion
premiums pursuant to the Closing of the Business Combination, as follows:
| |
Year
ending December 31, 2021 | |
Note Name | |
Net Carrying
Value at 12/31/2020 | | |
Borrowings,
net of OID | | |
Fair
Value Measurement Adjustments | | |
Accrued
Interest at Settlement | | |
FX
and
Other | | |
Cash
Payment | | |
Equity
Settlement | | |
Net Carrying
Value at 12/31/2021 | | |
Loss (Gain) at
Settlement | |
Settlement prior to
the Business Combination: | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Note
payable(5) | |
$ | 57,293 | | |
$ | — | | |
$ | — | | |
$ | 17,177 | | |
$ | (1,293 | ) | |
$ | — | | |
$ | (73,177 | ) | |
$ | — | | |
$ | — | |
Notes payable(7) | |
| 19,100 | | |
| — | | |
| — | | |
| 6,098 | | |
| — | | |
| — | | |
| (25,198 | ) | |
| — | | |
| — | |
Subtotal
settlements prior to the Business Combination | |
| 76,393 | | |
| — | | |
| — | | |
| 23,275 | | |
| (1,293 | ) | |
| — | | |
| (98,375 | ) | |
| — | | |
| — | |
Settlements
in the Business Combination: | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Notes payable –
NPA(6) | |
| 21,059 | | |
| — | | |
| 104 | | |
| 3,614 | | |
| — | | |
| (17,636 | ) | |
| (7,141 | ) | |
| — | | |
| 2,699 | |
Notes payable –
China(8) | |
| 3,659 | | |
| — | | |
| — | | |
| 2,713 | | |
| 56 | | |
| — | | |
| (6,428 | ) | |
| — | | |
| 2,430 | |
Notes payable –
China(8) | |
| 4,807 | | |
| — | | |
| — | | |
| 757 | | |
| 110 | | |
| — | | |
| (5,674 | ) | |
| — | | |
| 2,145 | |
Note payable(9) | |
| 17,712 | | |
| — | | |
| 1,988 | | |
| — | | |
| 667 | | |
| — | | |
| (20,367 | ) | |
| — | | |
| 7,698 | |
January
13 and March 12, 2021 Notes(9) | |
| — | | |
| 16,790 | | |
| 6,935 | | |
| — | | |
| — | | |
| — | | |
| (23,725 | ) | |
| — | | |
| 8,968 | |
Note payable(10) | |
| 20,972 | | |
| — | | |
| 138 | | |
| 270 | | |
| 667 | | |
| (18,992 | ) | |
| (3,055 | ) | |
| — | | |
| 1,155 | |
January
13 and March 8, 2021 Notes(10) | |
| — | | |
| 8,750 | | |
| 4,901 | | |
| 82 | | |
| — | | |
| (11,582 | ) | |
| (2,151 | ) | |
| — | | |
| 813 | |
Subtotal
settlements in the Business Combination | |
| 68,209 | | |
| 25,540 | | |
| 14,066 | | |
| 7,436 | | |
| 1,500 | | |
| (48,210 | ) | |
| (68,541 | ) | |
| — | | |
| 25,908 | |
Notes payable(4) | |
| 9,168 | | |
| — | | |
| — | | |
| — | | |
| (8,975 | ) | |
| — | | |
| — | | |
| 193 | | |
| (8,975 | ) |
Total | |
$ | 153,770 | | |
$ | 25,540 | | |
$ | 14,066 | | |
$ | 30,711 | | |
$ | (8,768 | ) | |
$ | (48,210 | ) | |
$ | (166,916 | ) | |
$ | 193 | | |
$ | 16,933 | |
Conversion of Notes Payable
Just prior to
the Business Combination, the Company converted notes payable with an aggregate principal balance of $75,100 and accrued interest of
$23,275 into 7,688,153 shares of Class A Common Stock.
Closing of the Business Combination
As described
in Note 3, Business Combination, in conjunction with the closing of the Business Combination, the Company paid $48,210 in cash
and a commitment to issue 6,854,013 shares of Class A Common Stock to settle notes payable principal amounts of $85,202, net carrying
amount of $93,749, and accrued interest of $7,436. Where the Company converted notes payable into Class A Common Stock, the Company recorded
a loss at settlement of the notes payable of $25,908 in the Consolidated Statements of Operations and Comprehensive Loss for the year
ended December 31, 2021.
| (5) | 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, bore interest of 12.00% per annum, had no covenants, and were unsecured. |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
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
was 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 at the closing date. The modification was accounted for as a troubled debt restructuring
because the Company was 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 was 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.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 57,293 | |
Accrued interest | |
| — | | |
| 13,769 | |
Interest expense | |
| 3,408 | | |
| 7,387 | |
Foreign exchange (gain) loss on principal | |
| (1,293 | ) | |
| 4,108 | |
Principal settled with equity | |
| 56,000 | | |
| — | |
Interest settled with equity | |
| 17,177 | | |
| — | |
| (6) | The Company issued 10% interest notes with various third parties through the NPA. Notes payable issued under the NPA are collateralized by virtually all tangible and intangible assets of the Company. Upon both a preferred stock offering and prepayment notice by the holder or the maturity date of the notes payable, the holder of the notes payable may elect to convert all of the outstanding principal and accrued interest of the notes 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 8, Fair Value of Financial Instruments. 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. |
Between June 2019 and August
2019, the Company borrowed $17,637 through notes payable under the NPA. The notes originally matured on May 31, 2020 and bore interest
of 10% per annum. In conjunction with the Closing of the Business Combination, the Company paid cash and issued Class A Common Stock
to settle the notes payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 17,637 | |
Accrued interest | |
| — | | |
| 2,637 | |
Interest expense | |
| 976 | | |
| 1,768 | |
Principal conversion premium settled with equity | |
| 3,527 | | |
| — | |
Interest settled with equity | |
| 3,613 | | |
| — | |
Principal payments in cash | |
| 17,637 | | |
| — | |
| (7) | The Company issued the following notes with an interest rate of 12.00% per annum. |
On various dates in 2016,
the Company borrowed amounts aggregating of $31,500 through notes payable issued by a U.S. based investment firm. The notes had no covenants
and were unsecured.
In September and November,
2020, the notes payable were 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, required 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 was accounted for as a troubled debt restructuring.
The modification was 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 did not require bifurcation.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
In December 2016, the Company
borrowed $10,000 through notes payable issued by a U.S. based investment firm. The notes have no covenants and are unsecured. During
2019, the Company converted $600 of accrued interest into the principal balance of the notes payable. Just prior to the Business Combination,
the Company converted the outstanding principal balance and accrued interest into Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 10,600 | |
Accrued interest | |
| — | | |
| 2,547 | |
Interest expense | |
| 704 | | |
| 1,275 | |
Principal settled with equity | |
| 10,600 | | |
| — | |
Interest settled with equity | |
| 3,251 | | |
| — | |
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, had
no covenants, and was unsecured. Just prior to the Business Combination, the Company converted the outstanding principal balance and
accrued interest into Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 1,500 | |
Accrued interest | |
| — | | |
| 587 | |
Interest expense | |
| 112 | | |
| 203 | |
Principal settled with equity | |
| 1,500 | | |
| — | |
Interest settled with equity | |
| 699 | | |
| — | |
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, had no covenants,
and was unsecured. The Company made principal payments of $13,000 in 2018. Just prior to the Business Combination, the Company converted
the outstanding principal balance, conversion premium and accrued interest into Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 7,000 | |
Accrued interest | |
| — | | |
| 1,682 | |
Interest expense | |
| 465 | | |
| 842 | |
Principal and conversion premium settled with equity | |
| 10,375 | | |
| — | |
Interest settled with equity | |
| 2,147 | | |
| — | |
| (8) | The Company issued notes with various third parties through its operations in China. |
As a result of the September
2020 Modification the Company recorded an immaterial gain on extinguishment and immaterial accretion of the discount in the Consolidated
Statements of Operations and Comprehensive Loss during the years ended December 31, 2021 and 2020.
In April 2017, the Company
borrowed $3,496 through a note payable from a Chinese lender. The note originally matured on October 20, 2017, bore interest at
9.00% per annum, had no covenants, and was unsecured.
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 3,677 | |
Accrued interest | |
| — | | |
| 2,314 | |
Interest expense | |
| 374 | | |
| 637 | |
Principal settled with equity | |
| 3,715 | | |
| — | |
Interest settled with equity | |
| 2,713 | | |
| — | |
Foreign exchange (gain) loss on principal | |
| 219 | | |
| 237 | |
Foreign exchange (gain) loss on accrued interest | |
| 167 | | |
| 142 | |
Between January 2019 and
December 2019, the Company borrowed $11,515 through notes payable from a Chinese lender. The notes payable matured on January 16,
2020 and December 6, 2020, bore interest at 6% per annum, had no covenants, and were unsecured. During 2019, the Company made principal
payments of $8,155. In conjunction with the Closing of the Business Combination, the Company issued Class A Common Stock to settle the
notes payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 4,140 | |
Accrued interest | |
| — | | |
| 569 | |
Interest expense | |
| 139 | | |
| 235 | |
Principal settled with equity | |
| 4,181 | | |
| — | |
Interest settled with equity | |
| 713 | | |
| — | |
Foreign exchange (gain) loss on principal | |
| 260 | | |
| 219 | |
Foreign exchange (gain) loss on accrued interest | |
| 44 | | |
| 35 | |
Proceeds | |
| — | | |
| 766 | |
Between June and September
2020, the Company borrowed $761 through notes payable from a Chinese lender. The notes payable were payable on demand by the lender,
bore interest at 6% per annum, had no covenants, and were unsecured. In conjunction with the Closing of the Business Combination, the
Company issued Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 729 | |
Accrued interest | |
| — | | |
| 19 | |
Interest expense | |
| 24 | | |
| 19 | |
Principal settled with equity | |
| 736 | | |
| — | |
Interest settled with equity | |
| 44 | | |
| — | |
Principal payments | |
| — | | |
| 32 | |
Foreign exchange (gain) loss on principal | |
| (25 | ) | |
| — | |
Foreign exchange (gain) loss on accrued interest | |
| 1 | | |
| — | |
Proceeds | |
| — | | |
| 761 | |
| (9) | On September 9, 2020, the Company issued $15,000 of secured convertible promissory notes to a US-based investment firm by entering into a joinder to the NPA, received net proceeds of $13,800, inclusive of an 8% original issue discount. The senior convertible promissory notes bore interest at 0%. The NPA notes mature on the earliest of (i) March 9, 2022, (ii) the Vendor Trust maturity date (See Note 11, 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 was 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 8, Fair Value of Financial Instruments. The fair value
of the note payable was $17,712 as of December 31, 2020.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
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 525,000 shares of Class A Common Stock, as adjusted for certain down-round provisions, for a period of up to seven years, or September
9, 2027. The exercise price of the warrant is $10.00 each. The warrants are accounted for in equity based on 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 $490 using the Black-Scholes option-pricing model (see Note 8, Fair Value of Financial Instruments). Determining
the fair value of these warrants requires subjective assumptions, including the fair value of the underlying stock, risk-free interest
rate, expected volatility of the underlying stock, and the expected dividend yield. These estimates involve inherent uncertainties and
the application of management’s judgment.
On January 13, 2021, the
Company amended the NPA to increase the principal amount of its $15,000 note payable by $667 as a consent fee permitting the issuance
of additional notes payable. The Company recorded the consent fee in Interest Expense in the Consolidated Statements of Operations and
Comprehensive Loss for year ended December 31, 2021. In conjunction with the Closing of the Business Combination, the Company issued
Class A Common Stock to settle the note payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 15,000 | |
Principal and conversion premium settled with equity | |
| 20,367 | | |
| — | |
Proceeds | |
| — | | |
| 13,800 | |
On January 13, 2021, the
Company entered into a notes payable agreement under the NPA, (“January 13 Notes”) with a US-based investment firm for total
principal of $11,250, receiving net proceeds of $9,870, net 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. 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, net of an 8% original issue
discount. The terms of this note payable were the same as the note payable issued on January 13, 2021. The Company elected the fair value
option for these note payable because the inclusion of a conversion feature that allowed the lenders to convert the notes payable into
Class A Common Stock after the closing of the Business Combination.
In conjunction with the
issuance of the January 13 Notes and March 12 Notes, the Company issued warrants to purchase 662,083 shares of the Class A Common Stock
with an exercise price of $10.00 per share, as adjusted for certain down-round provisions. The warrants were issued with a term of seven
years. The Company recorded the fair value of the warrants in APIC in accordance with the derivative accounting scope exception in ASC
815 for certain contracts involving an entity’s own stock. The Company estimated the fair value of the warrants to be $1,988 using
the Black-Scholes option-pricing model (see Note 8, Fair Value of Financial Instruments).
In conjunction with the
Closing of the Business Combination, the Company issued Class A Common Stock to settle the note payable.
January 13 and
March 12, 2021 Notes | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | — | |
Original issue discount and debt issuance
costs | |
| 1,940 | | |
| — | |
Principal and conversion premium settled with equity | |
| 23,725 | | |
| — | |
Proceeds | |
| 16,310 | | |
| — | |
| (10) | 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 accrued 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 8, Fair Value of Financial Instruments. The fair value of the note payable was $20,972 as of December 31, 2020. |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
In conjunction with the
Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the notes payable.
| |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | 15,000 | |
Interest expense | |
| 1,334 | | |
| 366 | |
Principal conversion premium settled with equity | |
| 2,785 | | |
| — | |
Interest and adjustment fee settled with equity | |
| 270 | | |
| — | |
Principal and conversion premium payments in cash | |
| 18,992 | | |
| — | |
Interest payments in cash | |
| 1,197 | | |
| 366 | |
Proceeds | |
| — | | |
| 15,000 | |
On January 13, 2021, the
Company amended the NPA to permit the issuance of additional secured convertible notes payable and issued $3,750 of notes payable to
Birch Lake (“BL Notes”), receiving net proceeds of $3,285, net of a 6.50% original issue discount and $225 of debt issuance
costs paid directly by the lender. The BL Notes accrued interest at 8% per annum. The BL Notes contained a liquidation premium that ranges
from 35% to 45% depending on the timing of settlement, with 50% of this premium convertible into equity. 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 was a
contingently exercisable put option with a liquidation premium and represents an embedded derivative. The Company elected the fair value
option to measure this note payable (see Note 8, Fair Value of Financial Instruments).
On March 8, 2021, the Company
entered into a notes payable agreement under the NPA with Birch Lake for 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 accrued interest
at 15.75% per annum. The notes payable contained a liquidation premium that ranges from 42% to 52% depending on timing of settlement,
with 50% of the premium convertible into equity. 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 was a contingently exercisable put option with a liquidation
premium and represents an embedded derivative. The Company elected the fair value option to measure these notes payable (see Note 8,
Fair Value of Financial Instruments).
In conjunction with the
Closing of the Business Combination, the Company paid cash and issued Class A Common Stock to settle the notes payable.
January 13 and
March 8, 2021 Notes | |
As
of and for the Year Ended December 31, | |
| |
2021 | | |
2020 | |
Outstanding principal | |
$ | — | | |
$ | — | |
Original issue discount and debt issuance
costs | |
| 1,132 | | |
| — | |
Interest expense | |
| 632 | | |
| — | |
Principal conversion premium settled with equity | |
| 2,069 | | |
| — | |
Interest settled with equity | |
| 82 | | |
| — | |
Principal and conversion premium payments in cash | |
| 11,582 | | |
| — | |
Interest payments in cash | |
| 550 | | |
| — | |
Proceeds | |
| 8,218 | | |
| — | |
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 $5,350 and $105,610 as of December 31, 2021 and 2020, respectively.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
10.
Notes Payable (cont)
Schedule of Principal Maturities
of Notes Payable
The future scheduled
principal maturities of notes payable as of December 31, 2021 are as follows:
Years ended December 31, | |
| |
2022 | |
| 130,772 | |
2023 | |
| 33,917 | |
| |
$ | 164,689 | |
11.
Vendor Payables in Trust
On April 29,
2019, Legacy FF established the Faraday Vendor Trust (“Vendor Trust”), with the intention to stabilize its supplier base
by providing suppliers with the ability to exchange their unsecured trade receivables for secured trust interests. Repayment of the trust
interests was governed by a Trade Receivables Repayment Agreement dated as of April 29, 2019 (“Trade Receivables Repayment Agreement”).
All interests in the Vendor Trust were collateralized by a first lien, with third payment priority, in agreement with applicable intercreditor
arrangements, on virtually all tangible and intangible assets of Legacy FF. The applicable interest rate for the vendor trust principal
balance was 6.00%, calculated daily from the date of contribution and was non-compounding. Management determined that the economic substance
of the obligations under the Vendor Trust was an in-substance financing.
A total of $0
and $111,574 of Legacy FF’s trade payables have been included in the Vendor Trust with accrued interest of $0 and $11,840 as of
December 31, 2021 and 2020, respectively. During the year ended December 31, 2020, the Company made aggregate payments of $4,500
on the Vendor Trust. The Vendor Trust also included approximately $8,380 of purchase orders as of the Closing Date related to goods and
services yet to be received (“Future Work”). These vendors did not contribute any receivables into the Vendor Trust related
to the Future Work, 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 PSAC shares if a Qualified SPAC Merger (as defined in the Vendor Trust
Agreement) occurs. Management accounted for this modification as an extinguishment because the conversion feature was considered substantive,
as the conversion feature was considered to be reasonably possible to be exercised. The conversion feature did not require bifurcation
because it is clearly and closely related to the host instrument, since the conversion did not involve a substantial premium or discount.
As a result, the Company recorded a discount of $1,812 against the carrying value of the Vendor Payables in Trust. The Company recorded
accretion of $1,350 and $462 in Interest Expense during the years ended December 31, 2021 and 2020, respectively, related to the
discount created from the gain on extinguishment in the Consolidated Statements of Operations and Comprehensive Loss. These adjustments
resulted in the Vendor Trust having a net carrying value of $110,224 as of December 31, 2020.
On March 1, 2021,
the maturity date of the secured trust interests in the Vendor Trust was extended to the Closing of the Business Combination.
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 a portion of the total Future Work outstanding 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 part of their interest in the Vendor Trust totaling $5,367.
The vendors’ remaining interests were settled along with the outstanding interests in the Vendor Trust as part of the close of
the Business Combination.
On July 12, 2021,
the Company entered into an agreement with a vendor to cancel the vendor’s interests in the Vendor Trust totaling $1,167 and instead
transferring them to accounts payable to be repaid in cash as part of the ordinary course of business.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
11.
Vendor Payables in Trust (cont)
At the Closing
Date of the Business Combination, the Company settled the outstanding payables in the Vendor Trust and accrued interest, by paying $22,355
in cash and the commitment to issue 9,618,542 shares of Class A Common Stock. The Company recorded a loss at settlement of the Vendor
Trust, and accrued interest thereon, of $41,776 in the Consolidated Statements of Operations and Comprehensive Loss for the year ended
December 31, 2021 due to the payment of an exit fee of $2,250, as required by the Vendor Trust Agreement, and converting the beneficial
interests in the Vendor Trust at $10.00 per share which was below the fair value of the stock on the date of conversion.
The Company committed
to issue 838,040 shares of Class A Common Stock to settle Future Work, which were recorded as deposits in the amount of $8,380 as of
the Closing Date of the Business Combination.
Through the payments
and issuances of shares for outstanding payables, accrued interest and Future Work, the Company settled the outstanding interests in
the Vendor Trust and no amount remains outstanding as of December 31, 2021.
12.
Commitments and Contingencies
Purchase obligations
Purchase obligations
represent legally binding commitments to purchase inventory, tooling, machinery and equipment as well as items to be used in research
and development activities. Although open purchase orders are generally considered enforceable and legally binding, some of the Company’s
purchase orders give the Company the option to cancel, reschedule and/or adjust its requirements based on its business needs prior to
the delivery of goods or performance of services and to inspect and reject products, for example, if they do not comply with its specifications.
Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.
As of December 31,
2021, the Company had binding purchase obligations and other commitments of $388,672.
The Palantir License
In July 2021,
the Company and Palantir entered into a master agreement that sets forth the terms of the Palantir’s platform hosting arrangement
which is expected to be used as a central operating system for data and analytics. Subsequent to entering into this arrangement, Palantir
invested $25,000 in the Company through the PIPE Financing and became a shareholder of the Company. Under the platform hosting agreement,
the Company committed to pay a total of $47,000 of hosting fees over a six-year term, $5,333 of which was paid during the year ended
December 31, 2021. The software is cloud hosted for the entirety of the subscription term and the Company cannot take possession
of the software. Accordingly, the Company determined that the subscription agreement represents a hosting arrangement that is a service
contract. The Company amortizes the hosting costs on a straight-line basis over the agreement term.
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 April 2027. 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 $2,665 and $2,452 for the years ended December 31, 2021 and 2020, respectively.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
12.
Commitments and Contingencies (cont)
The minimum aggregate
future obligations under noncancelable operating leases as of December 31, 2021 were as follows:
Year ended December 31, | |
| |
2022 | |
$ | 2,384 | |
2023 | |
| 2,695 | |
2024 | |
| 2,775 | |
2025 | |
| 2,859 | |
2026 | |
| 2,944 | |
Thereafter | |
| 991 | |
| |
$ | 14,648 | |
The Company has
three capital leases, one in Hanford, California for its main production facility, and two equipment leases.
The minimum aggregate
future minimum lease payments under capital leases as of December 31, 2021 were as follows:
Years ended December 31, | |
|
2022 | |
$ | 2,574 | |
2023 | |
| 2,166 | |
2024 | |
| 1,757 | |
2025 | |
| 1,792 | |
2026 | |
| 1,840 | |
Thereafter | |
| 1,864 | |
| |
$ | 11,993 | |
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, the outcome
of any such claims and disputes cannot be predicted with certainty.
On December 23,
2021, a putative class action lawsuit alleging violations of the Securities Exchange Act of 1934 was filed in the United States District
Court, Central District of California, against the Company and its current Chief Executive Officer, its current Chief Financial Officer,
its current Chief Product and User Ecosystem Officer, as well as the CFO of Legacy FF, and the Co-CEOs of PSAC. On March 7, 2022, the
court appointed co-lead plaintiffs and Co-Lead Counsel. Co-lead Plaintiffs filed an amended complaint on May 6, 2022. Defendants’
currently scheduled deadline to respond to the amended complaint is July 5, 2022. Thereafter, the defendants will have the opportunity
to answer or file a motion to dismiss the lawsuit. The Company believes the suit is without merit and therefore intends to vigorously
defend the suit. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claims.
On March 8 and
March 21, 2022, putative derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims
were filed in the United States District Court, Central District of California. Additionally, on April 11 and 25, 2022, putative derivative
lawsuits alleging violations of the Securities Exchange Act of 1934 and various common law claims were filed in the United States District
Court, District of Delaware. These lawsuits purport to assert claims on behalf of the Company against numerous current and former officers
and directors of the Company. Given the early stages of the legal proceedings, it is not possible to predict the outcome of the claims.
As of December 31,
2021 and 2020, the Company had accrued contingent liabilities of $16,881 related to six legal matters and $6,025 related to four legal
matters, respectively, for potential financial exposure primarily related to breach of contracts and employment matters which are deemed
both probable of loss and reasonably estimable. As of December 31, 2021 and 2020, contingent liabilities of $16,881 and $5,025,
respectively, were recorded in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets. As of December 31,
2020, non-current contingent liabilities of $1,000 were recorded in Other Liabilities, Less Current Portion on the Company’s Consolidated
Balance Sheets.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
12.
Commitments and Contingencies (cont)
In July 2021,
the Company settled a legal matter with a former employee for $2,850 in cash and issued stock options to purchase 847,800 shares of Class
A Common Stock at an exercise price of $2.55 per share (“Settlement Options”) and a grant date fair value of $8,459. The
Settlement Options vested 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 damages, were voluntarily dismissed. The Company
accrued $5,000 related to this matter as of December 31, 2020 and upon reaching the settlement in June 2021, recorded an incremental
loss of $6,309 in general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss for the year
ended December 31, 2021.
During year ended
December 31, 2021, the Company recorded: (i) $7,584 related to an outstanding legal dispute for breach of a loan contract with the
plaintiff seeking damages; (ii) $5,400 related to a legal dispute for breach of lease under which the Company was named a co-defendant
in a civil action case with the plaintiff seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes
related to the lease, which was settled in January 2022, pursuant to which the Company agreed to pay $1,800 in cash in January 2022 and
an additional $3,400 plus 5% interest in October 2022; (iii) $1,672 related to an outstanding legal dispute for breach of service contract
with the plaintiff seeking damages including late payments; and (iv) $1,200 related to an outstanding legal dispute for software infringement.
During the year
ended December 31, 2020, the Company settled $2,500 of legal claims in cash. In addition, during the year ended December 31,
2020, the Company resolved a legal matter associated with a United States Department of Labor investigation without any additional fines
or penalties, resulting in the reversal of accrued expenses 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. 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 current liabilities on the Consolidated Balance Sheet as of December 31, 2020.
13.
Stockholders’ Equity (Deficit)
The number of
authorized, issued and outstanding stock, as recast, were as follows:
| |
December
31, 2021 | |
| |
Authorized
Shares | | |
Shares Issued | | |
Shares
to be Issued | | |
Total
Issued and to be Issued Shares | |
Preferred Stock | |
| 10,000,000 | | |
| — | | |
| — | | |
| — | |
Class A Common Stock | |
| 750,000,000 | | |
| 168,693,323 | | |
| 89,152,130 | | |
| 257,845,453 | |
Class B Common Stock | |
| 75,000,000 | | |
| — | | |
| 64,000,588 | | |
| 64,000,588 | |
| |
| 835,000,000 | | |
| 168,693,323 | | |
| 153,152,718 | | |
| 321,846,041 | |
| |
December
31, 2020 | |
| |
Authorized
Shares | | |
Issued Shares | | |
Shares
to be Issued | | |
Total
Issued and to be Issued Shares | |
Preferred Stock, as recast | |
| 10,000,000 | | |
| — | | |
| — | | |
| — | |
Class A Common Stock, as recast | |
| 750,000,000 | | |
| 93,099,596 | | |
| — | | |
| 93,099,596 | |
Class B Common Stock, as recast | |
| 75,000,000 | | |
| 64,000,588 | | |
| — | | |
| 64,000,588 | |
| |
| 835,000,000 | | |
| 157,100,184 | | |
| — | | |
| 157,100,184 | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
13. Stockholder’s Equity
(Deficit) (cont)
Commitment to Issue Class A and
Class B Common Stock
Former stockholders
and noteholders of Legacy FF are required to submit a signed company share letter of transmittal or converting debt letter of transmittal
along with a lock-up agreement to the Company’s transfer agent in order for shares of the Company to be issued in their name in
exchange for their shares in, notes from, vendor trust or other supplier agreements with Legacy FF. As of December 31, 2021, the
Company’s transfer agent has issued 168,693,323 legally outstanding shares. Until the holder of the right to receive shares of
the Company’s Class A Common Stock is issued shares, that holder does not have any of the rights of a stockholder.
Since December
31, 2021 and through the issuance of these Consolidated Financial Statements, the Company issued 68,742,020 shares of Class A Common
Stock and 64,000,588 shares of Class B Common Stock related to the commitment to issue shares.
Amendment to the Company’s
Certificate of Incorporation
On the Closing
Date of the Business Combination, the Company’s shareholders adopted the Company’s Second Amended and Restated Certificate
of Incorporation. The amendment set forth the rights, privileges, and preferences of the Company’s Class A Common Stock and Class
B Common Stock (collectively “Common Stock”). The amendment 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 the Company’s Board of Directors. The
Company’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.
Voting
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” is defined as at the end of any 20 consecutive trading days, the Company has a volume weighted average
total equity market capitalization of at least $20,000,000 as determined by multiplying the average closing sale price per share of Class
A Common Stock on the NASDAQ 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 the Company.
Conversion
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.
Liquidation
In the event
of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of the shares of the Common Stock shall be entitled to receive all the
remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of
the Common Stock held by them.
Conversion of Related Party Notes
Payable and Notes Payable Prior to the Business Combination
On May 13, 2021,
related party notes payable with aggregate principal amounts of $90,869 and accrued interest of $43,490 were converted into shares of
Legacy FF convertible preferred stock and on July 21, 2021, the convertible preferred stock was converted into a commitment to issue
10,888,580 shares of Class A Common Stock upon the Closing of the Business Combination.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
13.
Stockholder’s Equity (Deficit) (cont)
Prior to the
Business Combination, the Company converted: (i) related party notes payable with a principal amount of $130,479 and accrued interest
of $29,958 into the commitment to issue 11,566,196 shares of Class A Common Stock; and (ii) notes payable with a principal balance of
$75,100 and accrued interest of $23,275 into the commitment to issue 7,823,306 shares of Class A Common Stock.
Conversion of Liabilities as Part
of the Business Combination
In conjunction
with the closing of the Business Combination, the Company paid $139,557 in cash and committed to issue 24,464,994 shares of Class A Common
Stock to settle liabilities of the Company and to compensate active and former employees, as further described in Note 3, Business
Combination.
Conversion of Class B Preferred
Stock
During 2020,
20,779,412 shares of the Legacy FF’s Class B Preferred Stock automatically converted into 20,779,412 shares of the Company’s
Class A Common 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 certain permitted circumstances and in accordance with the Company’s certificate of incorporation
effective at that time.
Warrants
The number of
outstanding warrants to purchase the Company’s Class A Common Stock as of December 31, 2021 were as follows:
| |
Number
of Warrants | | |
Exercise Price | | |
Expiration
Date |
Public Warrants | |
| 22,977,568 | | |
$ | 11.50 | | |
July 21, 2026 |
Private
Warrants(1) | |
| 674,551 | | |
$ | 11.50 | | |
July 21, 2026 |
Other
warrants | |
| 4,544,258 | | |
$ | 10.00 | | |
Various through August 10, 2028 |
Total | |
| 28,196,377 | | |
| | | |
|
| (1) | The Private Warrants are recorded in Other Liabilities, less Current Portion in the Consolidated Balance Sheet as of December 31, 2021. |
14.
Stock-Based Compensation
2021 SI Plan
In
July 2021, the Company adopted the 2021 Stock Incentive Plan (“2021 SI Plan”). The 2021 SI Plan allows the Board of Directors
to grant up to 49,573,570 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and
other stock-based awards for the Company’s Class A Common Stock to employees, directors, and non-employees. The number of shares
of Class A Common Stock available under the 2021 SI Plan will increase annually on the first day of each calendar year, beginning with
the calendar year ending December 31, 2022, and continuing until (and including) the calendar year ending December 31, 2031. Annual increases
are equal to the lesser of (i) 5 percent of the number of shares of Class A Common Stock issued and outstanding on December 31 of the
immediately preceding fiscal year and (ii) an amount determined by the Board of Directors. As of the effective date of the 2021 SI Plan,
no further stock awards have been or will be granted under the EI Plan or STI Plan. As of December 31, 2021, there were no awards issued
under the 2021 SI Plan.
As of December 31,
2021, the Company had 49,573,570 shares of Class A Common Stock available for future issuance under the 2021 SI Plan.
EI Plan
On February 1,
2018, the Board of Directors adopted the Equity Incentive Plan (“EI Plan”), under which the Board of Directors authorized
the grant of up to 42,390,000 incentive and nonqualified stock options, restricted stock, unrestricted stock, restricted stock units,
and other stock-based awards for Legacy FF’s Class A Ordinary Stock to employees, directors and non-employees.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
14.
Stock-Based Compensation (cont.)
On the Closing
Date and in connection with the Business Combination, each of the Legacy FF’s outstanding options under the EI Plan immediately
prior to the closing of the Business Combination remained outstanding and converted into the right to purchase the Company’s Class
A Common Stock based on the Exchange Ratio.
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 | |
| 30,402,801 | | |
$ | 2.45 | | |
| 8.75 | | |
$ | 885 | |
Granted | |
| 5,287,031 | | |
| 4.74 | | |
| | | |
| | |
Exercised | |
| (2,757,671 | ) | |
| 2.30 | | |
| | | |
| 7,740 | |
Expired/forfeited | |
| (969,240 | ) | |
| 3.65 | | |
| | | |
| | |
Outstanding
as of December 31, 2021 | |
| 31,962,921 | | |
$ | 2.81 | | |
| 7.77 | | |
$ | 86,075 | |
| |
| | | |
| | | |
| | | |
| | |
Exercisable as of December 31,
2021 | |
| 14,777,334 | | |
$ | 2.51 | | |
| 6.93 | | |
$ | 41,622 | |
Vested and expected to vest as
of December 31, 2021 | |
| 26,660,149 | | |
$ | 2.73 | | |
| 7.59 | | |
$ | 72,705 | |
The weighted-average
assumptions used in the Black-Scholes option pricing model for awards granted during the twelve months ended December 31, 2021 and 2020
are as follows:
| |
2021 | | |
2020 | |
Risk-free interest rate: | |
| 0.79 | % | |
| 0.45 | % |
Expected term (in years): | |
| 6.05 | | |
| 6.13 | |
Expected volatility: | |
| 42.10 | % | |
| 37.25 | % |
Dividend yield: | |
| 0.00 | % | |
| 0.00 | % |
The total grant
date fair value of options vested during the years ended December 31, 2021 and 2020 was $7,016 and $4,953, respectively.
As of December 31,
2021, the total remaining stock-based compensation expense for unvested stock options was $13,679 which is expected to be recognized
over a weighted average period of 3.0 years.
STI 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 14,130,000 incentive and nonqualified stock options, restricted shares, unrestricted shares, restricted share units, and other stock-based
awards for Legacy FF’s 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 399,553 fully-vested options with an exercise price of $2.767 per share. In the event that the intrinsic value of the option is
less than the accrued outstanding rent payments of $947 upon close of the Business Combination, the Company will pay the lessor the difference
in a single cash payment, otherwise, the accrued outstanding rent will be deemed paid. Upon close of the Business Combination, the intrinsic
value of the option was more than the accrued outstanding rent payments and therefore the accrued outstanding rent was deemed paid.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
14.
Stock-Based Compensation (cont.)
On the Closing
Date and in connection with the Business Combination, each of the Company’s outstanding options under the STI Plan immediately
prior to the closing of the Business Combination remained outstanding and converted into the right to purchase Class A Common Stock equal
to the number of shares subject to such option multiplied by the Exchange Ratio at an exercise price per share equal to the current exercise
price per share for such option divided by the Exchange Ratio.
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 | |
| 6,490,208 | | |
$ | 2.49 | | |
| 9.26 | | |
$ | 1,174 | |
Granted | |
| 5,516,399 | | |
| 7.82 | | |
| | | |
| | |
Exercised | |
| (1,630,925 | ) | |
| 2.54 | | |
| | | |
| 8,807 | |
Expired/Forfeited | |
| (848,955 | ) | |
| 2.68 | | |
| | | |
| | |
Outstanding
as of December 31, 2021 | |
| 9,526,727 | | |
$ | 5.55 | | |
| 8.01 | | |
$ | 13,905 | |
| |
| | | |
| | | |
| | | |
| | |
Exercisable as of December 31,
2021 | |
| 3,637,954 | | |
$ | 2.95 | | |
| 6.24 | | |
$ | 9,364 | |
Vested and expected to vest as
of December 31, 2021 | |
| 7,608,158 | | |
$ | 4.81 | | |
| 7.68 | | |
$ | 13,896 | |
The
Company has elected to use the contractual term of non-employee options awarded under the STI Plan as the expected term. The weighted-average
assumptions used in the Black-Scholes option pricing model for awards granted during the year ended December 31, 2021 and 2020 are
as follows:
| |
2021 | | |
2020 | |
Risk-free interest rate: | |
| 1.39 | % | |
| 0.59 | % |
Expected term (in years): | |
| 9.06 | | |
| 10 | |
Expected volatility: | |
| 35.86 | % | |
| 38.42 | % |
Dividend yield: | |
| 0.00 | % | |
| 0.00 | % |
The total grant
date fair value of options vested during the years ended December 31, 2021 and 2020 was $3,106 and $6,860, respectively.
As of December 31,
2021, the total remaining stock-based compensation expense for unvested stock options was $7,600, which is expected to be recognized
over a weighted average period of approximately 3.9 years.
Common Units of FF Global Partners
LLC
During 2020,
certain executives and employees of the Company were granted the opportunity to subscribe to 24,000,000 common units of FF Global Partners
LLC (“FF Global Partners”). 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 Legacy FF. 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 year ended December 31, 2021 and 2020.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
14.
Stock-Based Compensation (cont.)
The following
table presents stock-based compensation expense for all of the Company’s SI Plan, EI Plan, STI Plan and Common Units of FF Global
Partners LLC included in each respective expense category in the Consolidated Statements of Operations and Other Comprehensive Loss for
the years ended December 31:
| |
2021 | | |
2020 | |
Research and development | |
$ | 4,001 | | |
$ | 941 | |
Sales and marketing | |
| 1,185 | | |
| 387 | |
General and administrative | |
| 6,159 | | |
| 8,177 | |
| |
$ | 11,345 | | |
$ | 9,505 | |
On July 21, 2021,
in connection with the Closing of the Business Combination, the Company issued 1,404,459 restricted stock awards with a grant date fair
value of $13.78 per share as a bonus to employees and other service providers. The restricted stock awards vest 90 days from the grant
date. As of December 31, 2021, 53,489 of these restricted stock awards had been forfeited.
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:
Restricted stock awards for employee bonus, net | |
2021 | | |
2020 | |
Research and development | |
$ | 7,613 | | |
$ | — | |
Sales and marketing | |
| 2,310 | | |
| — | |
General and administrative | |
| 8,694 | | |
| — | |
| |
$ | 18,617 | | |
$ | — | |
15.
Income Taxes
The provision
for income tax consisted of the following:
| |
2021 | | |
2020 | |
Current: | |
| | |
| |
Federal | |
$ | — | | |
$ | — | |
State | |
| 3 | | |
| 3 | |
Foreign | |
| 237 | | |
| — | |
Total current | |
| 240 | | |
| 3 | |
| |
| | | |
| | |
Deferred: | |
| | | |
| | |
Federal | |
| (48,017 | ) | |
| (11,456 | ) |
State | |
| (49,894 | ) | |
| — | |
Foreign | |
| (9,956 | ) | |
| (2,044 | ) |
Valuation allowance | |
| 107,867 | | |
| 13,500 | |
Total deferred | |
| — | | |
| — | |
Total provision | |
$ | 240 | | |
$ | 3 | |
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
15.
Income Taxes (cont.)
The components
of losses before income taxes, by taxing jurisdiction, were as follows for the years ended December 31:
| |
2021 | | |
2020 | |
U.S. | |
$ | (408,520 | ) | |
$ | (79,605 | ) |
Foreign | |
| (107,745 | ) | |
| (67,480 | ) |
Total | |
$ | (516,265 | ) | |
$ | (147,085 | ) |
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 losses before income taxes as a result of the following:
| |
2021 | | |
2020 | |
Federal income tax expense | |
| 21.0 | % | |
| 21.0 | % |
State income taxes (net of federal benefit) | |
| 3.8 | % | |
| 0.0 | % |
Permanent differences | |
| (0.1 | )% | |
| (1.3 | )% |
Fair value debt adjustments | |
| (4.5 | )% | |
| (0.6 | )% |
Disallowed interest | |
| (0.4 | )% | |
| (2.7 | )% |
Foreign tax rate difference | |
| (0.2 | )% | |
| (6.7 | )% |
Return-to-provision adjustment | |
| (3.1 | )% | |
| 0.4 | % |
Uncertain tax benefit | |
| (0.4 | )% | |
| — | |
Expiration of tax attributes | |
| (1.7 | )% | |
| (1.0 | )% |
State tax rate change on deferred taxes | |
| 6.4 | % | |
| — | |
Valuation allowance | |
| (20.8 | )% | |
| (9.1 | )% |
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 embedded features. The main changes in foreign tax rate difference and valuation allowance related to higher
foreign losses incurred in 2021.
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:
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
15.
Income Taxes (cont.)
| |
2021 | | |
2020 | |
Deferred Tax Assets: | |
| | |
| |
Net operating losses (“NOL”) | |
$ | 225,339 | | |
$ | 123,633 | |
Research and development credits | |
| 4,240 | | |
| 7,921 | |
Accrued liabilities | |
| 16,258 | | |
| 7,564 | |
Construction in progress | |
| — | | |
| 3,061 | |
Excess interest expense under section 163(j) | |
| 5,018 | | |
| 3,670 | |
Capital losses | |
| 3,420 | | |
| 2,407 | |
Amortization | |
| 12,176 | | |
| — | |
Stock-based compensation | |
| 187 | | |
| 428 | |
Other | |
| 1,714 | | |
| 296 | |
Gross deferred tax assets | |
| 268,352 | | |
| 148,980 | |
Valuation allowance | |
| (256,413 | ) | |
| (148,546 | ) |
Deferred tax assets, net of valuation allowance | |
| 11,939 | | |
| 434 | |
Deferred Tax Liabilities: | |
| | | |
| | |
Depreciation | |
| (573 | ) | |
| 454 | |
State taxes | |
| (11,366 | ) | |
| (888 | ) |
Total deferred tax liabilities | |
| (11,939 | ) | |
| (434 | ) |
Total net deferred tax assets
(liabilities) | |
$ | — | | |
$ | — | |
The Company has
recognized a full valuation allowance as of December 31, 2021 and 2020 since, in the judgment of management given the Company’s
history of losses, the realization of these deferred tax assets was not considered more likely than not. The valuation allowance was
$256,413 and $148,546 as of December 31, 2021 and 2020, respectively, with increases attributable to the current year’s provision.
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 2021 and 2020, the Company evaluated the realizability of
its net deferred tax assets based on available positive and negative evidence and 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,
2021, the Company has U.S. federal and foreign net operating loss carryforwards of $718,798 and $113,019, respectively, which will begin
to expire in 2034 and 2022, respectively. The U.S. federal net operating loss carryforwards of $638,270 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, 2018 may be carried forward for twenty
years. As of December 31, 2021, the Company has California net operating loss carryforwards of $518,073, which will begin to expire in
2034.
The Company has
no U.S. federal R&D tax credit carryforwards and a state R&D tax credit carryforward of $4,230 as of December 31, 2021.
The U.S. 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.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
15.
Income Taxes (cont.)
The Company’s
intention is to indefinitely reinvest earnings in all jurisdictions outside the United States. As of December 31, 2021 and 2020, 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 and China. As of December 31, 2021,
the 2017 through 2021 federal returns and 2017 through 2021 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 2016 through 2021, are open under China tax law.
Uncertain Income Tax Position
The aggregate
change in the balance of unrecognized tax benefits for the years ended December 31, is as follows:
| |
2021 | | |
2020 | |
Beginning balance | |
$ | 2,666 | | |
$ | 2,598 | |
Increase related to current
year tax positions | |
| 2,331 | | |
| 68 | |
Ending balance | |
$ | 4,997 | | |
$ | 2,666 | |
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, 2021 and 2020, 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, 2021 and 2020, 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 following
table summarizes the valuation allowance:
| |
2021 | | |
2020 | |
Beginning balance | |
$ | 148,546 | | |
$ | 135,046 | |
Increase related to current
year tax positions | |
| 107,867 | | |
| 13,500 | |
Ending balance | |
$ | 256,413 | | |
$ | 148,546 | |
16.
Net Loss per Share
Net Loss Per Share Attributable
to Common Stockholders
Basic net loss
per share attributable to common stockholders is calculated by dividing net loss attributable to common stockholders by the weighted-average
number of shares issued and shares to be issued under the commitment to issue shares, as these shares are issuable for no consideration.
Diluted net loss
per share attributable to common stockholders adjusts the basic net loss per share attributable to common stockholders and the weighted-average
number of shares issued and shares to be issued under the commitment to issue shares for potentially dilutive instruments.
For purposes
of presentation of basic and diluted net loss per share, the Company includes shares to be issued in the denominator in accordance with
ASC 710-10-54-4 and ASC 260-10-45-48 as if they had been issued on the date of the merger, as such shares are non-contingent and are
issuable for no consideration (see Note 3, Business Combination).
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
16.
Net Loss per Share (cont.)
The net loss
per common share was the same for the Class A and Class B Common Stock because they are entitled to the same liquidation and dividend
rights and are therefore combined on the Consolidated Statements of Operations and Comprehensive Loss.
Because the Company
reported net losses for all periods presented, all potentially dilutive Common Stock equivalents were determined to be 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:
| |
2021 | | |
2020 | |
Stock-based compensation awards –
EI Plan | |
| 31,962,921 | | |
| 30,402,801 | |
Stock-based compensation awards – STI Plan | |
| 9,526,727 | | |
| 6,490,208 | |
Public Warrants | |
| 22,977,568 | | |
| — | |
Private Warrants | |
| 674,551 | | |
| — | |
Other warrants | |
| 4,544,258 | | |
| 272,730 | |
Convertible notes payable | |
| 9,009,210 | | |
| — | |
Total | |
| 78,695,235 | | |
| 37,165,739 | |
Faraday
Future Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
17. Subsequent Events
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.
Special Committee Investigation
As previously
disclosed on November 15, 2021, the Company’s Board established a special committee of independent directors (“Special Committee”)
to investigate allegations of inaccurate Company disclosures, including those made in an October 2021 short seller report and whistleblower
allegations, which resulted in the Company being unable to timely file its third quarter 2021 Quarterly Report on Form 10-Q, Annual Report
on Form 10-K for the year ended December 31, 2021 and amended Registration Statement on Form S-1 (File No. 333-258993). The Special Committee
engaged outside independent legal counsel and a forensic accounting firm to assist with its review. On February 1, 2022, the Company
announced that the Special Committee completed its review. On April 14, 2022, the Company announced the completion of additional investigative
work based on the Special Committee’s findings, which were performed under the direction of the Executive Chairperson, reporting
to the Audit Committee. In connection with the Special Committee’s review and subsequent investigative work, the following findings
were made:
| ● | In
connection with the Business Combination, statements made by certain Company employees to
certain investors describing the role of Yueting (“YT”) Jia, the Company’s
founder and former CEO, within the Company were inaccurate, and his involvement in the management
of the Company post-Business Combination was more significant than what had been represented
to certain investors. |
| ● | The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest. |
| ● | Consistent
with the Company’s previous public disclosures regarding identified material weaknesses
in its internal control over financial reporting, the Company’s internal control over
financial reporting requires an upgrade in personnel and systems. |
| ● | The
Company’s corporate culture failed to sufficiently prioritize compliance. |
| ● | Mr.
Jia’s role as an intermediary in leasing certain properties which were subsequently
leased to the Company was not disclosed in the Company’s corporate housing disclosures. |
| ● | In
preparing the Company’s related party transaction disclosures, the Company failed to
investigate and identify the sources of loans received from individuals and entities associated
with Company employees. |
In addition,
certain individuals failed to fully disclose to individuals involved in the preparation of the Company’s SEC filings their relationships
with certain related parties and affiliated entities in connection with, and following, the Business Combination, and failed to fully
disclose relevant information, including but not limited to, information in connection with related parties and corporate governance
to the Company’s independent registered public accounting firm PricewaterhouseCoopers LLP. Further, certain individuals failed
to cooperate and withheld potentially relevant information in connection with the Special Committee investigation.
Based on the
results of the investigation, the Special Committee concluded that, except as described above, other substantive allegations of inaccurate
FF disclosures that it evaluated, were not supported by the evidence reviewed.
Faraday Future
Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
17. Subsequent Events (cont.)
Based on the
results of the Special Committee investigation and subsequent investigative work described above, the Board approved the following remedial
actions:
| ● | certain
remedial actions designed to enhance oversight and corporate governance of the Company, namely
the following: |
| ● | the
appointment of Susan Swenson, a member of the Board, to the newly created position of Executive
Chairperson of FF; |
| ● | Dr. Carsten Breitfield, FF’s Chief Executive Officer, reporting directly to Ms. Swenson and receiving a 25% annual base salary reduction; |
| ● | the removal of Mr. Jia as an executive officer, although continuing in his position as Chief Product & User Ecosystem Officer of the Company and reporting directly to the Executive Chairperson, receiving a 25% annual base salary reduction, and his role limited to focusing on (a) Product and Mobility Ecosystem and (b) Internet, Artificial Intelligence, and Advanced R&D technology; |
| ● | Matthias
Aydt, Senior Vice President, Business Development and Product Definition and a director of
the Company, being placed on probation as an executive officer for a six-month period, during
which period he will remain as a non-independent member of the Board; |
| ● | the
appointment of Jordan Vogel as Lead Independent Director; certain changes to the composition
of Board committees, including Brian Krolicki stepping down from his role as Chairman of
the Board and Chair of the Nominating and Corporate Governance Committee and becoming a member
of the Audit and Compensation Committees of the Board; Jordan Vogel stepping down from the
Nominating and Corporate Governance Committee; and Scott Vogel becoming the Chair of the
Audit Committee and the Nominating and Corporate Governance Committee of the Board; and |
| ● | the
suspension without pay of Jiawei (“Jerry”) Wang, the Company’s former Vice
President, Global Capital Markets, who subsequently notified the Board of his decision to
resign from FF on April 10, 2022; |
| ● | the
assessment and enhancement of FF’s policies and procedures regarding financial accounting
and reporting and the upgrading of FF’s internal control over financial accounting
and reporting, including by hiring additional financial reporting and accounting support,
in each case at the direction of the Audit Committee; |
| ● | the
implementation of enhanced controls around FF’s contracting and related party transactions,
including regular attestations by FF’s employees with authority to bind FF to contracts
and related party transactions, for purposes of enabling FF to make complete and accurate
disclosures regarding related party transactions; |
| ● | the
hiring of a Chief Compliance Officer, who reports on a dotted line to the Chair of the Audit
Committee, and assessing and enhancing FF’s compliance policies and procedures; |
| ● | the
implementation of a comprehensive training program for all directors and officers regarding,
among other things, internal FF policies; |
| ● | the
separation of Jarret Johnson, FF’s Vice President, General Counsel and Secretary; and |
| ● | certain
other disciplinary actions and terminations of employment with respect to other FF employees
(none of whom is an executive officer). |
Faraday
Future Intelligent Electric Inc.
Notes to Consolidated
Financial Statements
December 31,
2021 and 2020
(in thousands,
except share and per share data)
17. Subsequent Events (cont.)
SEC Investigation
Subsequent to
the Company announcing the completion of the Special Committee investigation on February 1, 2022, the Company, certain members of the
management team and employees of the Company received a notice of preservation and subpoena from the staff of the SEC stating that the
SEC had commenced a formal investigation relating to the matters that were the subject of the Special Committee investigation. The Company,
which had previously voluntarily contacted the SEC in connection with the Special Committee investigation in October 2021, is cooperating
fully with the SEC’s investigation. The outcome of such an investigation is difficult to predict. The Company has incurred, and
may continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation.
At this stage, The Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the
SEC’s investigation or estimate the range of any potential loss.
Settlement of the Hans litigation
In January 2022,
the Company settled an outstanding legal dispute for breach of lease under which the Company was named a co-defendant in a civil action
case with the plaintiff seeking damages including unpaid rent, future unpaid rent, unpaid expenses, and unpaid taxes related to the lease.
Under the terms of the agreement, the Company paid $1,800 in cash in January 2022 and agreed to pay an additional $3,400 plus 5% interest
in October 2022.
Issuance of Options under the
2021 SI Plan
In January 2022,
the Company awarded 3,646,557 stock options to employees and nonemployees under the 2021 SI Plan with an exercise price of $5.32 per
share.
Beverly Hills, California Flagship
Store Lease
In February 2022,
the Company signed a Retail Lease Agreement with B. H. Triangle Associates, L.P., a California limited partnership (“Landlord”)
for an approximately 13,000 square feet property in Beverly Hills, California for its first flagship store. The lease will commence on
the earlier of the substantial completion of the Company’s leasehold improvements and June 1, 2022, and will continue for a period
of 126 months thereafter. According to the agreement, rent fees will escalate over the lease term, starting from $1,534 during the first
12 months of the lease and increasing by 3% each 12 months thereafter. The Company has two consecutive options to extend the lease beyond
its initial term for five additional years each by giving the Landlord not less than nine months prior notice. Rent fees during extension
periods will be determined according to the fair value mechanism agreed upon between the parties. The lease agreement was effective on
March 16, 2022. As part of the agreement, the Company is allowed tenant improvements in the amount of $1,030 by the Landlord. In connection
with the lease agreement, on March 4, 2022, the Company obtained an unconditional and irrevocable letter of credit from East West Bank
in the amount of $1,500. The letter of credit expires on March 4, 2023, and is renewed automatically for successive one-year periods,
unless earlier terminated by the Company.
South Korea Contract Manufacturing
Agreement
In February 2022,
the Company entered into a definitive contract manufacturing and supply agreement with Myoung Shin Co., Ltd. (“Myoung Shin”),
a South Korea-based automotive manufacturer and parts supplier, to manufacture the Company’s second vehicle, the FF 81. The agreement
has an initial term of nine years from the start of production of the FF 81, which is scheduled for 2024. Pursuant to the agreement,
Myoung Shin shall maintain sufficient manufacturing capabilities and capacity to supply FF 81 vehicles to the Company in accordance with
the Company’s forecasts and purchase orders. The Company and Myoung Shin will each manufacture and supply certain FF 81 parts that
Myoung Shin will use in the manufacture and assembly of FF 81 vehicles.
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 3.2 to the Annual Report on Form 10-K filed
May 13, 2022. |
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 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 |
10.19# |
|
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 |
10.20# |
|
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 |
10.21# |
|
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 |
10.22# |
|
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 |
10.23# |
|
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 |
10.24# |
|
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 |
10.25# |
|
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 |
10.26# |
|
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 |
10.27# |
|
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 |
10.28# |
|
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 |
10.29# |
|
First
Amendment to Employment Agreement by and among Faraday Future Intelligent Electric Inc., Faraday&Future Inc. and Carsten Breitfeld
dated January 31, 2022. |
|
Exhibit 10.35 to the Annual Report on Form 10-K
filed on May 13, 2022 |
10.30# |
|
Management
Services Agreement, dated as of February 23, 2022, by and between Faraday Future Intelligent Electric Inc. and AP Services, LLC |
|
Exhibit 10.1 to the Current Report on Form 8-K filed
on March 2, 2022 |
21.1 |
|
Subsidiaries
of the Registrant |
|
Exhibit 21.1 to the Annual Report on Form 10-K filed
on May 13, 2022 |
23.1* |
|
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm of the Company |
|
|
23.2* |
|
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). |
|
|
107* |
|
Filing
Fee Table |
|
|
+ | 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. |
|
(iii) |
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; |
|
B. |
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. |
|
C. |
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. |
|
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. |
|
E. |
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: |
|
(i) |
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424; |
|
(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; |
|
(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 |
|
(iv) |
Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser. |
|
F. |
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 June 9, 2022.
|
Faraday Future Intelligent
Electric Inc. |
|
|
|
|
By: |
/s/ Dr. Carsten Breitfeld |
|
|
Dr. Carsten Breitfeld |
|
|
Global 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 |
|
Title |
|
Date |
|
|
|
|
|
/s/ Dr. Carsten Breitfeld |
|
Global Chief Executive
Officer and Director |
|
June 9, 2022 |
Dr. Carsten Breitfeld |
|
(principal executive officer)
|
|
|
|
|
|
|
|
/s/ Becky Roof |
|
Interim Chief Financial Officer
(principal financial and accounting officer) |
|
June 9, 2022 |
Becky Roof |
|
|
|
|
|
|
|
|
* |
|
Executive Director |
|
June 9, 2022 |
Susan G. Swenson |
|
|
|
|
|
|
|
|
|
* |
|
Chairman |
|
June 9, 2022 |
Brian K. Krolicki |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Matthias Aydt |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Qing Ye |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Edwin Goh |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Lee Liu |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Jordan Vogel |
|
|
|
|
|
|
|
|
|
* |
|
Director |
|
June 9, 2022 |
Scott D. Vogel |
|
|
|
|
The undersigned, by signing his name hereto,
does sign and execute this Amendment No. 2 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/ Dr. Carsten Breitfeld |
|
|
Dr. Carsten Breitfeld |
|
|
Attorney-in-fact |
|
P1Y
P1Y
P5Y
P5Y
P1Y
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