Part I Financial Information [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company reports significant net losses and negative cash flows, raising substantial doubt about its going concern status Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $120,585 | $505,091 | | Total current assets | $175,111 | $607,257 | | Total assets | $588,242 | $907,432 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $257,719 | $293,806 | | Total liabilities | $286,840 | $339,778 | | Accumulated deficit | $(3,219,308) | $(2,907,644) | | Total stockholders' equity | $268,502 | $567,654 | Statement of Operations Summary (in thousands) | Line Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $98,015 | $8,673 | $212,950 | $15,394 | | Sales and marketing | $6,198 | $2,585 | $12,384 | $4,267 | | General and administrative | $33,253 | $16,430 | $61,133 | $27,423 | | **Loss from operations** | **$(137,466)** | **$(27,688)** | **$(286,467)** | **$(47,084)** | | **Net loss** | **$(141,694)** | **$(52,775)** | **$(294,792)** | **$(128,300)** | | **Net loss per share** | **$(0.44)** | **$(0.32)** | **$(0.91)** | **$(0.79)** | Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(235,104) | $(52,311) | | Net cash used in investing activities | $(90,234) | $(1,386) | | Net cash (used in) provided by financing activities | $(85,840) | $111,525 | | **Net (decrease) increase in cash and restricted cash** | **$(408,943)** | **$56,421** | - **Going Concern:** The company has concluded there is substantial doubt about its ability to continue as a going concern for one year, citing recurring losses and the need to raise additional funds by early September 2022 to continue operations[47](index=47&type=chunk)[48](index=48&type=chunk) - **Special Committee and SEC Investigations:** A Special Committee investigation found inaccurate disclosures regarding vehicle reservations and the role of founder YT Jia, prompting a formal investigation by the SEC and a request for information from the U.S. Department of Justice[112](index=112&type=chunk)[113](index=113&type=chunk)[123](index=123&type=chunk) - **Legal Proceedings:** The company is facing a putative class action lawsuit and derivative lawsuits alleging violations of the Securities Exchange Act of 1934 and has accrued **$14.8 million** for potential losses[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - **Subsequent Events - New Financing:** On August 14, 2022, the company entered into a Securities Purchase Agreement for **$52 million in committed senior secured convertible notes**, with the potential for an additional $248 million[152](index=152&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses rising operating losses, urgent capital needs, and going concern doubts for the pre-revenue company - The company is a development stage company that has not generated any revenue and expects to begin deliveries of its first vehicle, the FF 91, in Q3 or Q4 2022[206](index=206&type=chunk)[209](index=209&type=chunk) - As of June 30, 2022, the company had **399 fully refundable, non-binding preorders** for the FF 91[186](index=186&type=chunk) - The company projects it will require additional funds by early September 2022 to continue operations, raising **substantial doubt about its ability to continue as a going concern**[201](index=201&type=chunk)[244](index=244&type=chunk) - A Special Committee Investigation found inaccurate disclosures regarding vehicle reservations and the role of founder YT Jia, leading to remedial actions and subsequent investigations by the SEC and DOJ[191](index=191&type=chunk)[192](index=192&type=chunk)[199](index=199&type=chunk) Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $98,015 | $8,673 | $212,950 | $15,394 | | Sales and marketing | $6,198 | $2,585 | $12,384 | $4,267 | | General and administrative | $33,253 | $16,430 | $61,133 | $27,423 | | **Total operating expenses** | **$137,466** | **$27,688** | **$286,467** | **$47,084** | - The increase in R&D expense was primarily due to a **$57.4 million increase** in engineering, design, and testing (ED&T) services as the company progressed development of the FF 91[222](index=222&type=chunk) - The increase in General and Administrative expense was primarily due to a **$12.3 million increase** in professional services related to the Special Committee Investigation, financing efforts, and governance matters[223](index=223&type=chunk)[224](index=224&type=chunk) - As of June 30, 2022, the company's principal source of liquidity was **cash totaling $120.6 million**[239](index=239&type=chunk) - The company projects it will require additional funds by early September 2022 to continue operations and is seeking to raise additional capital to support the FF 91 production ramp-up[240](index=240&type=chunk) - The company has concluded that there is **substantial doubt about its ability to continue as a going concern** for a period of one year[244](index=244&type=chunk) Contractual Obligations as of June 30, 2022 (in thousands) | Obligation Type | Total | 2022 (6 months) | 2023 - 2024 | 2025 - 2026 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease obligations | $33,946 | $2,672 | $9,910 | $9,560 | $11,804 | | Finance lease obligations | $10,694 | $1,287 | $3,923 | $3,620 | $1,864 | | Notes payable | $79,214 | $45,297 | $33,917 | $0 | $0 | | Related party notes payable | $12,962 | $12,962 | $0 | $0 | $0 | | Palantir license | $41,667 | $2,667 | $19,500 | $19,500 | $0 | | **Total** | **$191,647** | **$78,049** | **$67,250** | **$32,680** | **$13,668** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from market risk disclosures as a "smaller reporting company" - 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"**[274](index=274&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to multiple material weaknesses in internal financial reporting controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of June 30, 2022, due to material weaknesses in internal control over financial reporting[276](index=276&type=chunk) - Material weaknesses identified include: an **ineffective control environment** lacking sufficient accounting professionals and proper segregation of duties; ineffective controls for identifying and accounting for complex transactions; and lack of formal accounting policies and procedures[276](index=276&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - Additional material weaknesses were identified from the Special Committee Investigation, including a failure to maintain a commitment to integrity and ethical values and **ineffective controls over related-party transactions**[283](index=283&type=chunk)[285](index=285&type=chunk) - A remediation plan is in progress, which includes hiring more finance personnel, implementing new policies, appointing an interim CFO, and enhancing controls around related-party transactions[287](index=287&type=chunk)[288](index=288&type=chunk) Part II Other Information [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a class action and derivative lawsuits related to allegations from the Special Committee investigation - The company is a defendant in a putative class action lawsuit and consolidated derivative lawsuits alleging violations of the **Securities Exchange Act of 1934** and other claims[108](index=108&type=chunk)[109](index=109&type=chunk) - For a detailed description of legal matters, the report refers to **Note 11** of the Condensed Consolidated Financial Statements[293](index=293&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) Key risks include going concern doubts, FF 91 launch delays, reliance on non-binding pre-orders, and internal control weaknesses - **Going Concern and Capital Needs:** The company has recurring losses and needs to raise additional capital in the near term to launch the FF 91 and continue operations, projecting a need for more funds by early September 2022[303](index=303&type=chunk)[307](index=307&type=chunk)[316](index=316&type=chunk) - **Operational Risks:** The FF 91 launch may be delayed beyond Q3/Q4 2022 due to capital shortages or supply chain issues, and as of June 30, 2022, the company only had **399 non-binding, fully refundable pre-orders**[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) - **Governance and Key Person Risk:** Founder YT Jia's public image and past legal issues in China could adversely impact the company, and his influence through FF Global may not align with company interests[325](index=325&type=chunk)[334](index=334&type=chunk)[340](index=340&type=chunk) - **Internal Controls:** The company has identified **multiple material weaknesses** in its internal control over financial reporting, which could prevent it from accurately reporting its financial condition[342](index=342&type=chunk)[344](index=344&type=chunk) - **Dilution Risk:** The conversion of outstanding and newly issued convertible notes will cause **substantial dilution** to existing stockholders' ownership interests[364](index=364&type=chunk)[365](index=365&type=chunk)[368](index=368&type=chunk) - **China Regulatory Risk:** The company faces challenges from the evolving and uncertain regulatory environment in China regarding cybersecurity, data security, and personal information protection[368](index=368&type=chunk)[370](index=370&type=chunk)[378](index=378&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[380](index=380&type=chunk) [Item 3. Defaults Upon Senior Securities](index=65&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[381](index=381&type=chunk) [Item 4. Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[381](index=381&type=chunk) [Item 5. Other Information](index=65&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[381](index=381&type=chunk) [Item 6. Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including required CEO and CFO certifications under the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act**[383](index=383&type=chunk)

Faraday Future Intelligent Electric Inc. (NASDAQ:FFIE) Q1 2022 Earnings Conference Call May 23, 2022 5:00 PM ET Company Participants Mark Connelly - VP, IR Carsten Breitfeld - Global CEO Becky Roof - Interim CFO Conference Call Participants Dan Ives - Wedbush Trevor Young - Credit Suisse Emmanuel Rosner - Deutsche Bank Michael Ward - The Benchmark Company Operator Good afternoon and welcome to Faraday Future’s First Quarter 2022 Earnings Conference Call. Today's call is being recorded, and we have allocated ...

Product Launch and Development - FF plans to commercially launch the FF 91 in Q3 2022, aiming to be the first ultra-luxury EV with a highly personalized, fully connected user experience [139]. - The FF 81 is scheduled for production start in 2024, targeting the premium mass-market segment to compete with Tesla Model S and BMW 5-series [149]. - FF expects to launch the FF 71 in 2025, designed to compete with Tesla Model 3 and BMW 3-series, integrating full connectivity and advanced technology [140]. - As of March 31, 2022, the company announced 401 preorders for the FF 91 vehicles, with deposits of $5,000 in the U.S. and CNY 50,000 in China for the Alliance Edition, and $1,500 in the U.S. and CNY 20,000 in China for the standard model [152]. - The company plans to launch the FF 91 for customer delivery starting in the third quarter of 2022, with testing and validation expected to be completed in the same quarter [180]. Financial Performance - The company reported total operating expenses of $149,001,000 for the three months ended March 31, 2022, a significant increase from $19,396,000 in the same period in 2021 [173]. - Research and development expenses surged to $114,935,000 in Q1 2022, compared to $6,721,000 in Q1 2021, reflecting the company's focus on vehicle development [173]. - The net loss for the three months ended March 31, 2022, was $153,098,000, compared to a net loss of $75,525,000 in the same period in 2021 [173]. - The company has not yet generated any revenue from vehicle sales, with the FF 91 launch anticipated in Q3 2022 [164]. - The company reported an accumulated deficit of $3,077,614 as of March 31, 2022, reflecting ongoing operational losses since inception [182]. - Net cash used in operating activities was $122,364 for the three months ended March 31, 2022, compared to $20,319 for the same period in 2021, indicating a significant increase in cash outflows [197]. - Net cash used in investing activities was $44,398 for Q1 2022, a substantial increase from $711 in Q1 2021, primarily related to the acquisition of fixed assets [198]. - Net cash used in financing activities was $85,676 for Q1 2022, compared to a cash inflow of $72,997 in Q1 2021, primarily due to $87,065 in repayment of notes payable [199]. Operational Challenges - The COVID-19 pandemic has impacted FF's operations, with potential delays in production and supply chain disruptions [144]. - There is substantial doubt about the company's ability to continue as a going concern for the next year due to recurring losses and cash outflows [181]. - The company expects to incur substantial additional capital requirements to fund operations and product development until it can generate sufficient revenue [163]. Corporate Governance and Compliance - The company is undergoing a Special Committee investigation related to allegations of inaccurate disclosures, which has led to significant changes in corporate governance and oversight [154]. - The company has engaged AlixPartners to enhance financial controls and address material weaknesses identified in its internal control over financial reporting [151]. - The company plans to enhance its compliance policies and procedures, including hiring a Chief Compliance Officer and implementing a comprehensive training program for directors and officers [158]. Manufacturing and Patents - FF has been granted over 667 patents globally as of March 31, 2022, supporting its innovation in technology and products [139]. - FF's manufacturing strategy includes a refurbished facility in Hanford, California, and a collaboration with Myoung Shin Co., Ltd. for additional capacity [141]. - A contract manufacturing agreement was signed with Myoung Shin Co., Ltd. for the production of the FF 81, scheduled to start in 2024, with an initial term of nine years [160]. Cash Flow and Obligations - Total contractual obligations as of March 31, 2022, amounted to $193,104, with significant payments due in the next two years [202]. - Operating lease obligations total $33,031, with $3,833 due in 2022 and $8,557 due in 2023-2024 [202]. - Finance lease obligations total $11,346, with $1,940 due in 2022 and $3,923 due in 2023-2024 [202]. - Related party notes payable total $13,636, with all payments due in 2022 [202]. - The effect of exchange rate changes on cash and restricted cash was an unfavorable $653 for Q1 2022, compared to $548 for Q1 2021 [200]. Expenses Breakdown - Research and development expenses increased to $114,935, a rise of 1,610.1% compared to $6,721 in the same period last year, primarily due to increased engineering, design, and testing services [174]. - Sales and marketing expenses rose to $6,186, reflecting a 267.8% increase from $1,682, driven by higher personnel costs and marketing efforts [175]. - General and administrative expenses surged to $27,880, up 153.6% from $10,993, mainly due to increased professional services related to a Special Committee Investigation [175]. - The change in fair value measurements improved to $1,186, a positive shift of 104.4% from a loss of $26,917 in the prior year [176]. - Interest expense decreased to $(3,746), a reduction of 80.5% from $(19,174), attributed to the settlement of notes payable [176].

Product Launch and Development - FF plans to commercially launch the FF 91 in Q3 2022, followed by the FF 81 in 2024 and the FF 71 in 2025, targeting the premium and mass-market segments [244]. - The FF 91 is positioned as the first fully connected car, offering a unique and personalized experience for each passenger [244]. - FF's B2C passenger vehicle launch pipeline includes the FF 91, FF 81, and FF 71 series, with a focus on integrating advanced technology and connectivity [244]. - The company aims to develop a Smart Last Mile Delivery (SLMD) vehicle, targeting high-growth delivery opportunities in Europe, China, and the U.S., with a launch planned for 2024 [244]. - FF's hybrid manufacturing strategy includes a refurbished facility in Hanford, California, and collaboration with Myoung Shin Co., Ltd. for additional capacity [243]. - FF's proprietary Variable Platform Architecture (VPA) and advanced propulsion system provide a competitive edge in acceleration and range [244]. - Announced contract with Myoung Shin Co., Ltd. to manufacture the FF 81, with production scheduled to start in 2024 [254]. - FF's Hanford manufacturing facility is approximately 1.1 million square feet, expected to support production of 10,000 vehicles per year, with production anticipated to commence in Q3 2022 [252]. - Unveiled the first production-intent FF 91 ultra-luxury EV, marking a significant manufacturing milestone [255]. - Announced Phase I updates to the FF 91 Product and Technology Gen 2.0 Project, including upgrades in major subsystems [253]. - Engaged Munro & Associates as co-creation consultant to assist with the production-readiness process of the FF 91 [253]. Financial Performance and Expenses - FF has not generated any revenue to date and anticipates that the launch of the FF 91 will be its first revenue-generating event [270]. - Research and development expenses for the three months ended September 30, 2021, were $79,757, a significant increase of 2,165.8% compared to $3,520 in the same period in 2020 [283]. - Sales and marketing expenses increased to $6,832 for the three months ended September 30, 2021, reflecting a 2,991.4% rise from $221 in the prior year [284]. - General and administrative expenses rose to $36,725, a 166.0% increase from $13,806 in the same period in 2020 [287]. - The company incurred a loss on the disposal of property and equipment amounting to $62,342 during the three months ended September 30, 2021 [288]. - Total operating expenses for the three months ended September 30, 2021, were $185,656, compared to $17,547 in the same period in 2020 [282]. - The net loss for the three months ended September 30, 2021, was $303,906, compared to a net loss of $33,339 in the same period in 2020 [282]. - Research and development expenses for the nine months ended September 30, 2021 increased to $94,506 from $14,704 in 2020, a change of $79,802 or 542.7% [299]. - Sales and marketing expenses for the nine months ended September 30, 2021 increased to $11,099 from $1,691 in 2020, a change of $9,408 or 556.4% [300]. - General and administrative expenses for the nine months ended September 30, 2021 increased to $64,148 from $32,538 in 2020, a change of $31,610 or 97.1% [302]. - Loss on disposal of property and equipment for the nine months ended September 30, 2021 was $62,987, with no comparable activity in 2020 [303]. Capital and Funding - FF will require substantial additional capital to fund operations and product development until it can generate sufficient revenue [269]. - The company is exploring various funding alternatives, including equipment leasing and equity offerings, to support ongoing operations [316]. - Financing activities during the nine months ended September 30, 2021, included proceeds from PIPE Financing of $761,400 and proceeds from the Business Combination of $229,583 [318]. - The company has been significantly funded by related party notes payable, with a total unpaid balance of $328,162 as of September 30, 2021 [323]. - The company had cash and cash equivalents totaling $666,061, held for working capital and general corporate purposes [313]. - Net cash provided by financing activities was $966,995 for the nine months ended September 30, 2021, significantly higher than $28,327 for the same period in 2020 [334]. - The company issued new notes payable to third parties with an aggregate principal balance of $172,031 during the nine months ended September 30, 2021 [338]. - The company converted related party notes payable with an aggregate principal balance of $90,869 into a commitment to issue 10,888,580 shares of Class A Common Stock [338]. Impact of COVID-19 - The COVID-19 pandemic has created significant volatility in the global economy, impacting FF's operations and supply chain [248]. - The company continues to evaluate the ongoing impact of COVID-19 on its operational and financial performance, including potential delays in production [250]. Corporate Structure and Governance - Completed merger with Property Solutions Acquisition Corp. and began trading on NASDAQ under ticker "FFIE" on July 22, 2021 [252]. - Announced plans to increase employee headcount significantly over the next 12 months following the Business Combination [252]. - Appointed Walter J. McBride as CFO to succeed Zvi Glasman, who stepped down on November 2, 2021 [254]. Cash Flow and Financial Position - Net cash used in operating activities was $237,878 for the nine months ended September 30, 2021, compared to $27,531 for the same period in 2020 [330]. - Cash used by investing activities was $(37,264) for the nine months ended September 30, 2021, primarily for the acquisition of fixed assets [333]. - The largest component of cash used in operating activities was $69,466 for wages and compensation related expenses for the nine months ended September 30, 2021 [332]. - Total notes payable as of September 30, 2021, amounted to $203,123 [324]. - The company had scheduled principal maturities of notes payable totaling $173,451 as of September 30, 2021 [325]. - Total contractual obligations amount to $259,797,000, with $30,202,000 due in 2021 and $193,104,000 due in 2022-2023 [341]. Stock and Equity - The fair value of Legacy FF's Class A Ordinary Stock increased from $0.391 per share in January 2021 to $1.572 per share by June 2021 [355]. - The company anticipates no cash dividends in the foreseeable future, using an expected dividend yield of zero [349]. - The increase in the fair value of Class A Ordinary Stock was attributed to progress towards the Business Combination and increased likelihood of a liquidity event [357]. - The fair value of related party notes payable and notes payable was primarily determined using a yield method, with significant assumptions regarding the probability of a liquidity event prior to maturity [362]. Risk Management - FF is exposed to foreign currency exchange risk through its Chinese subsidiaries, which use the Chinese Renminbi as their functional currency [369]. - FF has not hedged its foreign currency risk but may consider doing so in the future [369]. - The company closely monitors credit risk related to vendor deposits and has written off any deposits deemed unrecoverable [370].

Financial Performance - The company reported a net loss of $5,726,988 for the three months ended June 30, 2021, primarily due to operating costs of $442,736 and changes in fair value of warrant liability of $5,012,065 [124]. - For the six months ended June 30, 2021, the company had a net loss of $7,544,047, with operating costs of $1,327,335 and changes in fair value of warrant liability totaling $5,975,238 [124]. - Net loss per common share is calculated using the two-class method, with specific calculations for redeemable and non-redeemable common stock [140]. Cash and Securities - As of June 30, 2021, the company had cash and marketable securities held in the trust account amounting to $229,788,742, intended for completing the business combination [128]. - The company raised gross proceeds of $229,775,680 from its initial public offering, with an additional $5,945,510 from the sale of private units [125]. - The company entered into Subscription Agreements for the sale of 76,140,000 shares at $10.00 per share, generating $761.4 million in gross cash proceeds [120]. - As of June 30, 2021, the company had a balance of $200,000 outstanding under a convertible promissory note with the sponsor [116]. Transaction Costs and Debt - The company incurred $5,117,030 in transaction costs related to the initial public offering, including $4,595,510 in underwriting fees [126]. - The company has no long-term debt or off-balance sheet arrangements as of June 30, 2021 [133][134]. Business Strategy - The company intends to use funds held outside the trust account primarily for identifying and evaluating target businesses [129]. - EarlyBirdCapital has been engaged as an advisor for a Business Combination, with a cash fee of 3.5% of the gross proceeds from the Initial Public Offering [135]. Accounting and Risk Management - The company accounts for Private Warrants as liabilities, adjusting their fair value at each reporting period, estimated using a Monte Carlo simulation approach [138]. - Common stock subject to possible redemption is classified as temporary equity, reflecting certain redemption rights outside of the company's control [139]. - As of June 30, 2021, the company was not subject to market or interest rate risk, with net proceeds from the Initial Public Offering invested in short-term U.S. government securities [142].