Faraday Future(FFIE) - 2023 Q4 - Annual Report

Part I Item 1. Business FFIE is a global intelligent mobility ecosystem company designing and manufacturing next-generation electric vehicles, with initial FF 91 deliveries starting in 2023 - FFIE is a Delaware holding company operating through U.S. (FF U.S.) and China (PRC Subsidiaries) entities, designing and engineering intelligent, connected, electric vehicles[9][10][12] - Key technological innovations include proprietary Variable Platform Architecture (VPA), propulsion system, and Internet, Autonomous Driving, and Intelligence (I.A.I.) systems[13] - The FF 91 Futurist was upgraded to PT Gen 2.0 in 2023 with 26 significant improvements, and received its first major OTA upgrades in January 2024, consisting of 752 new additions and 846 improvements[14][15] FF 91 Futurist Performance and IP | Metric | Value | | :--- | :--- | | Acceleration (0-60 mph) | 2.27 seconds | | EPA Range | 381 miles | | Patents Granted (as of Dec 31, 2023) | ~660 | | Horsepower (FF 91 Futurist) | 1,050 hp | | Torque (FF 91 Futurist) | 12,510 Nm | - FF's product pipeline includes the FF 91 series (flagship, MSRP $309,000), FF 81 series (premium mass market), FF 71 series (mass market), and a Smart Last Mile Delivery (SLMD) vehicle, with future models contingent on funding[16][17][100][104][107] - Manufacturing strategy is hybrid, utilizing a 1.1 million sq ft facility in Hanford, California (10,000 vehicles/year capacity) and a contract manufacturing agreement with Myoung Shin in South Korea for the FF 81[19][109][110] - FF launched its 3-phase delivery plan for the FF 91 in May 2023, with Phase 2 (revenue generation) beginning in August 2023, and is building a direct sales model with online and offline channels[20][115][116] - The luxury car market ($80,000+ MSRP) is projected to grow at an 8-14% compound annual growth rate through 2031, with electric vehicles expected to comprise over 75% of new passenger vehicle sales by 2040[32][33] - FF faces intense competition from both established and new EV manufacturers, many of whom possess greater financial, technical, and marketing resources[141][142] Item 1A. Risk Factors FFIE faces severe liquidity constraints, substantial accumulated losses, and significant operational risks, including an SEC investigation and internal control weaknesses - FFIE has incurred cumulative losses of $3,958.5 million, has negative cash flows from operations, and an accumulated deficit as of December 31, 2023, raising substantial doubt about its ability to continue as a going concern[153][545] Key Financial Risks (as of Dec 31, 2023) | Metric | Amount (USD) | | :--- | :--- | | Accumulated Deficit | $3,958.5 million | | Unrestricted Cash Balance | $1.9 million | | Negative Working Capital | $169.8 million | | Unfunded SPA Commitments | $211.3 million | | Optional Unfunded SPA Commitments | $327.0 million | - The company is in default on Secured SPA Notes and in breach of a debt agreement with Chongqing Leshi Small Loan Co., Ltd., and is currently ineligible to utilize its 'at-the-market' equity program due to late Form 10-K filing[154][549][552] - FFIE faces significant risks of Nasdaq delisting due to non-compliance with minimum bid price and timely filing requirements, which could severely impact its market price and ability to raise capital[405][406][407] - FFIE is involved in an SEC investigation and multiple legal proceedings (class action, derivative lawsuits), incurring significant expenses and potential adverse findings[199][202][204] - Material weaknesses in internal control over financial reporting have been identified, leading to a restatement of previously issued financial statements and ongoing remediation efforts expected to extend beyond December 31, 2024[393][394][399][923][924][925][926][927][928][934] - Operations in China are subject to complex and rapidly evolving PRC laws and regulations, including those on foreign investment, cybersecurity, and data protection, posing risks of government intervention and operational changes[12][55][56][57][58][324][325][328][332][355][356][357][361][362][363][369][370][371][373][374][375][376][377][379][380][381] Item 1B. Unresolved Staff Comments There are no unresolved comments from the SEC staff regarding the company's previous filings - The company has no unresolved staff comments[459] Item 1C. Cybersecurity FFIE's cybersecurity strategy aligns with NIST frameworks, utilizing third-party vendors and annual penetration testing, with no material threats identified to date - FFIE's cybersecurity strategy aligns with the NIST Cybersecurity Framework (CSF) and Risk Management Framework (RMF), utilizing five core functions: Identify, Protect, Detect, Respond, and Recover[459] - The company partners with third-party vendors (Rapid7, Carbon Black, Cisco) for cybersecurity guidance and employs threat monitoring, detection, and SIEM tools[460][461] - Annual penetration testing is performed by an independent third-party firm, and employees are required to take annual cybersecurity training[462] - No cybersecurity threats have been identified that have materially impaired or are reasonably likely to materially impair FFIE's operations or financial standing[461] Item 2. Properties FFIE leases all its facilities, including its global headquarters and the Hanford manufacturing plant with a 10,000 vehicle/year capacity, across California and China - FFIE leases all of its facilities, comprising five locations in California and three in China, used for manufacturing, retail, office, R&D, and strategic planning[463] Major Facilities (as of Dec 31, 2023) | Location | Approximate Size (sq ft) | Primary Use | Lease Expiration Date | | :--- | :--- | :--- | :--- | | Gardena, California | 146,765 | Global headquarters, R&D, office | April 30, 2027 | | FF ieFactory California | 1,100,000 | Manufacturing | October 19, 2028 | | Beverly Hills, California | 12,947 | Retail | August 31, 2032 | | Beijing, China | 13,993 | Administrative services, R&D, strategic planning | December 14, 2024 | | Shanghai, China | 2,799 | Administrative services, R&D, strategic planning | July 19, 2024 | | Shanghai, China | 9,074 | Administrative services, R&D, strategic planning | July 15, 2027 | - The FF ieFactory California manufacturing facility is approximately 1.1 million square feet and, once fully built out, is expected to support a production capacity of 10,000 vehicles per year[465] Item 3. Legal Proceedings FFIE is involved in various legal and governmental proceedings whose uncertain outcomes could materially impact its business, financial condition, and operations - FFIE is a party to various legal or governmental proceedings, the outcome of which is uncertain and could have a material adverse effect on its business, financial condition, and results of operations[466] Item 4. Mine Safety Disclosures The company is not required to provide disclosures related to mine safety - The company is not applicable for mine safety disclosures[467] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities FFIE's Class A Common Stock and Public Warrants are listed on Nasdaq, with no cash dividends paid or anticipated, and a significant number of shares reserved for equity compensation plans - FFIE's Class A Common Stock (FFIE) and Public Warrants (FFIEW) are listed on Nasdaq; there is no established public trading market for Class B Common Stock[469] - As of May 17, 2024, there were 439,674,662 shares of Class A Common Stock and 266,670 shares of Class B Common Stock issued and outstanding[5] - The company has not paid cash dividends and does not anticipate declaring any in the foreseeable future, intending to retain earnings for business operations[470] Equity Compensation Plan Information (as of Dec 31, 2023, adjusted for 1-for-3 split) | Plan Category | Securities to be Issued upon Exercise | Weighted Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity Compensation Plans Approved By Security holders: Faraday Future Intelligent Electric Inc. 2021 Incentive Plan | 147,232 | $107.82 | 1,067,189 | | Equity Compensation Plans Not Approved by Security Holders: Smart King Ltd. Equity Incentive Plan | 81,203 | $660.19 | — | | Equity Compensation Plans Not Approved by Security Holders: Smart King Ltd. Special Talent Incentive Plan | 22,551 | $1,505.15 | — | | Total | 250,986 | $412.08 | 1,067,189 | Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations FFIE, an early-revenue stage company, generated $0.8 million in 2023 automotive sales but faces severe liquidity constraints, substantial operating losses, and an accumulated deficit of $3,958.5 million, raising going concern doubts - FFIE is a California-based global shared intelligent mobility ecosystem company, designing and engineering next-generation intelligent, connected, electric vehicles, with manufacturing in Hanford, California, and exploring contract manufacturing in South Korea and China[480][481] - The company operates in a single operating and reportable segment, with its co-Chief Operating Decision Makers being the Global CEO and Chief Product and User Ecosystem Officer[489] - FFIE's Board reduced its size from seven to six members in October 2023, and approved a 1-for-3 reverse stock split effective February 29, 2024, along with an increase in authorized shares[490][492] - FFIE began production of the FF 91 Futurist in March 2023 and started customer deliveries in August 2023, recognizing $0.8 million in automotive sales revenue for the year ended December 31, 2023[501][523] Consolidated Statements of Operations Highlights (Years Ended Dec 31, in thousands) | Metric | 2023 | 2022 | Change Amount | % Change | | :--- | :--- | :--- | :--- | :--- | | Auto sales revenue | $784 | $— | $784 | —% | | Cost of revenues | $42,607 | $— | $42,607 | —% | | Gross loss | $(41,823) | $— | $(41,823) | —% | | Research and development | $132,021 | $299,989 | $(167,968) | (56.0)% | | Sales and marketing | $22,836 | $21,689 | $1,147 | 5.3% | | General and administrative | $82,888 | $112,771 | $(29,883) | (26.5)% | | Loss from operations | $(286,054) | $(437,144) | $151,090 | (34.6)% | | Change in fair value of notes payable and warrant liabilities | $89,860 | $(70,512) | $160,372 | (227.4)% | | Loss on settlement of notes payable | $(217,019) | $(73,204) | $(143,815) | 196.5% | | Net loss | $(431,744) | $(602,239) | $170,495 | (28.3)% | - FFIE has substantial doubt about its ability to continue as a going concern due to recurring losses, negative cash flows, and an accumulated deficit of $3,958.5 million as of December 31, 2023[543][545] - The company is unable to access its 'at-the-market' (ATM) equity program and Shelf Registration due to its failure to timely file the Form 10-K, significantly limiting its liquidity sources[548][549] Cash Flow Summary (Years Ended Dec 31, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(278,178) | $(383,058) | | Net cash used in investing activities | $(31,109) | $(123,222) | | Net cash provided by (used in) financing activities | $291,446 | $(6,721) | | Effect of exchange rate changes on cash and restricted cash | $3,352 | $1,038 | | Net (decrease) increase in cash and restricted cash | $(14,489) | $(511,963) | | Cash and restricted cash, end of period | $4,025 | $18,514 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' Faraday Future is not required to provide quantitative and qualitative disclosures about market risk - FFIE is not required to provide quantitative and qualitative disclosures about market risk as it is a 'smaller reporting company'[587] Item 8. Financial Statements and Supplementary Data FFIE's audited financial statements for 2023 and 2022 are presented, with the auditor's report highlighting 'going concern' uncertainty due to recurring losses and negative cash flows, alongside detailed notes and subsequent events - The independent auditor's report includes an explanatory paragraph stating that FFIE's recurring losses from operations and continued cash outflows raise substantial doubt about its ability to continue as a going concern[592] Consolidated Balance Sheet Highlights (as of Dec 31, in thousands) | Asset/Liability | 2023 | 2022 | | :--- | :--- | :--- | | Total current assets | $91,364 | $84,526 | | Property and equipment, net | $417,812 | $406,320 | | Total assets | $530,539 | $529,288 | | Total current liabilities | $261,176 | $268,245 | | Total liabilities | $302,303 | $328,296 | | Total stockholders' equity | $228,236 | $200,992 | Key Financial Data (Years Ended Dec 31, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net loss | $(431,744) | $(602,239) | | Basic Net loss per share (Class A and B) | $(44.81) | $(393.56) | | Weighted average common shares (Basic) | 9,634,759 | 1,530,227 | | Net cash used in operating activities | $(278,178) | $(383,058) | | Net cash provided by (used in) financing activities | $291,446 | $(6,721) | | Cash and restricted cash, end of period | $4,025 | $18,514 | - As of December 31, 2023, FFIE had an accumulated deficit of $3,958.5 million, $1.9 million in unrestricted cash, and a negative working capital position of $169.8 million[674] - FFIE is in default on its Secured SPA Notes and in breach of a debt agreement with Chongqing Leshi Small Loan Co., Ltd., with an outstanding principal balance of $4.5 million at an 18% interest rate due to default[683][755] - Subsequent events include the lapse of insurance coverage after December 31, 2023, the issuance of new unsecured notes (some in default), additional SPA funding of $8.2 million, and the conversion of $34.4 million principal and $19.5 million interest into 398.6 million Class A Common Stock shares[910][911][912][913][914] - A 1-for-3 reverse stock split was effected on February 29, 2024, reducing the number of issued and outstanding Common Stock shares and adjusting authorized shares to 463,312,500[915][916] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures There have been no changes in or disagreements with accountants on accounting and financial disclosures - There have been no changes in or disagreements with accountants on accounting and financial disclosures[920] Item 9A. Controls and Procedures FFIE's disclosure controls and internal control over financial reporting were ineffective as of December 31, 2023, due to material weaknesses, with full remediation anticipated beyond December 31, 2024 - FFIE's disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2023, due to identified material weaknesses[921][922] - Material weaknesses include an ineffective control environment, insufficient controls for material misstatement risks, poor communication between departments, inadequate controls for complex transactions (e.g., convertible notes, warrants, sale leaseback), lack of formal accounting policies, ineffective IT general controls, and issues with integrity/ethical values and related party transaction identification[923][924][925][926][927][928] - Management is actively engaged in a remediation plan, including hiring finance and accounting personnel, developing new policies and procedures, installing IT systems, and enhancing controls around related party transactions[929][930][931][932][933] - Full remediation of material weaknesses is expected to extend beyond December 31, 2024, and will be time-consuming and costly[934] - No changes in internal control over financial reporting materially affected the company's internal control during the three months ended December 31, 2023[936] Item 9B. Other Information FFIE entered into a Consulting Services Agreement with FF Global for $0.2 million monthly, which automatically renewed in March 2024, and had no insider trading arrangements in 2023 and 2022 - FFIE entered into a Consulting Services Agreement with FF Global on March 6, 2023, effective February 1, 2023, for a monthly fee of $0.2 million plus expense reimbursements, covering strategic and operational assistance[937][938] - The Consulting Services Agreement automatically renewed on March 6, 2024, for successive 12-month periods[937] - No Rule 10b5-1 or non-Rule 10b5-1 insider trading arrangements were adopted or terminated with officers or directors during 2023 and 2022[939] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections The company is not applicable for disclosures regarding foreign jurisdictions that prevent inspections - The company is not applicable for disclosures regarding foreign jurisdictions that prevent inspections[941] Part III Item 10. Directors, Executive Officers and Corporate Governance FFIE's directors and executive officers are detailed, with the Audit Committee comprising independent financial experts, and FF Top holding director nomination rights, though some Section 16(A) reports were delinquent Executive Officers and Directors (as of May 17, 2024) | Name | Age | Position | | :--- | :--- | :--- | | Matthias Aydt | 67 | Global Chief Executive Officer and Director | | Yueting Jia | 50 | Chief Product and User Ecosystem Officer | | Jonathan Maroko | 39 | Interim Chief Financial Officer | | Scott Graziano | 53 | Global General Counsel | | Chui Tin Mok | 49 | Executive Vice President, Head of User Ecosystem | | Hong Rao | 52 | Vice President, I.A.I. | | Chad Chen | 41 | Director | | Li Han | 50 | Director | | Jie Sheng | 40 | Director | | Lev Peker | 42 | Director | - The Audit Committee comprises Lev Peker (Chair), Chad Chen, and Jie Sheng, all of whom are independent and qualify as 'audit committee financial experts'[962] - The Nominating and Governance Committee considers various qualifications for Board nominees, including achievements, skills, and ethical standards, with FF Top having specific rights to nominate directors[965][966][968] - FFIE has a Code of Ethics applicable to all employees, officers, and directors, available on its website[969] - Several directors and executive officers, including Rao Hong, Matthias Aydt, Lev Peker, Li Han, Chad Chen, and Jie Sheng, had delinquent Section 16(A) reports[970] Item 11. Executive Compensation FFIE's 2023 executive compensation included base salaries, bonuses, and equity awards, with salaries experiencing reductions, while non-employee directors received cash retainers and annual RSU awards - Named executive officers for 2023 included Matthias Aydt (Global CEO), Xuefeng Chen (former Global CEO), Jonathan Maroko (Interim CFO), Yun Han (former CAO/Interim CFO), Chui Tin Mok (EVP, Global Head of User Ecosystem), and YT Jia (Chief Product and User Ecosystem Officer)[971][972] - Base salaries for named executive officers were subject to temporary reductions in October 2023 (to minimum wage of $66,000) and further reductions in December 2023 (30-50% cuts)[974][979] Summary Compensation Table - Fiscal 2023 (in USD) | Name | Year | Salary | Bonus | Stock Awards | Option Awards | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Matthias Aydt | 2023 | $348,250 | $5,000 | $— | $— | $353,250 | | Matthias Aydt | 2022 | $383,333 | $— | $148 | $1,052 | $384,533 | | Xuefeng Chen | 2023 | $725,207 | $50,000 | $2,407 | $51,606 | $909,492 | | Xuefeng Chen | 2022 | $487,500 | $500,000 | $— | $— | $987,500 | | Jonathan Maroko | 2023 | $165,758 | $100,000 | $13,391 | $— | $279,149 | | Yun Han | 2023 | $390,000 | $325,000 | $— | $— | $715,000 | | Yun Han | 2022 | $73,976 | $200,000 | $4,983 | $— | $278,959 | | Chui Tin Mok | 2023 | $433,250 | $5,000 | $— | $— | $438,250 | | Chui Tin Mok | 2022 | $500,000 | $— | $185 | $115 | $500,300 | | YT Jia | 2023 | $390,750 | $50,000 | $— | $— | $440,750 | | YT Jia | 2022 | $397,900 | $— | $1,148 | $68,988 | $483,764 | - Non-employee directors receive an annual Board cash retainer of $50,000, additional retainers for committee roles, and an annual RSU award of $150,000[1008][1010] Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters Beneficial ownership of FFIE's Common Stock as of May 17, 2024, shows 439,674,662 Class A and 266,670 Class B shares outstanding, with individual and group executive/director ownership below 1% - As of May 17, 2024, there were 439,674,662 shares of Class A Common Stock and 266,670 shares of Class B Common Stock outstanding[5][1011] Beneficial Ownership of Class A Common Stock (as of May 17, 2024) | Name | Number of Shares Beneficially Owned | Percentage of Class | | :--- | :--- | :--- | | Matthias Aydt | 2,450 | <1% | | Chad Chen | 15,389 | <1% | | Xuefeng Chen | 1,480 | <1% | | Yun Han | 3,228 | <1% | | Li Han | 14,719 | <1% | | Chui Tin Mok | 4,866 | <1% | | Jie Sheng | 15,134 | <1% | | Lev Peker | 10,125 | <1% | | Jonathan Maroko | 4,831 | <1% | | Yueting Jia | 4,777 | <1% | | All executive officers and directors as a group (12 individuals) | 79,620 | <1% | Item 13. Certain Relationships and Related Transactions, and Director Independence FFIE's related party transactions include agreements with FF Top granting director nomination rights and borrowings from FF Global, all reviewed and approved by the Audit Committee - FFIE has an Amended and Restated Registration Rights Agreement with PSAC Sponsor, EarlyBirdCapital, FF Top, and Season Smart, granting them resale registration rights for Class A Common Stock[1020] - Indemnification agreements are in place with directors and executive officers, requiring the company to indemnify them to the fullest extent permitted by Delaware law[1021] - The Amended and Restated Shareholder Agreement with FF Top grants FF Top the right to nominate four directors, influence Board composition, and has provisions for voting power changes and Board expansion[1023][1024][1028][1029][1030][1031] - FFIE has engaged in various related party transactions, including $9.8 million in related party notes payable as of December 31, 2023, and a Consulting Services Agreement with FF Global for $0.2 million monthly[1067][1078][1079] - The Audit Committee is responsible for reviewing and approving all related person transactions, considering factors such as the related person's interest, material facts, impact on independence, and benefits to FFIE[1083][1084] Item 14. Principal Accounting Fees and Services Mazars USA LLP served as FFIE's independent auditor for 2022-2023, with audit fees increasing from $557,000 to $1,265,000, and all services pre-approved by the Audit Committee - Mazars USA LLP served as FFIE's independent registered public accounting firm for the years ended December 31, 2022 and 2023[1085] Audit Fees Billed by Mazars USA LLP | Year | Audit Fees | | :--- | :--- | | 2023 | $1,265,000 | | 2022 | $557,000 | - No audit-related, tax, or other fees were paid to Mazars for the years ended December 31, 2022 or 2023[1087] - The Audit Committee has a policy for pre-approval of all audit and permitted non-audit services, and all services provided by Mazars in 2022 and 2023 were approved[1088] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, noting no separate schedules are required as information is integrated or insufficient, and details various agreements and corporate documents - The report includes consolidated financial statements as part of Item 8 and lists various exhibits in the Exhibit Index[1091] - No separate financial statement schedules are required as the necessary information is either not present in sufficient amounts or is included in the consolidated financial statements[1091] - The Exhibit Index details numerous documents, including merger agreements, corporate certificates, warrant agreements, registration rights agreements, shareholder agreements, employment agreements, and financial instrument details[1092][1093][1094][1095][1096][1097][1098][1099][1100][1101][1102][1103][1104][1105][1106][1107][1108][1109][1110][1111][1112][1113][1114][1115][1116][1117][1118][1119][1120][1121][1122][1123][1124][1125][1126] Item 16. Form 10-K Summary This item is not applicable and contains no summary content - This item is not applicable and contains no summary content[1091] Signatures The Form 10-K report was duly signed by FFIE's Global CEO, Interim CFO, and several directors on May 28, 2024 - The report is signed by Matthias Aydt (Global Chief Executive Officer), Jonathan Maroko (Interim Chief Financial Officer), and directors Chad Chen, Li Han, Chui Tin Mok, Lev Peker, and Jie Sheng[1128][1129] - The signing date for the report is May 28, 2024[1128][1129]