FARADAY FUTURE INTELLIGENT ELECTRIC INC. annual report, FY2021

Business context and reporting period

Faraday Future Intelligent Electric Inc. filed this Form 10-K for the fiscal year ended December 31, 2021. Although the request references 2021 Q4, the supplied filing presents annual results, not standalone fourth-quarter figures. FF is a pre-revenue electric-vehicle developer; it had not sold vehicles by the filing date. Its planned first vehicle, the FF 91, was targeted for commercial launch in Q3 2022. The July 2021 business combination with PSAC provided public-listing proceeds and was accounted for as a reverse recapitalization.

Financial results and condition

Amounts below are in U.S. dollars; financial statement figures are in millions unless noted.

Margins are not meaningful because FF had no revenue. R&D expense rose to $174.9 million from $20.2 million; general and administrative expense rose to $97.9 million from $41.1 million. The 2021 results included a $64.2 million write-off of abandoned FF 91 construction-in-progress assets and an $86.9 million net loss on settling debt and vendor-trust obligations, partly offset by a $20.3 million fair-value gain related to an obligation to issue registered shares.

At year-end, cash was $505.1 million and restricted cash was $25.4 million. Current assets were $607.3 million and current liabilities $293.8 million; working capital, excluding restricted cash, was approximately $288 million, versus a deficit of approximately $835 million in 2020. Total liabilities were $339.8 million. Notes payable had a net carrying value of $167.1 million, with a further $13.7 million of related-party notes payable; these balances exclude accrued interest. The company reported an accumulated deficit of $2.91 billion and positive stockholders’ equity of $567.7 million, compared with a deficit of $579.3 million in 2020.

Material changes versus the prior year

• Net loss increased by $369.4 million, while operating cash use increased by $298.6 million, reflecting the restart and expansion of vehicle development, hiring, supplier re-engagement, and public-company and investigation-related costs.
• The business combination and PIPE financing generated substantial financing cash flow. FF reported $990.98 million of gross proceeds and used funds for transaction costs and liability settlements; the year-end cash balance was $505.1 million.
• Debt and vendor-trust obligations were substantially settled in cash or equity at the business-combination closing, but the company still had significant debt due in 2022 and 2023.
• FF wrote off $64.2 million of FF 91 tooling and other construction-in-progress assets following component redesign and a cost-reduction program.

Outlook, risks, contingencies and unusual items

• Funding and going concern: The auditor’s report and management both state that recurring losses and operating cash outflows raise substantial doubt about FF’s ability to continue as a going concern. Management expected year-end cash to fund the final FF 91 launch preparations, but said ongoing operations beyond launch require additional financing. No assurance was given that funding would be available on acceptable terms.
• Launch and execution: FF targeted FF 91 customer deliveries beginning in Q3 2022, subject to testing, validation, certification, manufacturing readiness, and supplier availability. The Hanford facility was expected to support approximately 10,000 vehicles annually once built out. FF 81 production with South Korea’s Myoung Shin was scheduled for 2024; FF 71 was planned for 2025, subject to funding.
• Debt developments after year-end: The March and August 2021 Ares notes, totaling $85 million principal, were repaid on February 25, 2022 for $96.9 million including interest and payment premium. FF disclosed January 2022 defaults on the June 2021 notes and Optional Notes; holders waived the Optional Notes default. The filing does not clearly state the resolution of the June 2021 notes default.
• Controls, disclosures and governance: FF concluded disclosure controls were ineffective at year-end and identified unremediated material weaknesses, including in accounting resources, transaction and related-party controls, reporting processes, and IT controls. The special committee found certain statements about founder YT Jia’s role and FF 91 reservations were inaccurate or potentially misleading; only several hundred of more than 14,000 reported reservations were paid, with the rest unpaid indications of interest. Remediation was underway.
• Investigations and litigation: The SEC opened a formal investigation relating to the disclosure matters; FF said it was cooperating and could not estimate a potential loss. A securities class action, derivative lawsuits, supplier disputes, and other legal matters were also disclosed. Accrued legal contingencies were $16.9 million at year-end. Management stated that outcomes of the SEC investigation and lawsuits were uncertain.
• Other exposures: FF cited reliance on single-source suppliers, supply-chain and raw-material risks, intense competition, regulatory approval requirements, China-related regulatory and data risks, and potential Nasdaq listing risk after late SEC filings. It had $388.7 million of binding purchase obligations at year-end, in addition to $266.1 million of specified contractual obligations. The company also disclosed related-party transactions and significant influence associated with FF Global and YT Jia.

Important facts for investors to verify

• Whether FF 91 production, certification, customer deliveries, and revenue actually commenced on the stated timetable, and the extent of refundable, non-binding preorders converting to sales.
• Current unrestricted and restricted cash, cash burn, financing raised since year-end, and the status and terms of remaining debt—including the June 2021 notes.
• Progress in remediating material weaknesses, restoring timely SEC reporting, and maintaining Nasdaq listing compliance.
• Developments and potential financial exposure from the SEC investigation, securities and derivative litigation, supplier disputes, and accrued contingencies.
• Execution of manufacturing and supply plans, including Hanford readiness, supplier qualification, purchase commitments, and the Myoung Shin agreement.