Faraday Future Intelligent Electric Inc. — Form 10-Q Summary
Reporting period: Quarter ended June 30, 2021; filed August 13, 2021. The statements cover Property Solutions Acquisition Corp. (PSAC), the SPAC, before its July 21, 2021 business combination with FF Intelligent Mobility Global Holdings Ltd. They do not report Faraday Future’s standalone operating results.
Business context and financial results
Before closing, the company’s activities were limited to formation, its IPO, and pursuing a business combination. It had no operations or revenue. Accordingly, revenue, operating margins, and product-level or vehicle-business financial metrics are not applicable or provided.
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Operating and formation costs | $442,736 | $1,327,335 |
| Net loss | $5,726,988 | $7,544,047 |
| Interest income from trust investments | $8,213 | $38,926 |
| Noncash warrant fair-value loss | $5,012,065 | $5,975,238 |
| Noncash convertible-note fair-value loss | $280,400 | $280,400 |
| Net cash used in operating activities | Not provided for the quarter | $1,366,185 |
The six-month net loss was driven mainly by fair-value remeasurement of warrants and a related-party convertible note, rather than operating activity. Basic and diluted loss per share for non-redeemable common stock was $0.77 for Q2 and $1.03 for the first half.
Liquidity, liabilities, and material changes
- At June 30, cash outside the trust was $17,873; trust assets were $229.8 million. Working-capital deficit was $2,276,754, excluding $79,800 of franchise taxes payable.
- Current liabilities were $2.48 million, including $1.98 million of accounts payable and accrued expenses and a $500,000 related-party promissory note. The balance sheet also reported a $480,400 fair-valued related-party convertible note and $6.61 million of warrant liabilities.
- Cash used in operating activities for the first half was partly offset by $700,000 of related-party financing proceeds and $134,663 withdrawn from the trust for taxes.
- Compared with December 31, 2020, cash outside the trust fell from $549,395 to $17,873; warrant liabilities increased from $630,224 to $6.61 million; and stockholders’ equity of $5.0 million became a $9.43 million deficit. Redeemable shares are presented as temporary equity, not liabilities.
- After the reporting date, the July 21 business combination made FF a wholly owned subsidiary and changed the registrant’s name to Faraday Future Intelligent Electric Inc. A private placement of 76.14 million shares at $10 each generated $761.4 million in gross proceeds. Holders redeemed 20,600 PSAC shares for approximately $0.2 million. These subsequent events are not reflected in the June 30 balance sheet.
Outlook, risks, and unusual items
- No operating or financial guidance for Faraday Future is provided in this SPAC-period filing. Management said it expected to incur significant costs in pursuing the transaction.
- The filing stated that the pre-combination company’s low outside-trust cash and working-capital deficit raised substantial doubt about its ability to continue as a going concern for twelve months from issuance; it warned that additional financing might be needed. The subsequent merger and private placement occurred before the report was filed.
- The company restated its prior-year financial statements to classify private placement warrants as derivative liabilities. The resulting fair-value accounting materially affected reported losses. Management identified a material weakness in internal control over warrant accounting and said disclosure controls were ineffective for this reason; remediation was planned, with no assurance it would succeed.
- COVID-19 created uncertainty around identifying a business-combination target, though the specific impact was not determinable. The filing also warned that negative interest rates on trust investments could reduce public-stockholder redemption value.
- Outstanding warrants generally have an $11.50 exercise price and may create dilution; their value is subject to market and contractual conditions. The filing reported no legal proceedings or off-balance-sheet arrangements.
Key facts for investors to verify
- Review post-combination filings for FF’s actual revenue, cash burn, liquidity, debt, manufacturing plans, and results, which this pre-combination 10-Q does not contain.
- Verify net cash received and its use after transaction expenses, redemptions, and other closing adjustments; the $761.4 million PIPE figure is gross proceeds.
- Assess whether the warrant-accounting material weakness was remediated and whether subsequent filings report any further control deficiencies or restatements.
- Examine post-closing capitalization, including warrants, options, converted FF securities, and related dilution and governance arrangements.
- Compare the going-concern warning and liquidity position with subsequent post-combination financial statements and financing disclosures.