Faraday Future Intelligent Electric Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 9, 2023. Faraday Future (FF) is a pre-revenue electric-vehicle developer. Its planned first model, the FF 91 Futurist, had not entered commercial production and no vehicles had been sold by year-end.
Financial performance and position
| Metric | FY2022 / year-end | FY2021 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $451.0 million | $354.1 million |
| Operating loss | $451.0 million | $354.1 million |
| Net loss | $552.1 million | $516.5 million |
| Net loss per share, basic and diluted | $1.50 | $2.21 |
| Net cash used in operating activities | $383.1 million | $339.8 million |
| Net cash used in investing activities | $123.2 million | $95.7 million |
| Cash and restricted cash | $18.5 million | $530.5 million |
| Total assets | $510.3 million | $907.4 million |
| Total liabilities | $327.5 million | $339.8 million |
| Stockholders’ equity | $182.8 million | $567.7 million |
Gross margin is not meaningful because the company had no revenue. At December 31, 2022, working capital was a deficit of $202.6 million; accumulated deficit was $3.48 billion. Notes payable had $41.7 million of principal outstanding ($31.1 million net carrying value), and related-party notes payable totaled $8.4 million. The balance sheet also included $95.1 million of bridge warrant liabilities. Cash at February 27, 2023 was reported as $37.6 million, including $2.1 million restricted.
Material changes and unusual items
- Net loss increased $35.6 million year over year, while operating expenses rose $96.8 million. Research and development increased $136.1 million, principally reflecting engineering, design and testing activity for the FF 91; general and administrative expense rose $18.5 million, including increased Special Committee investigation and professional-service costs.
- The 2022 results included a $69.7 million net loss from changes in fair-value measurements, largely related to financing instruments and warrants. Loss on settlement of debt and vendor payables was $7.7 million, compared with $86.9 million in 2021.
- Cash used in operations and investment totaled $506.3 million. Financing cash flow was a $6.7 million outflow, versus $966.6 million inflow in 2021, when the business combination and PIPE financing generated substantial proceeds.
- Property and equipment, net, was $417.8 million, including $392.9 million in construction in progress, primarily for the Hanford, California factory. Total contractual commitments were estimated at $383.6 million, including $282.3 million due in 2023; that 2023 amount included $243.8 million of open purchase orders.
Outlook, liquidity and principal risks
- Management targeted FF 91 production around the end of March 2023 and first deliveries before the end of April, subject to funding, factory commissioning, supplier performance, cost reductions, and successful testing and certification. These were forward-looking targets, not completed milestones reported for FY2022.
- The filing reported $267.0 million of financing commitments, subject to conditions; $171.4 million had been funded at the stated reporting point, yielding $150.4 million net of discounts and costs. The February 2023 Sixth Amendment provided further staged commitments; the filing reported $70.0 million gross received under it by the financial statements’ issuance, or $62.2 million net. The company said additional capital would still be needed to ramp production and fund future models.
- The company concluded that recurring losses and operating cash outflows raised substantial doubt about its ability to continue as a going concern for one year after issuance of the financial statements. The auditor’s report included a going-concern explanatory paragraph. FF disclosed that it was in default on Bridge Notes at December 31, 2022; holders later waived the default.
- FF identified 356 non-binding, fully refundable pre-orders as of February 27, 2023; it had no binding customer purchase orders. Supplier payment delays, single-source components, production execution, demand uncertainty, and substantial future funding needs could delay or limit deliveries.
- Financing may materially dilute existing holders. The company disclosed convertible notes, warrants and a Yorkville equity purchase agreement, which was not drawable until registration effectiveness and other conditions were met. The February 28, 2023 stockholder approval increased authorized Class A shares to 1.69 billion.
- Disclosure controls and internal control over financial reporting were ineffective at year-end, with material weaknesses still unremediated. The filing also describes an SEC investigation, a DOJ information request, shareholder litigation, governance disputes and significant board and management turnover. Legal contingencies accrued at year-end were $18.9 million.
- Other key risks include Nasdaq listing compliance, potential further dilution, governance influence by FF Global/FF Top, PRC regulatory and cross-border cash-transfer uncertainty, and the company’s ability to complete compliance remediation. Management said full remediation could extend beyond December 31, 2023.
Most important facts for investors to verify
- Whether committed financing was funded on time and on the stated terms, and the company’s current unrestricted cash, cash burn and remaining runway.
- Whether FF 91 production, certification, delivery and customer conversion milestones were achieved; distinguish refundable pre-orders from binding orders and completed sales.
- Current debt principal, maturity/default status, warrant and convertible-note terms, and the resulting potential share dilution.
- Whether suppliers remain engaged and the Hanford facility can produce saleable vehicles at planned quality, volume and cost; assess the large contractual commitments against available liquidity.
- Progress in remediating material weaknesses, the status and potential exposure of investigations and litigation, and any Nasdaq listing developments.
- Cash transfer restrictions and regulatory approvals relevant to PRC subsidiaries and future financing or operations in China.