Business Context and Reporting Period
This Form 8-K, dated July 11, 2023, reports material events for Faraday Future Intelligent Electric Inc. (FFIE), a global shared intelligent electric mobility ecosystem company. The filing addresses a non-reliance on previously issued financial statements and significant changes in executive leadership.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, or debt figures. Instead, it discloses that previously issued financial statements for the periods ended December 31, 2022, March 31, 2023, and September 30, 2022, should no longer be relied upon. The company states it is currently unable to quantify the financial impact of the identified errors.
Material Changes and Accounting Restatement
- Non-Reliance on Financial Statements: The Audit Committee determined that errors exist in the Annual Report (Form 10-K) for 2022 and Quarterly Reports (Form 10-Q) for Q1 2023 and Q3 2022.
- Source of Error: The errors stem primarily from a non-cash, non-operating item related to the change in fair value upon conversion of notes issued under Securities Purchase Agreements.
- Internal Controls: The errors were identified during the remediation of material weaknesses in internal controls over financial reporting.
- Restatement Plan: The company expects to file restated financial statements on Form 10-K/A and Form 10-Q/A as soon as reasonably practical.
Management Changes and Compensation
- Resignation: Yun Han resigned as Interim Chief Financial Officer (CFO), principal financial officer, and principal accounting officer effective July 5, 2023. She will continue as Chief Accounting Officer.
- Appointment: Jonathan Maroko was appointed Interim CFO, principal financial officer, and principal accounting officer, effective July 24, 2023.
- Compensation Package for Mr. Maroko:
- Annual base salary: $400,000.
- Cash signing and retention bonus: $200,000 (payable in two installments).
- Discretionary annual performance bonus: Up to $250,000.
- Restricted Stock Units (RSUs): Target grant date fair value totaling $2,000,000 over five years ($200k, $300k, $400k, $500k, $600k).
- Performance Stock Units (PSUs): Target value of $2,000,000 contingent on achieving specific milestones.
Risks and Contingencies
The filing highlights several risks, including the uncertainty regarding the timing and nature of the final resolution of accounting issues, potential delays in filing required periodic reports, and the possibility that additional errors may be identified in other prior accounting periods. The company also notes potential adverse effects on its business and stock price volatility resulting from these disclosures.
Investor Verification Checklist
- Verify the timeline for the filing of restated Form 10-K/A and Form 10-Q/A documents.
- Monitor for the quantification of the financial impact of the accounting errors once the review is complete.
- Review the effectiveness of the remediation plan for internal control weaknesses.
- Assess the potential for further restatements affecting periods prior to September 30, 2022.
- Confirm the start date and initial performance of the new Interim CFO, Jonathan Maroko.