Faraday Future Intelligent Electric Inc. — Q1 2024 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2024. Faraday Future designs and manufactures electric vehicles, with the FF 91 as its first production model. It reported only $2,000 of revenue and no vehicle sales or leases during the quarter. The report was signed and filed July 30, 2024; the company disclosed that delayed filings had impaired its access to financing and affected its Nasdaq listing status.
Key financial metrics
| Metric | Q1 2024 | Q1 2023, as restated |
|---|---|---|
| Revenue | $2,000 | None |
| Cost of revenue / gross loss | $20.7 million / $20.7 million gross loss | None |
| Operating expenses | $22.9 million | $95.8 million |
| Loss from operations | $43.6 million | $95.8 million |
| Net loss | $48.2 million | $145.0 million |
| Operating cash flow | -$14.7 million | -$103.0 million |
| Investing cash flow | -$0.012 million | -$16.9 million |
| Financing cash flow | $12.0 million | $134.4 million |
| Cash and restricted cash at period end | $1.3 million, including $0.4 million unrestricted cash | $33.3 million |
At March 31, total assets were $499.9 million and total liabilities were $298.4 million. Current assets were $82.7 million against current liabilities of $257.0 million. Management reported negative working capital of $175.2 million excluding restricted cash. Property, plant and equipment, net, was $397.4 million. Accumulated deficit was $4.01 billion.
Current liabilities included $63.8 million of notes payable and $14.8 million of related-party notes payable. Separately, the company disclosed $17.4 million of accrued related-party interest. Debt obligations were classified as current, and the company reported defaults under SPA financing commitments and a related-party loan. It also had $26.2 million of financial obligations from a sale-and-leaseback transaction.
Changes versus the prior comparable period
- Net loss narrowed by $96.8 million, and operating cash used fell by $88.3 million. Management attributed lower operating expenses mainly to reduced R&D activity after substantial completion of FF 91 development, lower headcount and cost-saving measures.
- R&D expense decreased 88% to $6.7 million; sales and marketing decreased 51% to $2.5 million; and general and administrative expense decreased 48% to $13.8 million.
- Q1 2024 included a $27.9 million gain from fair-value changes in notes payable and warrant liabilities, partly offset by an $11.4 million loss on debt settlements and a $14.3 million loss related to related-party debt. These financing-related and fair-value items materially affected reported net loss.
- Despite the lower loss, revenue remained negligible, and cost of revenue was $20.7 million. The company says revenue was primarily from leasing; it reported no vehicle deliveries in the quarter.
- Class A shares outstanding rose from 42.4 million at December 31, 2023 to 159.4 million at March 31, 2024, principally reflecting conversions of notes and accrued interest. Per-share data also reflect the company’s reverse stock splits.
Outlook, risks and unusual items
- Going concern and financing: Management concluded substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance of the statements. It expects significant operating losses and needs substantial additional capital. The company warned that, if it cannot raise funds, it may be unable to meet obligations or continue operations and may need to seek bankruptcy protection.
- Funding access and dilution: Of $554.5 million in SPA commitments, $211.3 million remained unfunded at March 31 and was subject to milestones, closing conditions, disputes and other requirements. An additional $325.4 million of optional commitments remained unfunded. The company said it could not access its ATM program while not S-3 eligible following filing delays. Convertible notes contain full-ratchet anti-dilution provisions and may result in substantial share issuance.
- Operating outlook: No specific revenue, profit or production guidance is provided in the filing. Management said delayed financing could delay or reduce production and cause actual 2024 cash use, production volume and revenue to differ materially from prior forecasts. Development of future models and the Bridge Strategy depend on additional funding; the filing describes the Bridge Strategy as preliminary and subject to significant execution, tariff, supply-chain and cost risks.
- Defaults and subsequent financing activity: The company disclosed defaults on SPA commitments and a related-party loan, and certain short-term convertible notes became overdue after quarter-end. Subsequent to March 31, it received $6.5 million of additional SPA funding; $15.4 million of SPA principal and $8.3 million of interest converted into 282.7 million Class A shares. It also disclosed $12.3 million of subsequent unsecured convertible notes, of which $1.4 million was in default by the statement issuance date.
- Legal and contractual exposures: Accrued legal contingencies were $20.8 million. The filing describes numerous vendor, employment, securities and other disputes, including an $8.1 million stipulated judgment with Autokiniton, a $1.1 million arbitration award to Envisage, and a Palantir settlement requiring $5.0 million plus possible late-payment damages; the company reported missing a Palantir settlement payment. Unconditional contractual commitments were estimated at $296.0 million.
- Listing and controls: Nasdaq had issued a delisting determination citing bid-price and filing deficiencies; the company reported an appeal-panel extension with conditions, including timely reports and regaining bid-price compliance. Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses, including staffing, financial-close, complex accounting, IT and related-party controls. Management said remediation was ongoing and could extend beyond 2024.
- Other notable matters: Certain required insurance coverage lapsed due to nonpayment after March 31. The company reported that the Zhou securities class-action settlement received final court approval in March, with the $7.5 million settlement to be funded entirely by insurers.
Important facts for investors to verify
- Whether the company secured funding sufficient to meet near-term obligations, and whether SPA commitments’ conditions were satisfied or waived.
- Current cash, cash burn, debt defaults, accrued interest and the extent of further financing-related dilution, including post-quarter share conversions.
- Vehicle production, deliveries and revenue progress, and whether management’s prior 2024 forecasts remain achievable.
- Nasdaq listing compliance and the status of required filings, including the subsequent quarterly report.
- Progress in remediating material weaknesses and any further developments in material litigation, judgments, settlements or insurance coverage.