FARADAY FUTURE INTELLIGENT ELECTRIC INC
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
FFAI$0.30-7.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001628280-24-037267
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001628280-24-046478
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 193 previous paragraphs and 223 current paragraphs.
117 unchanged; 32 reworded; 72 added; 44 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 35 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (72)
Current report
•On September 22, 2024, we delivered an FF 91 2.0 Futurist Alliance to Born Leaders Entertainment in Hollywood, where Born Leaders also became a Developer Co-Creation Officer for us.
Current report
•On September 19, 2024, we officially launched our second brand, Faraday X (FX), specifically focused on producing affordable electric vehicles priced between$20,000 and$50,000 to capture a broader consumer market.
Current report
•On September 5, 2024, we entered into a Junior Securities Purchase Agreement (the “Junior Secured SPA”) with institutional investors for$30.0 million in commitments, consisting of$22.5 million in cash and$7.5 million converted from a prior loan (see Note 7, Notes Payablein the notes to the Unaudited Condensed Consolidated Financial Statements). The notes pursuant to the Junior Secured SPA have a 10% interest rate, are convertible into common stock, and were issued with warrants to purchase 5.7 million shares with an exercise price of$6.29. Each investor also received an incremental warrant to fund, at the investor’s sole discretion, additional notes pursuant to the Junior Secured SPA for amounts up to the original principal balance the investor funded.
Current report
•On August 16, 2024 after market close, the Company’s 1-for-40 reverse stock split became effective.
Current report
•On August 12, 2024, Wei Gao, Head of Global Communication and Community Sales, took delivery of an FF 91 2.0 Futurist Alliance, marking the second delivery in the Start of Delivery Second Phase (SOD2).
Current report
•On August 2, 2024, we entered into a Waiver Agreement with certain investors holding secured and unsecured convertible notes, allowing adjustments to the notes’ conversion price under specific conditions to reduce cash obligations, providing noteholders with the option to convert at a lower price while waiving accrued interest, and extending their right to purchase additional notes for one year.
Current report
•On August 1, 2024, we filed a Certificate of Amendment to increase authorized common stock from 463.3 million to 4.17 billion shares, bringing the total authorized shares to 4.18 billion (each on a pre-split adjusted basis). Also on August 1, 2024, we filed a Certificate of Elimination to eliminate the designation of the Series A Preferred Stock classification, reclassifying it as authorized but unissued, following the automatic redemption of all outstanding Series A Preferred shares.
Current report
•On July 18, 2024, we unveiled our Automotive Bridge Strategy, reintroducing a two-brand approach to target both luxury and affordable EV markets, expanding our reach through the integration of advanced AI and software technologies.
Current report
•On July 11, 2024, we entered into a Master Lease Agreement with Utica Leaseco, LLC with respect to a collateralized loan arrangement (see Note 7, Notes Payablein the notes to the Unaudited Condensed Consolidated Financial Statements).
Current report
•On November 1, 2024, we filed a Registration Statement on Form S-1 with the SEC. This registration covers the issuance of Class A Common Stock that are contingently issuable under the terms of the Junior Secured SPA Notes (see Note 7, Notes Payablein the notes to the Unaudited Condensed Consolidated Financial Statements).
Current report
•On October 24, 2024, we announced a co-investment agreement with Master Investment Group, led by Sheikh Abdulla Al Qassimi, to establish our future regional headquarters in Ras Al Khaimah, UAE, supporting Faraday’s Middle East expansion strategy. Construction is set to begin by late 2024, with operations expected by late 2025 or early 2026. Faraday Future signed agreements with the Ras Al Khaimah Economic Zone (RAKEZ) for both a current business location and a larger operational facility to strengthen its presence in the UAE’s strategic economic hub.
Current report
•We made senior leadership changes, appointing Koti Meka as Chief Financial Officer, effective September 23, 2024 and Aaron Ma as Acting Head of EV R&D, effective August 2024, to advance its dual-brand strategy.
Current report
•On September 22, 2024, we delivered an FF 91 2.0 Futurist Alliance to Born Leaders Entertainment in Hollywood, where Born Leaders also became a Developer Co-Creation Officer for us.
Current report
•On September 4, 2024, Nasdaq confirmed that we regained compliance with Nasdaq's listing requirements. This followed a series of actions to address deficiencies in timely filing of the Form 10-K and the Q1 2024 10-Q and a minimum bid price deficiency. On June 26, 2024, Nasdaq had granted continued listing, contingent upon meeting filing and minimum bid price requirements by July 31 and August 31, 2024, respectively. On July 30, 2024, we met the periodic reporting compliance requirement by filing our Q1 2024 Form 10-Q. Subsequently, in August 2024, we met the minimum bid price requirements following the August 2024 Reverse Stock Split.
Current report
•On August 27, 2024, we appointed Tin Mok as Head of FF United Arab Emirates (“UAE”), where he will lead business development and strategic financing efforts in the UAE and Middle East.
Current report
•On July 31, 2024, at the annual stockholder meeting, our stockholders approved proposals to increase authorized shares, approve a reverse stock split, reelect directors, and amend the 2021 Stock Incentive Plan, raising available shares by 88.3 million (on a pre-split adjusted basis).
Current report
Settlement on Accrued Research and Development Expenses
Current report
Settlement on accrued research and development expenses represents adjustments resulting from settling previously accrued R&D obligations at amounts lower than initially estimated. This line item generally includes gains arising from negotiations or dispute resolutions with vendors, technology partners, or service providers, where the final settlement amount reduces the originally accrued expenses associated with R&D activities.
Current report
Lease impairment loss includes impairment charges on right-of-use (ROU) assets for leased properties that we have vacated, abandoned, or plan to terminate. This line item captures losses recognized when the carrying value of an ROU asset exceeds its fair value due to our exiting premises or terminating leases. Impairment losses may occur when facilities, including retail, office, or research spaces, are vacated, and the remaining lease liabilities continue to be recognized on the balance sheet. Lease impairment loss is not offset against lease termination gain, which is included in Other Income (Expense), net discussed below.
Current report
Other Income (Expense), net
Current report
Total revenue decreased by$0.5 million for thethree months ended September 30, 2024 compared to the same period in 2023. Automotive leasing revenue was recognized during the three months ended September 30, 2024, though the amount was not material, and no automotive sales revenue was recorded. In contrast, automotive sales revenue totaled$0.6 million for the three months ended September 30, 2023, with no leasing revenue during that period. The 2023 sales revenue resulted from the initial delivery of our flagship luxury electric vehicle, the FF 91 Futurist.
Current report
Cost of revenues increased by$5.3 million for the three months ended September 30, 2024 compared to the same period in 2023. This increase was primarily driven by depreciation expenses resulting from placing equipment into service to improve our production capabilities, in particular our paint and body shop, and an increase in corporate cost absorption into inventory and cost of revenues.
Current report
During thethree months ended September 30, 2024, we continued transitioning our production capabilities to include both luxury and more affordable electric vehicles. This strategic shift, which is aligned with broader market demand, is expected to result in additional fixed cost allocations to cost of revenues as equipment is placed into service, while we continue to optimize our production efficiencies.
Current report
R&D expense decreased by$16.4 million for the three months ended September 30, 2024 compared to the same period in 2023. This reduction was primarily attributable to a$10.1 million decrease resulting form headcount reductions and the reassignment of R&D personnel to production roles, as well as a$4.3 million decrease in engineering, design, and testing costs.
Current report
As we transition from an R&D focus to full-scale production, resources have been reallocated from R&D to manufacturing to enhance operational efficiency. This shift supports the commercialization of completed R&D developments while enabling targeted innovation in key areas. Strategic partnerships with technology providers and industry experts have also been established to sustain innovation with reduced internal costs.
Current report
We have also begun shifting our R&D focus towards the development of more affordable electric vehicle platforms, expanding our technology portfolio to address broader market demands. This strategic shift ensures continued innovation across both luxury and more affordable segments, aligning with evolving industry trends.
Current report
Sales and marketing expense decreased by$2.7 million for the three months ended September 30, 2024 compared to the same period in 2023. The reduction was primarily driven by a $1.7 million decrease in compensation expense, a decrease of$0.3 millionin advertising costs, and a $0.2 million decrease in professional services expenses.
Current report
Despite a reduction in sales and marketing personnel, we continue to market effectively by leveraging our Co-Creation strategy, which involves partnerships with industry pioneers and influential personalities. Through this approach, we amplify our brand by engaging high-profile figures and involving users in our product development and marketing processes. Additionally, we host VIP events and participate in major industry showcases to provide customers and stakeholders with immersive experiences of our flagship vehicles, further enhancing customer engagement and brand visibility. These efforts allow us to optimize our marketing reach and increase brand awareness while maintaining lower internal costs.
Current report
General and administrative expense decreased by$15.7 million for the three months ended September 30, 2024 compared to the same period in 2023. This decrease was primarily driven by a$6.5 million reduction in professional service fees, a$4.0 million decrease in general expenses, such as rent and insurance costs, and a$1.9 million reduction in wages and wage-related costs. Additionally, there was a$1.9 million decrease in depreciation expense.
Current report
These reductions reflect our ongoing cost-cutting initiatives aimed at optimizing general and administrative expenses. We have implemented measures to streamline operations, including renegotiating vendor contracts, consolidating office space to reduce rent, and restructuring our workforce to lower wage-related expenses, all while maintaining operational efficiency.
Current report
Settlement of Accrued Research and Development expenses
Current report
*NM = not meaningful
Current report
Gain on settlement of previously accrued R&D expenses increased by$14.9 million for the three months ended September 30, 2024 compared to the same period in 2023. This gain resulted from a settlement that resolved ongoing disputes over unpaid invoices due to Palantir Technologies Inc. (“Palantir”) As of the date of settlement, we had accrued approximately$19.9 million of R&D expense.
Current report
Following arbitration, the parties reached a settlement in which we agreed to pay Palantir$5.0 million. We paid $0.2 million in cash and fulfilled the remaining$4.8 million obligation with the issuance of Class A Common Stock. On August 8, 2024, we issued Palantir 252,768 shares of Class A Common Stock valued at $2.4 million. As of September 30, 2024, we had an obligation to pay Palantir the remaining $2.4 million. We settled this obligation on October 1, 2024 through the issuance of 827,526 shares of Class A Common Stock. We recognized a gain of$14.9 million, reflecting the difference between the accrued expenses and the final settlement amount due to Palantir.
Current report
We recognized a$2.6 million loss on the disposal of property, plant, and equipment during the three months ended September 30, 2024. No comparable transactions were recorded during the three months ended September 30, 2023. We dispose of equipment when the assets become obsolete, costly to maintain, or are replaced by more efficient technologies.
Current report
We did not have any earnout shares that were re-measured at fair value during the three months ended September 30, 2024. As of August 25, 2023, upon an increase in our authorized shares of Class A Common Stock, we reclassified the earnout shares from liability classification to equity classification. Once the number of authorized shares of our Class A Common Stock was increased, the earnout shares were determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. The$0.1 million decrease in the fair value of the earnout shares represents the change in fair value of the earnout prior to its reclassification and was recognized as a Change in fair value of earnout liability during the three months ended September 30, 2023.
Current report
During the three months ended September 30, 2024, the fair value of our outstanding notes and warrants were revalued at lower fair values compared to the same period in 2023. The decrease in the fair value of the notes and warrants during the period was driven by factors including: (1) the decline in our stock price during the period; (2) pursuant to the terms of the Waiver Agreement(see Note 7, Notes Payable in the notes to the Unaudited Condensed Consolidated Financial Statements), interest payments due under the Secured SPA became due at maturity; and (3) the elimination of the interest make-whole pursuant to the Waiver Agreement. These gains were partially offset by$0.7 million in transaction costs during the period. The change in the fair value of our notes payable and warrant liabilities also decreased during thethree months ended September 30, 2024 when compared with the same period in 2023 due to a 46% decrease in notes payable outstanding that are remeasured at fair value.
Current report
During the three months ended September 30, 2024, the fair values of our outstanding related party notes and warrants were revalued at lower fair values compared to the same period in 2023. This decrease was primarily driven by declines in our stock price during the period. The change in the fair value of our notes payable and warrant liabilities also decreased during thethree months ended September 30, 2024 when compared with the same period in 2023 due to a 55% decrease in notes payable outstanding that are remeasured at fair value.
Current report
Interest expense increased by $1.4 million for the three months ended September 30, 2024 compared to the same period in 2023. This increase was primarily due to financial obligations associated with the Hanford, California manufacturing facility. We pursued a sale-leaseback arrangement for this facility to generate liquidity for operational and facility enhancements. However, due to conditions within the sale-leaseback agreement, the transaction was treated as a financing arrangement under U.S. generally accepted accounting principles (“GAAP”), resulting in interest expense rather than lease expense. This arrangement did not exist during the same period in 2023.
Current report
Related party interest expense increased by $1.1 million for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to interest expense due to our loan with Chongqing Leshi Small Loan Co., Ltd. (“Chongqing”), a related party. This increase was primarily due to our default on the related party note with Chongqing, in the first quarter of 2024, which triggered an increase in the interest rate as well as additional interest expense and penalties. Since the default, we continue to accrue all relevant interest and penalties.
Showing the first 40 of 72 passages. Open the source sections for the rest.
Removed paragraphs (44)
Previous report
•As of April 1, 2024, we completed our voluntary recall in the United States through an OTA software update.
Previous report
•We announced, on April 9, 2024, the establishment of a Middle Eastern sales entity in Dubai, U.A.E.
Previous report
•On April 22, 2024, we announced Werner Wilhelm as Executive Launch Director.
Previous report
•On May 29, 2024, we announced plans to share the details of the Bridge Strategy in the following months.
Previous report
•In June 2024, we determined that the previously announced future FF 91 Alliance Edition users, Rem D Koolhaas and Emma Hernan, would not complete the acquisition of their respective FF cars, due to personal reasons.
Previous report
•In July 2024, we unveiled its innovative Bridge Strategy, making a return to a two-brand approach.
Previous report
•On June 9, 2024, Li Han resigned as a director of the Company for personal reasons. Ms. Han also served as a member of the Nominating and Corporate Governance Committee.
Previous report
•On July 31, 2024, we announced the passage of each of the proposals presented at the annual meeting of stockholders, including the re-election of all members of the Board.
Previous report
•On April 18, 2024, Nasdaq notified us that since we had not yet filed our Form 10-K for the year ended December 31, 2023, we no longer complied with Listing Rule 5250(c)(1). Pursuant to Listing Rule 5810(c)(2)(A), this deficiency was a basis for delisting (in addition to our failure to maintain a minimum bid price of at least $1.00 per share for the prior 30-consecutive-trading-day period from November 9, 2023 to December 27, 2023, as previously disclosed). We requested and were granted a hearing from the Nasdaq Hearings Panel. On June 26, 2024, Nasdaq notified us that the Nasdaq Hearings Panel had granted our request for continued listing on Nasdaq subject to our compliance with the periodic reporting requirement by July 31, 2024, and the minimum bid price requirement by August 31, 2024. We met the periodic reporting compliance requirement by filing our Q1 2024 Form 10-Q on July 30, 2024.
Previous report
Other Expense, net
Previous report
Automotive sales revenue was $0.3 million for the three months ended June 30, 2024. We started vehicle delivery to its customers during the third quarter of 2023. We began delivering vehicles in the third quarter of 2023.
Previous report
Cost of revenues was $21.0 million for the three months ended June 30, 2024. On March 29, 2023, we announced the start of production of our first electric vehicle, the FF 91 Futurist and, on April 14, 2023, our first production FF 91 Futurist vehicle came off the line. We began delivering vehicles in the third quarter of 2023.
Previous report
The decrease in R&D expense wasprimarily due to a decrease in personnel and compensation expenses of $21.2 million, a decrease in stock-based compensation of $1.0 million due to a decrease in headcount as part of cost saving measures implemented by us in light of its financial position, as well as the allocation of certain personnel from the R&D department to production, and a decrease in professional services expenses of $0.8 million.
Previous report
The decrease in sales and marketing expense wasdue to a decrease in compensation expenses of $3.3 million, a decrease in professional services expenses of $1.1 million, a decrease in marketing expenses of $0.7 million, a decrease in stock-based compensation expense of $0.1 million, and a decrease in other miscellaneous expenses of $0.5 million.
Previous report
The increase in general and administrative expense was primarily due to an increase in information technology expense of $0.4 million, partially offset by a decrease in stock-based compensation expense of $0.1 million.
Previous report
During the three months ended June 30, 2024, the we moved out of a leased store facility and a leased research facility while working with the landlords to negotiate the related lease terminations, resulting in a lease ROU asset impairment loss of $7.5 million for the loss of use of these two leased facilities. We also terminated one of the operating leases in China, resulting in a net lease ROU asset impairment loss of $0.1 million during the three months ended June 30, 2024.
Previous report
We recognized an immaterial Loss on disposal of property, plant and equipment for the three months ended June 30, 2024. There were no such transactions for the three months ended June 30, 2023.
Previous report
As of April 21, 2023, we reclassified the earnout obligation from equity classification to liability classification as a result of the us having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. As a result of the reclassification, we reclassified $2.1 million out of Additional paid-in capital into the Earnout liability. The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the three months ended June 30, 2023. There was no comparable transaction during the three months ended June 30, 2024.
Previous report
During the three months ended June 30, 2024, the fair value of our outstanding notes and warrants were revalued at higher fair values than in the preceding three month period. The increase in the fair value of the notes and warrants during the period was primarily driven by improvements in our stock price, which also contributed to an improvement in our volatility assumption. During the three months ended June 30, 2023, the fair value of our notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.
Previous report
During the three months ended June 30, 2024, the fair value of our outstanding related party notes and warrants were revalued at higher fair values than in the preceding three month period. The increase in the fair value of the related party notes and warrants during the period was primarily driven by improvements in our stock price, which also contributed to an improvement in our volatility assumption. During the three months ended June 30, 2023, the fair value of our related party notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.
Previous report
The increase in Interest expense was primarily due to the financial obligation on sale and leaseback transaction that did not exist during the three months ended June 30, 2023.
Previous report
The increase in Related party interest expense was due to our default on the Chongquing Leshi Small Loan Co., Ltd. note, which resulted in a substantial increase in our interest rate along with additional interest expense and penalties. As discussed in Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements, we had previously negotiated with a related party to partially forgive debt and interest on its related note, in exchange for the promise to make payments on a scheduled basis. The interest related to this note was reinstated during the first quarter of 2024 due to our default on the underlying note.
Previous report
Other Expense, net
Previous report
The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S. Dollars that are remeasured at the end of each period.
Previous report
Automotive sales revenue was $0.3 million for the six months ended June 30, 2024. On March 29, 2023, we announced the start of production of our first electric vehicle, the FF 91 Futurist and, on April 14, 2023, our first production FF 91 Futurist vehicle came off the line. We started vehicle delivery to its customers during the third quarter of 2023.
Previous report
Cost of Revenues
Previous report
Cost of revenues was $41.7 million for the six months ended June 30, 2024. We began production of vehicles during the second quarter of 2023 and began delivering vehicles in the third quarter of 2023.
Previous report
The decrease in R&D expense is primarily due to the reduction in ED&T, General expenses and Information technology of $21.1 million, $4.0 million, and $2.0 million, respectively, as we substantially completed R&D activities related to the FF91 in late 2023 and moved into production. In addition, there was a decrease in personnel and compensation expenses of $35.8 million due to a decrease in headcount resulting from both the substantial completion of R&D and cost saving measures implemented by us in light of our financial position, as well as a decrease in stock-based compensation expense of $7.0 million resulting from the same reduction in headcount and revaluation of stock-based compensation resulting from the transition of stock-based compensation from liability to equity classification.
Previous report
The decrease in sales and mark eting expense is primarily due to a decrease in personnel and compensation expenses of $5.0 million due to a decrease in headcount as part of cost saving measures implemented by us in light of our financial position and a decrease of $0.6 million in stock-based compensation expense driven by reductions in headcount and the revaluation of stock-based compensation resulting from the transition of stock-based compensation from liability to equity classification. In addition, there was a decrease in marketing expenses and professional services expenses of $0.9 million and $0.8 million, respectively.
Previous report
The decrease in general and administrative expense was primarily due to the decrease in professional services expense of $8.3 million, personnel and compensation expense of $2.9 million, and stock-based compensation expense of $1.5 million, due to a decrease in headcount as part of cost saving measures implemented by us in light of our financial position.
Previous report
During the six months ended June 30, 2024, we moved out of a leased store facility and a leased research facility while working with the landlords to negotiate the related lease terminations, resulting in a lease ROU asset impairment loss of $7.5 million for the loss of use of these two leased facilities. We also terminated one of the operating leases in China, resulting in a net lease ROU asset impairment loss of $0.1 million during the six months ended June 30, 2024.
Previous report
(Gain)/Loss on Disposal of Property, Plant and Equipment
Previous report
As of December 31, 2022, we had reclassified our earnout obligation from equity classification to liability classification as a result of us having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. On February 28, 2023, upon stockholder approval to increase our authorized shares, we had sufficient authorized shares to fully settle all outstanding equity-linked financial instruments. Accordingly, we reclassified the fair value of the Earnout liability of $5.0 million into Additional paid-in capital. The $2.8 million increase in the Earnout liability from December 31, 2022 to February 28, 2023 was recognized as an expense in the Change in fair value of earnout liability during the six months ended June 30, 2023.
Previous report
In addition, as of April 21, 2023, we again reclassified our earnout obligation from equity classification to liability classification as a result of us having insufficient authorized shares to share-settle the earnout, which was previously determined to be equity classified under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. As a result of the reclassification, we reclassified $2.1 million out of Additional paid-in capital into the Earnout liability. The $0.7 million decrease in the Earnout liability from April 21, 2023 to June 30, 2023 was recognized as a gain in the Change in fair value of earnout liability during the six months ended June 30, 2024. There was no comparable transaction during the six months ended June 30, 2024.
Previous report
During the three months ended June 30, 2023, the fair value of our notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period. The change in fair value during the six months ended June 30, 2024 is smaller than during the six months ended June 30, 2023 predominantly due to improvements in our conversion terms and a smaller decline in our stock price during the period.
Previous report
During the six months ended June 30, 2024, the fair value of our outstanding related party notes and warrants were revalued at higher fair values than in the preceding six month period. The increase in the fair value of the related party notes and warrants during the period was primarily driven by improvements in our stock price, which also contributed to an improvement in our volatility assumption. During the six months ended June 30, 2023, the fair value of our related party notes and warrants decreased substantially due to pricing inputs that use the market price of our Common Stock and debt discount rate, which experienced a significant decline during the period.
Previous report
The decrease in the Loss on settlement of notes payable during the six months ended June 30, 2024 was driven by a lower conversion volume during the period, partially offset by a higher loss on settlement per dollar of principal. During the six months ended June 30, 2024, note holders converted $33.7 million of notes payable compared to $156.0 million in the comparable prior year period.
Previous report
The increase in Interest expense was primarily due to the financial obligation on sale and leaseback transaction that did not exist during the six months ended June 30, 2023.
Previous report
The increase in Related party interest expense was due to our default on the Chongquing Leshi Small Loan Co., Ltd note, which resulted in a substantial increase in our interest rate along with additional interest expense and penalties. As discussed in Note 8, Related Party Transactions, we had previously negotiated with a related party to partially forgive debt and interest on its related note, in exchange for the promise to make payments on a scheduled basis. The interest related to this note was reinstated for the first quarter of 2024 due to our default on the underlying note.
Previous report
The change in Other expense, net was primarily due to a decrease in foreign currency transaction losses resulting from the revaluation of transactions denominated in currencies other than U.S. Dollars that are remeasured at the end of each period.
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Reworded paragraphs (32)
Previous wording
FF designs and engineers next-generation intelligent, connected, electric vehicles. We manufacture vehicles at our production facility in Hanford, California (the “FF ieFactory California”), with additional future production capacity needs addressed through a contract manufacturing agreement with Myoung Shin Co., Ltd. (“Myoung Shin”), an automotive manufacturer headquartered in South Korea. We have additional engineering, sales, and operational capabilities in China and are exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangements.
Current wording
FF designs and engineers next-generation intelligent, connected, electric vehicles. We manufacture vehicles at our production facility in Hanford, California (the “FF ieFactory California”). We have additional engineering, sales, and operational capabilities in China and are exploring opportunities for potential manufacturing capabilities in China through a joint venture or other arrangements.
Previous wording
•Since inception, we have developed a portfolio of intellectual property, established our supply chain, and assembled a global team of automotive and technology experts and innovators to achieve our goal of redefining the future of the automotive industry. As of June 30, 2024, we have been granted approximately 660 patents globally.
Current wording
•Since inception, we have developed a portfolio of intellectual property, established our supply chain, and assembled a global team of automotive and technology experts and innovators to achieve our goal of redefining the future of the automotive industry. As of September 30, 2024, we have approximately 660 active patents globally.
Previous wording
Through June 30, 2024, we have sold a total of four and leased six vehicles. As a result, we will require substantial additional capital to develop products and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales, we will fund our ongoing operations through a combination of various funding and financing alternatives, including equipment financing of the FF ieFactory California, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on our assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time. Any delays in the successful completion of our FF ieFactory California will impact our ability to generate revenue. For additional discussion of the substantial doubt about our ability to continue as a going concern, see Note 2, Liquidity and Capital
Current wording
Through September 30, 2024, we have sold a total of five and leased nine vehicles. As a result, we will require substantial additional capital to develop products and fund operations for the foreseeable future. Until we can generate sufficient revenue from product sales, we will fund our ongoing operations through a combination of various funding and financing alternatives, including equipment financing of the FF ieFactory California, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options. The particular funding mechanisms, terms, timing, and amounts are dependent on our assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time. Any delays in the successful completion of our FF ieFactory California will impact our ability to generate revenue. For additional discussion of the substantial doubt about our ability to continue as a going concern, see Note 2,
Previous wording
Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements and for further details on liquidity, see the “Liquidity and Capital Resources” section below.
Current wording
Liquidity and Capital Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements and for further details on liquidity, see the “Liquidity and Capital Resources” section below.
Previous wording
We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023. We sold and leased zero vehicles during the three months ended June 30, 2024.
Current wording
We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023. During the three months ended September 30, 2024, we did not sell any vehicles and leased out two vehicles.
Previous wording
Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, 24/7 roadside assistance, OTA software updates, internet connectivity and destination fees.
Current wording
Automotive sales revenue includes revenues related to deliveries of new vehicles, and specific other features and services including home charger, charger installation, 24/7 roadside assistance, Over-The-Air (“OTA”) software updates, internet connectivity and destination fees.
Previous wording
Our customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time. Refundable deposits, for vehicle reservations and services, received from customers prior to an executed vehicle purchase agreement are recorded as customer deposits within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.
Current wording
Our customers may reserve a vehicle and preorder certain services by making a customer deposit, which is fully refundable at any time. Refundable deposits, for vehicle reservations and services, received from customers prior to an executed vehicle purchase agreement are recorded as customer deposits within Accrued expenses and other current liabilities on our Condensed Consolidated Balance Sheets.
Previous wording
Research and Development (“R&D”) activities represent a significant part of our business. Our R&D efforts focus on the design and development of our electric vehicles and continuing to prepare our prototype electric vehicles to exceed industry standards for compliance, innovation, and performance. R&D expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on R&D activities, other related costs, depreciation, R&D services provided by co-creators, and an allocation of overhead. We expect R&D expenses to decrease in the near future as we substantially completed R&D activities related to the FF 91 in late 2023.
Current wording
Research and Development (“R&D”) activities represent a significant part of our business. Our R&D efforts focus on the design and development of our electric vehicles and continuing to prepare our prototype electric vehicles to exceed industry standards for compliance, innovation, and performance. R&D expenses consist of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on R&D activities, other related costs, depreciation, R&D services provided by co-creators, and an allocation of overhead.
Previous wording
Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on sales and marketing, costs associated with sales and marketing activities, marketing services provided by co-creators, and an allocation of overhead. Marketing activities are those related to introducing our brand and our electric vehicle prototypes to the market. We expect selling and marketing expenses to continue to increase as we bring our electric vehicles to market and seek to generate sales.
Current wording
Sales and marketing expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees focused on sales and marketing, costs associated with sales and marketing activities, marketing services provided by co-creators, and an allocation of overhead. Marketing activities are those related to introducing our brand and our electric vehicle prototypes to the market.
Previous wording
General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees associated with administrative services such as legal, human resources, information technology, accounting and finance, other related costs, and legal loss contingency expenses, which are our estimates of future legal settlements. These expenses also include certain third-party consulting services, certain facilities costs, and any corporate overhead costs not allocated to other expense categories. We expect our general and administrative expenses to increase as we continue to grow our business.
Current wording
General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation) for our employees associated with administrative services such as legal, human resources, information technology, accounting and finance, other related costs, and legal loss contingency expenses, which are our estimates of future legal settlements. These expenses also include certain third-party consulting services, certain facilities costs, and any corporate overhead costs not allocated to other expense categories.
Previous wording
Loss on disposal of property, plant and equipment relates to the abandonment of certain FF 91 Futurist program construction in progress assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation of our cost reduction program. Charges associated with disposals are recognized within operating expenses in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
Current wording
Loss on disposal of property, plant and equipment relates to the abandonment of certain FF 91 Futurist program construction in progress assets, primarily vendor tooling, machinery, and equipment, due to the redesign of the related FF 91 components and implementation of our cost reduction program. Charges associated with disposals are recognized within operating expenses.
Previous wording
Legacy FF stockholders, as of the July 21, 2021 closing date of the Business Combination (as defined in Note 10, Commitments and Contingenciesin the notes to the Unaudited Condensed Consolidated Financial Statements) until its fifth anniversary, are entitled to contingent consideration of up to 104,167 additional shares of Class A Common Stock in the aggregate in two equal tranches upon the occurrence of each earnout triggering event (“Earnout Shares”). We recognized the Earnout Shares at fair value upon the closing of the Business Combination and classified them in Stockholders’ Equity since the Earnout Shares were determined to be indexed to our own stock and meet the requirements for equity classification in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. From time to time subsequent to the closing of the Business Combination, the Earnout Shares may be classified as derivative liabilities under ASC 815, Derivatives and Hedging, due to us having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. The Earnout Shares reclassified as derivative instruments are recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification are settled or we have sufficient authorized, unissued shares to settle such contracts with shares.
Current wording
Legacy FF stockholders, as of the July 21, 2021 closing date of the Business Combination (as defined in Note 10, Commitments and Contingenciesin the notes to the Unaudited Condensed Consolidated Financial Statements) until its fifth anniversary, are entitled to contingent consideration of up to 2,605 additional shares of Class A Common Stock in the aggregate in two equal tranches upon the occurrence of each earnout triggering event (“Earnout Shares”). We recognized the Earnout Shares at fair value upon the closing of the Business Combination and classified them in Stockholders’ Equity since the Earnout Shares were determined to be indexed to our own stock and meet the requirements for equity classification in accordance with ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity. From time to time subsequent to the closing of the Business Combination, the Earnout Shares may be classified as derivative liabilities under ASC 815, Derivatives and Hedging, due to us having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. The Earnout Shares reclassified as derivative instruments are recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification are settled or we have sufficient authorized, unissued shares to settle such contracts with shares.
Previous wording
Related party interest expense consists of interest expense on notes payable with related parties.
Current wording
Related party interest expense consists of interest expense on notes payable with related parties not marked to fair value.
Previous wording
Other expense, net consists of foreign currency transaction gains and losses and other expenses such as bank fees and late charges. Foreign currency transaction gains and losses are generated by revaluation of debt and the settlements of invoices denominated in currencies other than the functional currency. We expect other expense to fluctuate as we continue to transact internationally.
Current wording
Other expense, net primarily consists of foreign currency transaction gains and losses and other expenses such as bank fees and late charges. Foreign currency transaction gains and losses are generated by revaluation of debt and the settlements of invoices denominated in currencies other than the functional currency. Other income, net primarily consists of lease termination gains.
Previous wording
(Gain)/Loss on Disposal on Property, Plant and Equipment
Current wording
Loss on Disposal on Property, Plant and Equipment
Previous wording
Thedecrease in the Loss on settlement of notes payable during the three months ended June 30, 2024 was driven by a reduced conversion volume during the period. In addition, during the three months ended June 30, 2023, we recognized an $11.4 million Loss on settlement of notes payable from amendments to our Secured SPA Notes in May 2023 accounted for as extinguishments. During the three months ended June 30, 2024, note holders converted $15.4 million of notes payable compared with $94.4 million in the comparable prior year period. The impact of the volume difference is offset by a larger loss on settlement per dollar of principal during the three months ended June 30, 2024. The increase in the loss on settlement per dollar of principal was driven by the trailing-twelve-month trend of declines in the fair value of our notes payable driven by the change in our stock price over the period and improvements in the conversion terms of the notes from June 30, 2023 to June 30, 2024.
Current wording
The increase in the loss on settlement of notes payable during the three months ended September 30, 2024 was driven by an increase in the notes payable converted during the period compared with the same period in 2023. During the three months ended September 30, 2024, noteholders converted $62.0 million of notes payable compared with $25.8 million during the three months ended September 30, 2023. Additionally, during the three months ended September 30, 2024, we recognized a loss on extinguishment of $2.7 million resulting from the Waiver Agreement. The increase was partially offset by a decrease in the loss on settlement per dollar of principal during the three months ended September 30, 2024.
Previous wording
There were no settlements of related party notes payable during the three months ended June 30, 2024. During the three months ended June 30, 2023, the related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 290,549 shares of our Class A Common Stock. We recognized a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Current wording
There were no settlements of related party notes payable during the three months ended September 30, 2024. During the three months ended September 30, 2023, a related party converted Unsecured SPA Notes with an aggregate principal balance of$6.6 million in exchange for 21,850 shares of Class A Common Stock. We recognized a loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Previous wording
Comparison of results of operations for the six months ended June 30, 2024 versus the six months ended June 30, 2023:
Current wording
Comparison of results of operations for the nine months ended September 30, 2024 versus the nine months ended September 30, 2023:
Previous wording
The change in loss on disposal of property, plant and equipment was primarily due to the non-recurring write-off of $3.7 million during the six months ended June 30, 2023 of certain construction in process assets that are not expected to be used as part of start of production.
Current wording
Loss on disposal of property, plant, and equipment decreased by $1.2 million for the nine months ended September 30, 2024 compared to the same period in 2023. In 2024, we recognized a $2.5 million loss on the disposal of property, plant, and equipment, while in 2023, there was a non-recurring write-off of $3.7 million, primarily related to construction-in-process assets that were not expected to be used as part of the start of production. We dispose of equipment when the assets become obsolete, costly to maintain, or are replaced by more efficient technologies.
Previous wording
During the six months ended June 30, 2024 and 2023, the fair value of our outstanding notes and warrants were revalued at lower values than in the preceding six month periods. Our outstanding notes and warrants were remeasured at predominantly lower fair values due to pricing inputs that use the market price of our Common Stock and debt discount rate, which have experienced a decline.
Current wording
During the nine months ended September 30, 2024 and 2023, the fair value of our outstanding notes and warrants were revalued at lower values than in the preceding periods. Our outstanding notes and warrants were remeasured at predominantly lower fair values due to pricing inputs that use the market price of our Common Stock and debt discount rate, which have experienced a decline.
Previous wording
During the six months ended June 30, 2024, related party note holders converted $0.7 million of related party notes payable, which constituted the remaining outstanding balance, in exchange for 1,324,292 shares of our Class A Common Stock and we recognized a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument. In addition, as discussed in Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements, we also recognized a $14.1 million loss on related party notes from the recognition of interest and penalties and the increase of principal due to our breach of the agreement with Chongquing Leshi Small Loan Co., Ltd. There was no comparable related party loss in the comparable prior year period.
Current wording
During the nine months ended September 30, 2024, related party noteholders converted $0.7 million of related party notes payable into 1,324,292 shares of our Class A Common Stock, and we recognized a loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument. In addition, as discussed in Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements, we also recognized a $14.1 million loss on related party notes from the recognition of interest and penalties and the increase of principal due to our breach of the agreement with Chongqing Leshi Small Loan Co., Ltd. There was no comparable related party loss in the comparable prior year period.
Previous wording
During the six months ended June 30, 2023, a related party converted Unsecured SPA Notes with principal balances of $12.0 million in exchange for 290,549 shares of our Class A Common Stock. We recognized a Loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Current wording
In May 2023, we entered into Unsecured SPA Notes with Metaverse Horizon Limited (“MHL”), who is a related party, and V W Investment Holding Limited (“V W Investment”). During the nine months ended September 30, 2023, MHL converted Unsecured SPA Notes with an aggregate principal balance of$18.7 million into 602,947 shares of Class A Common Stock, and we recognized a loss on settlement of related party notes payable for the difference between the fair value of the shares issued and the fair value of the debt instrument.
Previous wording
We have and will continue to devote substantial effort and, to the extent available, capital resources, to strategic planning, engineering, design, and development of our electric vehicle platform, development of vehicle models, finalizing the build out of the FF ieFactory California manufacturing facility, and capital raising. We incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $4,115.4 million, an unrestricted cash balance of $0.8 million and a negative working capital position of $198.7 million, excluding restricted cash, as of June 30, 2024. During 2023, we delivered our first vehicles but expect to continue generating significant operating losses for the foreseeable future. We have funded our operations and capital needs primarily through the issuance of related party notes payable and notes payable (see Note 7, Notes Payable and Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements), convertible notes, and the sale of common stock.
Current wording
We have and will continue to devote substantial effort and, to the extent available, capital resources, to strategic planning, engineering, design, and development of our electric vehicle platform, development of vehicle models, finalizing the build out of the FF ieFactory California manufacturing facility, and capital raising. We incurred cumulative losses from operations, negative cash flows from operating activities, and have an accumulated deficit of $4,193.1 million, an unrestricted cash balance of $7.3 million and a negative working capital position of $168.3 million, excluding restricted cash, as of September 30, 2024. During 2023, we delivered our first vehicles but expect to continue generating significant operating losses for the foreseeable future. We have funded our operations and capital needs primarily through the issuance of related party notes payable and notes payable (see Note 7, Notes Payable and Note 8, Related Party Transactions in the notes to the Unaudited Condensed Consolidated Financial Statements), convertible notes, and the sale of common stock.
Previous wording
Pursuant to the Secured SPA, the Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder, and the Senyun Joinder (collectively the “SPA Commitments”) (see Note 7, Notes Payable and Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements), we obtained commitments from several investors. As of June 30, 2024, the SPA Commitments totaled $554.5 million, of which $343.2 million was funded, $211.3 million remained to be funded, and $78.6 million in principal was outstanding. As of June 30, 2024, Optional Commitments under the SPA Commitments totaled $366.0 million, of which $47.2 million was funded, $318.8 million remained to be funded, and $9.2 million was outstanding. The remaining amounts to be funded as of June 30, 2024, are subject to the achievement of delivery milestones, satisfaction of closing conditions, resolution of disputes with investors, and satisfaction or waiver of other conditions, including for a portion of such financing an effective registration statement for the shares underlying the applicable notes.
Current wording
Pursuant to the Secured SPA, the Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder, and the Senyun Joinder (collectively the “SPA Commitments”) (see Note 7, Notes Payable and Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements), we obtained commitments from several investors. As of September 30, 2024, the SPA Commitments totaled $554.5 million, of which $365.3 million was funded, $189.2 million remained to be funded, and $38.7 million in principal was outstanding. As of September 30, 2024, Optional Commitments under the SPA Commitments totaled $366.0 million, of which $48.4 million was funded, $317.6 million remained to be funded, and $10.4 million was outstanding. The remaining amounts to be funded as of September 30, 2024, are subject to the achievement of delivery milestones, satisfaction of closing conditions, and satisfaction or waiver of other conditions.
Previous wording
In addition, on September 26, 2023, we entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, B. Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc. and Maxim Group LLC, as sales agents, to sell shares of Class A Common Stock, from time to time, with aggregate gross sales proceeds of up to $90.0 million pursuant to the Registration Statement as an “at-the-market” offering under the Securities Act (the “ATM Program”). The ATM Program had been the primary source of liquidity for us since September 2023. SEC rules and regulations, because we failed to timely file the Form 10-K and the Quarterly Report Form 10-Q for the quarter ended March 31, 2024, it is not S-3 eligible and cannot access the ATM Program. As such, our current primary source of liquidity is the issuance of various convertible note instruments.
Current wording
In addition, on September 26, 2023, we entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, B. Riley Securities, Inc., A.G.P./Alliance Global Partners, Wedbush Securities Inc. and Maxim Group LLC, as sales agents, to sell shares of Class A Common Stock, from time to time, with aggregate gross sales proceeds of up to $90.0 million pursuant to the Registration Statement as an “at-the-market” offering under the Securities Act (the “ATM Program”). The ATM Program was the primary source of liquidity for us during the period from September 2023 through December 2023. Under applicable SEC rules and regulations, because we failed to timely file our Form 10-K and the Quarterly Report Form 10-Q for the quarter ended March 31, 2024, we are not eligible to use the S-3 registration process, which restricts our ability to raise capital through that streamlined method of offering securities and cannot access the ATM Program. As such, our current primary source of liquidity is the issuance of various convertible note instruments.
Previous wording
Our ability to issue and sell additional shares of common stock or warrants under the SEPA is constrained by the number of authorized shares of our common stock. We must consider shares issuable under convertible debt, warrants or other obligations with equity rights. In addition, equity issuances can potentially trigger provisions under the SPA Commitments that increase the number of shares to be issued upon conversion and reduce the strike price of related warrants. This could result in us having inadequate authorized shares to meet our outstanding commitments.
Current wording
Our ability to issue and sell additional shares of common stock or warrants under the SEPA and ATM Program is constrained by the number of authorized shares of our common stock. We must consider shares issuable under convertible debt, warrants or other obligations with equity rights. In addition, equity issuances can potentially trigger provisions under the SPA Commitments and Junior Secured SPA Notes that increase the number of shares to be issued upon conversion and reduce the strike price of related warrants. This could result in us having inadequate authorized shares to meet our outstanding commitments.
Previous wording
As of and since June 30, 2024, we were and have been in default on the SPA Commitments and we are presenting the related notes as current. Since April 2023, we had been in default on, and since January 1, 2024, have been in breach of, our debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balance of $7.6 million and interest payable of $18.5 million as of June 30, 2024.
Current wording
Since April 2023, we have been in default on, and since January 1, 2024, we have been in breach of, our debt agreement with Chongqing Leshi Small Loan Co., Ltd., a related party, with an outstanding principal balanceof $7.7 million and interest payable of $20.0 million as of September 30, 2024. During 2024, we were also in default on our Unsecured Convertible Note obligations and various related party notes (see Note 7, Notes Payable and Note 8, Related Party Transactionsin the notes to the Unaudited Condensed Consolidated Financial Statements). Due to the cross default provisions of the SPA Notes and Junior Secured SPA Notes, we were and have been in default on the SPA and Junior Secured Commitments and we are presenting the related notes as current.
Previous wording
As of June 30, 2024, we maintained unrestricted cash on hand totaling $0.8 million, which was held for working capital and general corporate purposes. We also have access to various sources of additional capital, including the SEPA, the ATM Program, the SPA Commitments and other unsecured convertible notes. Our current primary source of liquidity the issuance of various convertible note instruments. Our ability to access these sources of capital and further information on amounts available is discussed in Note 2, Liquidity and Capital Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements.
Current wording
As of September 30, 2024, we maintained unrestricted cash on hand totaling $7.3 million, which was held for working capital and general corporate purposes. We also have access to various sources of additional capital, including the SEPA, the ATM Program, the Secured SPA, the Unsecured SPA, the Unsecured Streeterville SPA, the FFVV Joinder, and the Senyun Joinder (collectively the “SPA Commitments”), the Junior Secured SPA and other unsecured convertible notes. Our current primary source of liquidity is the issuance of various convertible note instruments pursuant to the SPA Commitments and the Junior Secured SPA. Our ability to access these sources of capital and further information on amounts available is discussed in Note 2, Liquidity and Capital Resources and Going Concern in the notes to the Unaudited Condensed Consolidated Financial Statements.
Previous wording
All notes are classified as current as of June 30, 2024.
Current wording
All notes, except amounts due in greater than 12 months pursuant to the Collateralized Loan, are classified as current as of September 30, 2024.
Previous wording
We continue to experience negative cash flows from operations as we design and develop our vehicles and build our infrastructure both in the United States and China. Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as R&D associated with our electric vehicles, corporate planning, and general and administrative functions. Our operating cash flows are also affected by our working capital needs to support growth and fluctuations in personnel-related expenditures, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.
Current wording
We continue to experience negative cash flows from operating activities as we design and develop our vehicles and build our infrastructure in both the United States and China. Cash flows from operating activities are significantly impacted by our capital investments to support business growth, particularly in enhancing the production capabilities of our electric vehicles, corporate planning, and general and administrative functions. Additionally, our operating cash flows are influenced by working capital requirements to support growth, as well as fluctuations in personnel-related expenses, accounts payable, accrued interest, other current liabilities, deposits, and other current assets.
Previous wording
Net cash used in investing activities was $0.3 million and $25.9 million for the six months ended June 30, 2024 and 2023, respectively, and was related to the significant decrease in the acquisition of fixed assets due to the reduction of liquidity.
Current wording
Net cash used in investing activities was $0.6 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively, representing a decrease of$10.3 million. This change was driven by a significant decrease in the acquisition of fixed assets due to the reduction of liquidity.
Previous wording
The effects of exchange rate changes on cash and restricted cash was immaterial for the six months ended June 30, 2024 and $5.6 million for the six months ended June 30, 2023. The effects of exchange rate changes on cash and restricted cash result from fluctuations in the translation of assets and liabilities denominated in foreign currencies, primarily Chinese Renminbi. Fluctuations in exchange rates against the U.S. Dollar may positively or negatively affect our operating results.
Current wording
The effects of exchange rate changes on cash and restricted cash was immaterial for the nine months ended September 30, 2024 and $3.7 million for the nine months ended September 30, 2023. The effects of exchange rate changes on cash and restricted cash result from fluctuations in the translation of assets and liabilities denominated in foreign currencies, primarily Chinese currency CNY. Fluctuations in exchange rates against the U.S. Dollar may positively or negatively affect our operating results.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Loss on Disposal of Property, Plant and Equipment
Current report — wording carried from elsewhere
During the nine months ended September 30, 2024 and 2023, the fair value of our outstanding related party notes and warrants were revalued at lower values than in the preceding periods. Our outstanding notes and warrants were remeasured at predominantly lower fair values due to pricing inputs that use the market price of our Common Stock and debt discount rate, which have experienced a decline.