Faraday Future Intelligent Electric (FFAI) risk factors, FY2024 10-K

Risks Related to our Common Stock

1. 01Cautionary Note Regarding Forward-Looking Statements
2. 78We are currently unable to continue to utilize our “at-the-market” equity program
3. 79Under applicable SEC rules and regulations, because we failed to timely file our Form 10-K for the year ended December 31, 2023, as well as our Form 10-Q for the quarter ended March 31, 2024, we will not be eligible to access the ATM Program until August 1, 2025, at the earliest
4. 80If we seek to implement a reverse stock split, the announcement or implementation of such a reverse stock split could negatively affect the price of our Common Stock
5. 81We do not currently intend to pay dividends on our Common Stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the market price for our Common Stock
6. 82The market price of our securities has been and may continue to be highly volatile. For example, the market price of our Common Stock ranged from a high price of $156.00 per share and a low price of $0.99 per share for the period from January 1, 2024, through December 31, 2024
7. 83Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or other ownership changes
8. 84Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) could have a material adverse effect on our business
9. 85We may issue additional shares of Common Stock or preferred shares, which would dilute the interest of our stockholders
10. 86It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales
11. 87We have granted preferential director nomination rights to certain investors that may cause us to fall out of compliance with Nasdaq listing rules
12. 88Charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of the Common Stock
13. 89Our Third Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law
14. 90Our dual-class structure may depress the trading price of our Common Stock
15. 91If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline
16. 92We have incurred and will continue to incur increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations
17. 93The JOBS Act permits “emerging growth companies” like ours to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. The reduced reporting requirements applicable to us may make our Common Stock less attractive to investors

Risks Related to our Business and Industry

1. 02We do not have sufficient liquidity to pay our outstanding obligations and to operate our business and will likely file for bankruptcy protection if we are unable to access additional capital
2. 03We have a limited operating history and face significant barriers to growth in the electric vehicle industry
3. 04We have incurred substantial losses in the operation of our business and anticipate that we will continue to do so. We may never achieve or sustain profitability
4. 05We expect operating expenses to increase significantly, which may impede our ability to achieve profitability
5. 06Our financial forecasts rely in large part upon assumptions and analyses developed by management. If these assumptions and analyses prove to be incorrect, actual operating results could suffer
6. 07We have significant unfunded commitments. If we are unable to satisfy the conditions to funding or if there is a dispute regarding the conversion requirements related to the unfunded commitments, we may not have enough capital to support our business and could be subject to investor legal claims
7. 08MHL and V W Investment are purchasers of the Unsecured SPA Notes (as defined in Note 7, Notes Payable, in the Notes to the Consolidated Financial Statements contained in the Form 10-K) and are affiliates of FF Global and a longtime stockholder of our company, respectively, and such purchasers have limited assets
8. 09We have incurred and expect to continue to incur substantial indebtedness, and may be unable to refinance borrowings on terms that are acceptable, or at all
9. 10The production and delivery of the FF 91 Futurist has experienced, and may continue to experience, significant delays
10. 11Through December 31, 2024, we had sold or leased only 16 FF 91 Futurist vehicles to user developers and employees. Non-employee user developers entered into consulting, branding, and other arrangements with us in exchange for fees ranging from approximately $150,000 to $475,000
11. 12The success of our business depends on attracting and retaining a large number of consumers and maintaining strong demand for our vehicles, software and services. If we are unable to do so, we will not be able to achieve profitability
12. 13Vehicle retail sales depend heavily on affordable interest rates and availability of credit for vehicle financing and if rates continue to increase substantially or remain relatively high it could materially and adversely affect our business, prospects, financial condition, results of operations, and cash flows
13. 14If we have insufficient reserves to cover future warranty claims, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected
14. 15We have taken remedial measures in response to the Special Committee findings, which may be unsuccessful. In addition, certain remedial measures have reversed or not fully implemented in light of the corporate governance agreements with FF Top and FF Global
15. 16On January 13, 2023, we entered into an amended shareholder agreement with FF Global (only with respect to the amendment of the Heads of Agreement) and FF Top (the “Amended Shareholder Agreement”), pursuant to which various terms of the Heads of Agreement were amended
16. 17Given the governance changes pursuant to the Heads of Agreement such as those described above and further changes to the composition of the Board, the remedial actions approved by the Board in connection with the Special Committee investigation may not be fully implemented or successful
17. 18The market for our vehicles is nascent and not established
18. 19We have not approved secondary sources for the key single-sourced components used in the FF 91 series. Generally, we do not maintain long-term agreements with these single-source suppliers
19. 20If any of our suppliers become economically distressed or go bankrupt, we may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase our costs, affect our liquidity or cause production disruptions
20. 21We face a number of challenges in the sale and marketing of our vehicles
21. 22We have developed and continue to develop complex software and technology systems in coordination with vendors and suppliers for our electric vehicles
22. 23Manufacturing the FF 91 at our leased FF ieFactory in California does not guarantee we will not incur significant production delays
23. 24We have minimal experience servicing and repairing our vehicles. The inability to adequately service vehicles may adversely affect our business
24. 25Changes in U.S. and international trade policies, including the export and import controls and laws, particularly with regard to China, may adversely impact our business and operating results
25. 26Continued or increased price competition in the automotive industry generally, and in electric and other alternative fuel vehicles, may harm our business
26. 27Our go-to-market and sales strategy, including partner stores and showrooms as well as our online web platform, will require substantial investment and commitment of resources and is subject to numerous risks and uncertainties
27. 28Difficult economic conditions, financial or economic crises, or the perceived threat of such a crisis, including a significant decrease in consumer confidence, may affect consumer purchases of premium items, such as our FF 91 Futurist
28. 29We face risks related to natural disasters, climate change, health epidemics and pandemics, terrorist attacks, civil unrest and other circumstances outside our control, which could significantly disrupt our operations
29. 30If we are unable to attract and/or retain key employees and hire qualified Board members, officers and other individuals, our ability to compete could be harmed
30. 31Unionization activities or labor disputes may disrupt our business and operations and affect our profitability
31. 32If our employees engage in strikes or other work stoppages, or if third-party strikes or work stoppages cause supply chain interruptions, our business, prospects, operations, financial condition and liquidity could be materially adversely affected
32. 33The discovery of defects in vehicles may result in delays in production and delivery of new models, recall campaigns or increased warranty costs, which may adversely affect our brand and result in a decrease in the residual value of our vehicles
33. 34We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims
34. 35Third-party claims of infringing or misappropriating intellectual property rights could be costly, time consuming and prevent us from developing or commercializing future products
35. 36We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets or other intellectual property rights of former employers of our employees
36. 37We have elected to protect some of our technologies as trade secrets rather than as patents, which has certain risks and disadvantages
37. 38We depend on our proprietary intellectual properties
38. 39We may not be able to obtain patent protection on certain of our technological developments and may face better-funded competitors with formidable patent portfolios
39. 40We are subject to cybersecurity risks relating to our various systems and software, or that of any third party that we rely upon, and any failure, cyber event or breach of security could prevent us from effectively operating our business, harm our reputation and subject us to significant liability
40. 41We may be unable to obtain regulatory approval for our vehicles
41. 42We and our suppliers may be subject to increased environmental and safety or other regulations and disclosure rules resulting in higher costs, cash expenditures, and/or sales restrictions
42. 43Increases in costs, disruption of supply or shortage of materials used to manufacture our vehicles, in particular for lithium-ion cells or electronic components, could harm our business
43. 44We may be subject to risks associated with autonomous driving technology
44. 45Developments in new energy technology or improvements in the fuel economy of internal combustion engines or significant reduction in gas prices may materially and adversely affect our business, prospects, financial condition and results of operations
45. 46Our vehicles use lithium-ion battery cells, which have been observed to catch fire or vent smoke and flames
46. 47Our EVs’ battery’s range and life will deteriorate with usage and time, which, if material, could negatively influence potential customers’ decisions to purchase our EVs
47. 48Our expansion into new business lines and services may result in unseen risks, challenges and uncertainties
48. 49Our future growth is dependent on the demand for, and upon customers’ willingness to adopt, EVs
49. 50We may not be able to provide customers with access to efficient, economical and comprehensive charging solutions
50. 51If owners of our EVs modify our EVs regardless of whether third-party aftermarket products are used, the EV may not operate properly, which may create negative publicity and could materially and negatively affect our business
51. 52We face risks associated with international operations, including possible unfavorable regulatory, political, currency, tax and labor conditions, which could harm our business, prospects, financial condition and results of operations
52. 53We may not obtain and maintain sufficient insurance coverage, which could expose us to significant costs and business disruption
53. 54Demand for our products and services may be impacted by the status of government and economic incentives supporting the development and adoption of such products
54. 55We may engage in direct-to-consumer leasing or financing arrangements which would expose us to credit, compliance and residual value risks, the failure of which to manage may materially harm our business, prospects, financial condition and results of operations
55. 56Additionally, if we do not successfully monitor and comply with applicable national, state, and/or local consumer protection laws and regulations governing these transactions, we may become subject to enforcement actions or penalties, either of which may harm our business and reputation
56. 57Yueting Jia is subject to restrictions in China that may adversely impact our China strategy
57. 58Yueting Jia and FF Global, over which Mr. Jia exercises significant influence, have control over our management, business and operations, and may use this control in ways that are not aligned with our business or financial objectives or strategies or that are otherwise inconsistent with our interests
58. 59As a result of the foregoing, FF Global has significant influence over the composition of the Board and, as a result, Mr. Jia and FF Global have strengthened their already significant influence over us
59. 60Disputes with stockholders are costly and distracting
60. 61We are subject to legal proceedings, claims, and disputes arising both in and outside the ordinary course of business
61. 62Our latest business strategy, which we refer to as the Bridge Strategy and/or Dual Brand Strategy, is subject to numerous risks and uncertainties

Risks Related to our Operations in China

1. 63Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies
2. 64Uncertainties with respect to the Chinese legal system, regulations and enforcement policies could have a material adverse effect
3. 65Fluctuations in exchange rates could result in foreign currency exchange losses and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our Common Stock in foreign currency terms
4. 66Changes in the laws and regulations of China or noncompliance with applicable laws and regulations may have a significant impact on our business, results of operations and financial condition
5. 67The continuance of the PRC Subsidiaries’ operations depends upon compliance with, among other things, applicable Chinese environmental, health, safety, labor, social security, pension and other laws and regulations. Failure to comply with such laws and regulations could result in fines, penalties or lawsuits
6. 68PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to the PRC Subsidiaries, which could materially and adversely affect its liquidity and its ability to fund and expand its business
7. 69The PRC government can take regulatory actions and make statements to regulate business operations in China with little advance notice, so our assertions and beliefs of the risks imposed by the Chinese legal and regulatory system cannot be certain
8. 70The Mergers and Acquisitions Rules and certain other PRC regulations establish certain procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China
9. 71We may be adversely affected by the complexity, uncertainties and changes in PRC regulations on internet-related business, automotive businesses and other business carried out by the PRC Subsidiaries
10. 72On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cyber Security Law of the PRC (the “Cyber Security Law”), which became effective on June 1, 2017
11. 73In the event that the independent registered public accounting firm operating in China that we use as an auditor for our operations in China is not permitted to be subject to inspection by PCAOB, then investors may be deprived of the benefits of such inspection
12. 74U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China
13. 75There may be difficulties in effecting service of legal process, conducting investigations, collecting evidence, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management
14. 76A significant portion of our financing is expected to come from investors in China, and such investment is subject to delay due to due diligence review, including know your customer, anti-money laundering and other review

Risks Related to the Restatement

1. 77We face risks related to the restatement of our previously issued consolidated financial statements