Related Party Notes Payable

9 Months Ended

Sep. 30, 2021

The Company has been significantly funded by notes payable from related parties. These related parties include employees as well as affiliates of employees and affiliates and other companies controlled or previously controlled by the Company’s founder and former CEO.

In connection with the findings of the Special Committee Investigation, the Company found misclassifications in its Consolidated Financial Statements as of and for the year ended December 31, 2020, resulting in an understatement of related party notes payable and overstatement of notes payable by $32,952, an overstatement of accrued interest and understatement of related party accrued interest of $3,677, and an overstatement of interest expense and understatement of related party interest expense of $2,552. This also resulted in an understatement of payments of related party notes payable and overstatement of payments of notes payable of $1,652, an understatement of proceeds from related party notes payable and overstatement of proceeds from notes payable of $300 within the financing cash flows for the year ended December 31, 2020, and an inappropriate caption of the line item Conversion of customer deposit to notes payable that should have been referred to as Conversion of related party deposit to related party notes payable in the supplemental disclosure of non-cash financing activities for the same period. The effects of the misstatement also resulted in the understatement of the disclosure of the change in fair value of related party notes payable and overstatement of change in fair value of notes payable of $1,425 in Note 8, Fair Value Measurement. The misstatements did not affect any subtotals or totals on the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive Loss and Cash Flows for the year ended December 31, 2020. The Company concluded that such misstatements were not material to the previously issued financial statements, however, the Consolidated Balance Sheet as of December 31, 2020 and Consolidated Statements of Operations and Comprehensive Loss and Cash Flows for the year ended December 31, 2020 have been revised to correct for these misstatements.

Related party notes payable consists of the following:


Note Name	Contractual Maturity Date	Contractual Interest Rates	Unpaid Balance as of September 30, 2021		Fair Value Measurement Adjustments		Carrying Value as of September 30, 2021		Interest Expense for the Three Months Ended Sept. 30, 2021		Interest Expense for the Nine Months Ended Sept. 30, 2021
Related party notes –China(1)	Due on Demand	18.00%	$	9,252	$	—	$	9,252	$	864	$	2,450
Related party notes – China various other	Due on Demand	0% coupon, 10.00% imputed	4,211		—		4,211		—		183
Total related party notes payable			$	13,463	$	—	$	13,463	$	864	$	2,633

(1)As of September 30, 2021, the Company was in default on a related party note with a principal amount of $9,252.

The estimated fair value of the related party notes payable, which are not carried at fair value, using inputs from Level 3 under the fair value hierarchy, was $13,251 and $287,183 as of September 30, 2021 and December 31, 2020, respectively.

The Company settled select related party notes payable during the three months ended September 30, 2021 through the conversion of related party notes payable and accrued interest into Class A Common Stock just prior to the Business Combination and with a combination of cash payments and commitment to issue Class A Common Stock in settlement of outstanding principal plus accrued interest and conversion premiums pursuant to the closing of the Business Combination, as follows:


Note Name	Contractual Maturity Date	Contractual Interest Rates	Principal Balance at June 30, 2021 (pre-Closing)		Accrued Interest at Settlement		Fair Value Adjustment at Settlement		Cash Payment		Settlement with Commit-ment to Issue Class A Common Stock		Loss on Settlement for the Three and Nine Months Ended Sept. 30, 2021
Settlement prior to the Business Combination:
Related party note(2)	June 30, 2021	12.00%	$	130,479	$	29,958	$	—	$	—	$	(160,437)	$	—
Pursuant to the closing of the Business Combination:
Related party note(4)	June 30, 2021	12.00%	19,196		—		—		—		(19,196)		7,256
Related party note(4)	Due on Demand	15.00%	10,000		3,708		—		(13,708)		—		—
Related party notes – NPA tranche(3)(4)	October 9, 2021	10.00%	27,593		5,745		5,518		(27,593)		(11,262)		4,257
Related party notes – China various other(4)	Due on Demand	0% coupon, 10.00% imputed	774		—		—		—		(774)		292
Related party notes – China various other(4)	Due on Demand	8.99%	1,410		44		—		—		(1,454)		550
Related party notes – Other(4)	June 30, 2021	6.99%	4,160		—		—		—		(4,160)		1,572
Related party notes – Other(4)	June 30, 2021	8.00%	6,452		1,195		—		—		(7,647)		2,891
Related party notes – Other(4)	June 30, 2021	Various	8,440		819		—		—		(9,259)		3,500
Related party notes – Other(4)	Various	Various	1,760		378		—		—		(2,138)		808
Related party notes – Other(4)	June 30, 2021	8.00%	11,635		1,693		—		—		(13,328)		5,038
Subtotal settlements pursuant to the closing of the Business Combination			91,420		13,582		5,518		(41,301)		(69,218)		26,164
Total			$	221,899	$	43,540	$	5,518	$	(41,301)	$	(229,655)	$	26,164

(2)On April 9, 2021, the Company signed agreements with certain of its related party notes holders to convert their notes with principal amounts of $194,810 and accrued interest of $71,764 into the commitment to issue 20,420,248 shares of Class A Common Stock. Under the agreements, the notes ceased to accrue interest on March 31, 2021.

On May 13, 2021, related party notes payable with aggregate principal amounts of $90,869 and accrued interest of $43,490 were converted into the commitment to issue shares of Legacy FF convertible preferred stock. On July 21, 2021, the shares of Legacy FF were converted into 10,888,580 shares of Class A Common Stock upon the closing of the Business Combination.

Prior to the Business Combination, the Company converted related party notes payable with a principal amount of $130,479 and accrued interest of $29,958 into the commitment to issue 11,566,196 shares of Class A Common Stock.

(3)On April 29, 2019, the Company executed the Note Purchase Agreement (“NPA”) with U.S. Bank National Association, as the notes agent, and Birch Lake Fund Management, LP as the collateral agent. The aggregate principal amount that may be issued under the NPA was $200,000. Upon both a Company Preferred Stock offering and prepayment notice by the holder, or on the maturity date of the notes payable, the holder may elect to convert all of the outstanding principal and accrued interest of the notes payable, plus a 20.00% premium, into shares of Preferred Stock in the offering. The Company elected the fair value option for these notes payable. These related party notes payable were settled along with other related party notes payable with cash and shares, as detailed in the table above, as part of the Business Combination.

(4)As further described in Note 3, Business Combination, in conjunction with the closing of the Business Combination, the Company paid $41,301 in cash and a commitment to issue 6,921,814 shares of Class A Common Stock to settle related party notes payable principal amounts of $91,420 and accrued interest of $13,581. Where the Company converted related party notes payable into Class A Common Stock, the Company recorded a loss on settlement of the related party notes payable of $26,164 in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 due to converting the related party notes payable at $10.00 per share which was below the fair value of the stock on the date of conversion.

As part of the Business Combination, the Company assumed related party promissory notes of $500 and related party convertible notes of $300, which PSAC issued to certain related parties during 2021. The convertible related party notes were fair valued at $580 at the Closing Date. As part of the closing of the Business Combination, the Company issued 80,000 shares of Class A Common Stock and 80,000 Private Warrants to settle related party notes of PSAC with an aggregate principal amount of $800.

During the nine months ended September 30, 2021, the Company received $200 in proceeds from a related party in the form of a bridge loan, which was fully paid during the period. In addition, the Company repaid bridge loans received in December 2020 aggregating $424.

Schedule of Principal Maturities of Related Party Notes Payable

The future scheduled principal maturities of related party notes payable as of September 30, 2021 are as follows:


Due on demand			$	13,463