Subsequent Events

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

Subsequent Event

Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited Condensed Consolidated Financial Statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited Condensed Consolidated Financial Statements.

Unsecured Securities Purchase Agreement – Streeterville Capital, LLC (“Streeterville”)

On August 4, 2023, the Company entered into a Securities Purchase Agreement (the “Streeterville SPA”) with Streeterville, to issue and sell $16.5 million aggregate principal amount of the Company’s unsecured convertible senior promissory notes (the “Streeterville Note”) and a common stock purchase warrant (the “Streeterville Warrant”) to purchase up to 6,100,840 shares of Common Stock with an exercise price equal to $0.8925 per share, subject to full ratchet anti-dilution protection and other adjustments, and are exercisable for seven years on a cash or cashless basis.

The Streeterville Note is subject to an original issue discount of $1.5 million. In addition, the Company will pay Streeterville $0.2 million to cover Streeterville’s legal fees and other transaction costs incurred in connection with the purchase and sale of the Streeterville Note (the “Transaction Expense Amount”). The original issue discount will be included in the

initial principal balance of the Streeterville Note and will be reduced from the amount funded at closing. The Streeterville Note is convertible into shares of Class A Common Stock, at a conversion price equal to $0.8925, plus an interest make-whole amount as set forth in the Streeterville Note, subject to certain adjustments including full ratchet anti-dilution price protection.

The Streeterville Note matures on August 4, 2029. The Streeterville Note accrues interest at 10% per annum, payable on each conversion date and the maturity date in cash, or, at the Company’s option if all the Equity Conditions (as defined in the Streeterville Note) have been met, Class A Common Stock or a combination thereof, provided that, subject to certain conditions set forth in the Streeterville Note, the Company may elect to pay such interest in Class A Common Stock at a rate equal to 15% per annum with respect to the portion of such payment made in Common Stock. The Company may, from time to time, prepay the principal amount owing under the Streeterville Note, subject to a prepayment premium percentage in an amount ranging from 0% to 10% of the principal amount of such Streeterville Note determined in accordance with a schedule set forth in the Streeterville SPA, so long as (i) the Company provides at least 15 days’ prior written notice to Streeterville of such prepayment and delivers to Streeterville an appropriately completed payment notification, and (ii) the Company accompanies such prepayment with the payment of any interest make-whole amount as set forth in the Streeterville Note.

Under the Streeterville SPA, the Company is required to reserve 25,000,000 shares of Class A Common Stock from its authorized and unissued Class A Common Stock to provide for all issuances of Class A Common Stock under the Streeterville Note (the “Share Reserve”). On September 8, 2023 and from time to time thereafter until the Streeterville Note is paid in full, subject to certain conditions, the Company is required to add additional shares of Class A Common Stock to the Share Reserve in increments of 1,000,000 shares as and when requested by Streeterville if the number of shares held in the Share Reserve is less than two (2) times the number of shares of Class A Common Stock Streeterville would be entitled to receive upon conversion of all interest under the Streeterville Note (including any Make-Whole Amount (as defined in the Streeterville Note)) plus two (2) times the number of shares Streeterville would be entitled to receive upon conversion of all principal under the Streeterville Note.

Streeterville has the option, from time to time for 12 months after the date of the Streeterville SPA, to purchase up to $7.5 million in aggregate (or $15.0 million in aggregate with Company’s consent) in additional convertible senior unsecured notes and warrants on the same terms as the Streeterville Note and Streeterville Warrant. Additionally, from the date of the Streeterville SPA until the date that is the five-year anniversary of the date of the Streeterville SPA, upon any issuance by the Company or any of its subsidiaries of Class A Common Stock or Class A Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (subject to certain exceptions set forth in the Streeterville SPA) (each, a “Subsequent Financing”), if Streeterville that then owns at least $7.5 million principal amount of Streeterville Notes (when aggregated with any affiliates of Streeterville) shall have the right to participate in up to an amount of the Subsequent Financing such that Streeterville’s ownership of the Company remains the same immediately following such Subsequent Financing as its ownership immediately prior to such Subsequent Financing, pursuant to the procedures outlined in the Streeterville SPA.

Under the Streeterville SPA, so long as the Streeterville Note is outstanding, upon any issuance by Company of any security with a More Favorable Term (as defined in the Streeterville SPA), or amendment, waiver or adjustment to any existing security that results in the granting of a More Favorable Term, then the Company is required to notify Streeterville and such More Favorable Term, at Streeterville’s option, will become a part of the Transaction Documents (as defined in the Streeterville SPA) for the benefit of Streeterville. Additionally, if the Company fails to notify Streeterville of any such More Favorable Term, but Streeterville becomes aware that the Company has granted such a term to any third party, Streeterville may notify the Company and such More Favorable Term will become a part of the Transaction Documents retroactive to the date on which the More Favorable Term was granted to the applicable third party.

The Company is required to use commercially reasonable efforts to efforts to file, within 15 calendar days of the date of the Streeterville SPA, a registration statement on the appropriate form providing for the resale by Streeterville of at the least the Initial Required Registration Amount (as defined in the Streeterville Note). The Company is also required to use commercially reasonable efforts to cause such registration statement to become effective as promptly as possible and to maintain the effectiveness of such registration statement at all times until each Streeterville no longer owns any Streeterville Warrants or Streeterville Notes or shares of Class A Common Stock issuable upon exercise or conversion thereof.

Pursuant to the Streeterville Note, the Company agrees to include a proposal to obtain stockholder approval, as is required by the Nasdaq listing rules, with respect to the issuance of any shares of Class A Common Stock in excess of 19.99% of the issued and outstanding shares of Class A Common Stock (the “Issuance Cap”), of the Conversion Shares (as defined in the Streeterville Note), the Warrant Shares (as defined in the Streeterville SPA), and subject to any applicable Nasdaq rules, any

shares Common Stock issuable pursuant to the note and warrant issuable in connection with the reinvestment right set forth in the Streeterville SPA (so long as such reinvestment is made within 90 days of the Approval) in excess of the Issuance Cap (the “Approval”) at the earlier of its next annual meeting of stockholders to be held in 2024 and any special meeting of stockholders called by the Company at which at least one “routine” proposal (as determined by the New York Stock Exchange) is to be included in the proxy statement for such special meeting; provided however, that if at any time after the date of the Streeterville SPA and prior to the Approval, Streeterville submits a Conversion Notice (as defined in the Streeterville Note) at such time as the Issuance Cap would prohibit the conversion of less than 150% of the Conversion Shares subject to such Conversion Notice, the Company will use its reasonable best efforts to hold a special meeting of stockholders (which may also be at the annual meeting of stockholders) for the Approval within 45 days from the date of the Company’s receipt of such Conversion Notice, and in any case, with the recommendation of the Board that such proposal be approved, and the Company will solicit proxies from its stockholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders are required to vote their proxies in favor of such proposal. The Company is required to use its reasonable best efforts to obtain such Approval, including if the Company does not obtain the Approval at such special meetings, the Company will use reasonable best efforts to hold a new special meeting within 45 days from the date of such previous special meeting to obtain such Approval. If the Approval is not obtained at either meeting, the Company will be required to use its reasonable best efforts to seek such approval at each subsequent annual meeting of stockholders until such approval is obtained or the Streeterville Notes are no longer outstanding.

Amendments No. 9 and 10 to the SPA

On August 4, 2023, the Company entered into Amendment No. 9 to the Secured SPA (the “Ninth Secured SPA Amendment”) with FFVV (the “ATW Party”), as purchaser, and Amendment No. 10 to Secured SPA (the “Tenth Secured SPA Amendment” and together with Ninth Secured SPA Amendment, the “Amendments”) with Senyun, as purchaser, pursuant to which, the Company and each of the ATW Party and Senyun, respectively, as required purchasers under the Secured SPA, agreed to the following amendment: the definition of Required Minimum (as defined in the Secured SPA), was amended to mean (a) until the earlier of (x) September 30, 2023 and (y) the earlier of (I) the trading day immediately following the date of consummation of a reverse stock split of the Common Stock and (II) the 15th business day after the Company shall have obtained stockholder approval to increase the authorized shares of Common Stock (as applicable, the “Waiver Expiration Date”), zero shares of Common Stock, and (b) immediately after the Waiver Expiration Date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents (as defined in the Secured SPA), including any Underlying Shares (as defined in the Secured SPA) issuable upon exercise in full of all Warrants (as defined in the Secured SPA) or conversion in full of all Secured SPA Notes (including Underlying Shares issuable as payment of interest on the Secured SPA Notes), ignoring any conversion or exercise limits set forth therein.

Amendment to Joinder and Amendment Agreement

On June 26, 2023, the Company entered into a Joinder and Amendment Agreement (the “ATW Joinder”) with the ATW Party. On August 4, 2023, the Company entered into Waiver and Amendment Agreement (the “ATW Amendment”) to the ATW Joinder, pursuant to which the ATW Party (as defined in the ATW Amendment) has agreed to waive any and all requirements of the Company to reserve shares of Common Stock for issuance pursuant to Notes or Warrants (each as defined in each of the Secured SPA and the Unsecured SPA, which is discussed further below) and defers any obligations of the Company to deliver any shares of Common Stock for issuance pursuant to the Notes or Warrants until the earlier of (x) September 30, 2023 and (y) the earlier of (I) the trading day immediately following the date of consummation of a reverse stock split of the Common Stock and (II) the 15th business day after the Company’s receipt of stockholder approval to increase the authorized shares of Common Stock.

Further the ATW Amendment provides that if the ATW Party or a permitted assign exercises its option to invest another $10.0 million of Tranche B Notes in accordance with the terms of the Secured SPA (the “Additional Tranche B Investment”) on or prior to the latest of (x) August 1, 2023, (y) four business days after the meeting of the Company’s stockholders for the required stockholder approval under the Unsecured SPA to increase the Company’s authorized shares of Common Stock and for purposes of Nasdaq Listing Rule 5635 (to the extent needed) (the “Stockholder Approval”), and (z) six business days after the Company has filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, then the ATW Party shall have the right, upon delivery of a written notice to the Company, at any time prior to the 30th day after the date of consummation of such Additional Tranche B Investment, to invest another $20.0 million in New Notes (as defined in the ATW Joinder), subject to terms substantially identical to those provided for in the Unsecured SPA.

Tranche B SPA Funding

In July 2023, ATW Partners LLC purchased additional senior secured notes and SPA Warrants of the Company. The Company received gross proceeds of $10.0 million ($9.0 million net of original issuance discount) in exchange for such issuances.

Tranche A SPA Funding

In July 2023, Senyun and a purchaser affiliated with ATW Partners LLC purchased additional senior secured notes and SPA Warrants of the Company. The Company received gross proceeds of $8.5 million ($7.6 million net of original issuance discount) in exchange for such issuances.

Unsecured SPA Funding

In August 2023, Streeterville purchased additional unsecured convertible senior promissory notes and Warrants of the Company. The Company received gross proceeds of $16.5 million ($14.9 million net of original issuance discount) in exchange for such issuance.

Special Meeting of Stockholders

On July 20, 2023, FF filed a Proxy Statement with the SEC in connection with the special meeting of FFIE stockholders, which was held on August 16, 2023. At such meeting FFIE stockholders approved a proposal to authorize the Board to effect a reverse stock split of the Company’s outstanding common stock at a range between 1-for-2 and 1-for-90 shares of outstanding common stock. This approval gives the Board the discretion to amend the Amended and Restated Charter to effect a reverse stock split (with such ratio to be determined in the discretion of the Board in the range of 1-for-2 to 1-for-90) of the outstanding Common Stock at any time within one year of the date of such special meeting of stockholders. In addition, at the special meeting, FFIE stockholders approved a proposal to approve, if and only if the reverse stock split proposal is approved and the reverse stock split is implemented at a ratio of 1-for-8 or greater, a proposal to limit the number of shares of authorized common stock to a number equal to 12,355,000,000 divided by the reverse stock split ratio determined by the Board. This approval essentially caps the number of authorized shares of common stock to a number that is seven times the amount of authorized shares currently available. The Company anticipates implementing the reverse stock split (which will result in an increase in authorized shares of Common Stock) soon after the issuance of the unaudited Condensed Consolidated Financial Statements. In addition, at the special meeting, FFIE stockholders approved for a proposal to approve, as is required by the applicable Nasdaq rules and regulations, additional transactions involving notes and warrants issued to Metaverse Horizon Limited,, V W Investment Holding Limited, FF Vitality Ventures LLC (“FFVV”), and Senyun International Ltd. (“Senyun”) under the Unsecured SPA, as amended.