REE Automotive Ltd 6-K, filed Aug 16, 2022
REE Automotive Ltd. (REEAF)
6-K
2022-08-16
For: 2022-06-30
View Original
Added on
April 06, 2026
About this 6-K
REE Automotive Ltd filed this 6-K on August 16, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number: 001-40649
REE AUTOMOTIVE LTD.
(Exact name of registrant as specified in its charter)
Kibbutz Glil-Yam 4690500, Israel
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
EXPLANATORY NOTE
On August 16, 2022, REE Automotive Ltd. (“REE” or the “Company”) issued a press release entitled “REE Automotive Announces Second Quarter 2022 Financial Results,” in which REE reported its financial results for the second quarter of 2022. A copy of that press release is furnished as Exhibit 99.1 hereto.
The Interim Consolidated Financial Statements (unaudited) as of and for the six months ended June 30, 2022 are furnished as Exhibit 99.2 hereto.
The Company’s management discussion and analysis (unaudited) as of and for the three and six months ended June 30, 2022 are furnished as Exhibit 99.3 hereto.
This information contained in Exhibit 99.2 to this Report of Foreign Private Issuer on Form 6-K shall be deemed to be incorporated by reference into the Company’s registration statement on Form S-8 (File No. 333-261130) and shall be a part thereof from the date on which this Report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
.
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EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| REE AUTOMOTIVE LTD. | ||||||||
| By: | /s/ David Goldberg | |||||||
| Name: | David Goldberg | |||||||
| Title: | Chief Financial Officer | |||||||
Date: August 16, 2022
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Exhibit 99.1
REE AUTOMOTIVE ANNOUNCES SECOND QUARTER 2022 FINANCIAL RESULTS
Strong customer feedback on Proxima Powered by REE and P7-B following fleet evaluations
Company expects orders for multiple test fleets
–Successful customer evaluations of Proxima Powered by REE; orders expected to follow
–Ongoing customer evaluations of REE’s P7-B, with public road testing expected in the coming months
–Both P7-based electric vehicles are on track and on budget
–Continued on-time progress on integration centers ahead of anticipated 2023 start of production
TEL AVIV – August 16, 2022 – REE Automotive Ltd. (NASDAQ: REE) (“REE” or the “Company”), an automotive technology leader and provider of electric vehicle (EV) platforms, today announced its financial results for the second quarter of 2022. REE continues to execute on its milestones with a focus on commercialization of its P7 platform - revealing Proxima Powered by REE, a class 5 walk-in-van, and P7-B, a class 3 box truck. Execution remains on track and within our expected timeline and budget.
“We continue executing on our plan and remain on track and on budget as we make progress towards production in 2023. After the end of the quarter, we introduced Proxima Powered by REE, a class 5 electric walk-in van built with body manufacturing leaders EAVX and Morgan Olson. The first wave of product evaluations by leading delivery, logistics and e-commerce companies generated positive feedback: the competitive strengths of the vehicle resonated with prospective customers, and we expect orders from leading fleet operators for test vehicles in the coming months. We believe there is a significant opportunity to help companies achieve their commitments to electrification and carbon-neutrality, and we see the potential for substantial orders after real-world evaluations.” said Daniel Barel, REE’s Co-Founder and Chief Executive Officer. “Additionally, over the past several months, multiple e-commerce and logistics companies evaluated our new P7-B box truck and provided strong feedback on REE’s technology and ability to offer a turnkey, customizable solution. We expect to start delivering the first test vehicles to prospective customers in the near future so they can evaluate the P7-B in their fleets. For both Proxima Powered by REE and P7-B, fleet owners noted the game-changing nature of our technology, including enhanced maneuverability and safety with all-wheel steer and all-wheel-drive, the low step-in height for efficient delivery cycle times, superior ergonomics, and significantly less drag than the industry standard. These are all factors that provide operational efficiencies and driver wins, and we believe we are well-positioned in the last- and mid-mile delivery market as we prepare to scale production.”
Commercial Developments & Outlook
We believe that our ability to utilize multiple distinct go-to-market channels – directly to potential fleet customers with our P7-B box truck and through partnerships with body upfitters – is a strong competitive differentiator. This allows us to address a larger market and bring superior commercial EV solutions with a capex light approach. In both of these go-to market channels, REE is the Manufacturer of Record (MoR), in-line with the traditional commercial vehicle OEM market approach.
P7 Platform
Fully flat from end-to-end, the P7 platform, which was unveiled in January 2022, powers class 3-5 vehicles with payloads up to 8,000 pounds, range of up to 215 miles and all-wheel steering and drive. The P7 platform allows for unique user benefits, efficiencies, and flexibility enabled by REEcorners™ and their fully independent, x-by-wire control system. It is suited for applications across commercial trucks, walk-in-vans, recreational vehicles and school buses. REEcornerTM technology further allows for significantly reduced development times of electric commercial vehicles models.
Proxima Powered by REE
Together with EAVX, a subsidiary of JB Poindexter & Co and Morgan Olson, REE debuted and conducted evaluations by prospective customers of Proxima Powered by REE, a fully electric walk-in step van prototype. The vehicle highlights the benefits of the newly designed EAVX and Morgan Olson body paired with REE’s fully flat, modular P7 chassis and x-by-wire technology. Proxima Powered by REE checks all the boxes fleet customers are looking for, ultimately leading to lower total cost of ownership (TCO). The walk-in van offers increased interior space for cargo and passengers and a low step-in height while targeting a maximum speed of 75 mph (120 km/h), max range of 125 miles (200 km), up to 8,000 lbs. (3,630 kg) payload, and vehicle weight ratings (GVWR) of up to 19,500 lbs. (8,900 kg).
Benefits when compared with industry standard vehicles include:
•Greater volumetric and payload capacity
•56% improved aerodynamics driving efficiency gains
•REEcorners™ x-by-wire technology enables minimal turning radius from all-wheel steer
•Industry leading maneuverability in urban zones and loading docks, as well as stability in adverse conditions
•Low load floor enables fast, easy accessibility for drivers and helps reduce delivery cycle times
•Driver-centric cabin design and smart VX digital infrastructure to increase safety, comfort, and connectivity
•73% greater driver visibility boosting both driver and pedestrian safety
•Minimal down times from rapid REEcorner™ swaps
Following the evaluations, REE expects firm orders from customers in the coming months.
P7-B class 3 box truck for mid- and last-mile delivery applications
In response to market needs, REE debuted P7-B, a new class 3 box truck built on REE’s cab chassis designed for mid- and last-mile delivery applications. The box truck offers increased interior space for cargo and passengers and a low step-in height while targeting a maximum speed of 75 mph (120 km/h), max range of 150 miles (241 km), up to 4,400 lbs. (2,000 kg) payload, and vehicle weight ratings (GVWR) of up to 14,000 lbs. (6,350 kg). The configuration can be modified to best suit customer needs. The full x-by-wire architecture supports all-wheel steer and drive, adaptive regenerative breaking, creep control, hill start assist, and torque vectoring as standard as well as over-the-air updates.
The company is currently conducting customer evaluations for prospective delivery, logistics and e-commerce companies. REE’s P7-B leverages all-wheel drive and steer for unparalleled maneuverability and control. Its low step-in height is designed for faster delivery times than industry standard models. In addition, its superior aerodynamics and the highly efficient power management system of REE’s P7 platform architecture is expected to enable reduced energy consumption, all aiming to reduce total cost of ownership to help facilitate fleets’ transition to EVs.
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The medium duty electric vehicle targets the important and growing mid- and last-mile delivery markets. P7-B is part of a test fleet in the UK accumulating testing, validation and durability miles in anticipation of start of production in 2023.
Operational Developments
REE has been focused on the build-out and validation of its first highly automated integration center and finalized the hiring of its core engineering team, bringing all key activities in-house and decreasing the Company’s reliance on third parties. The first integration center will be operational with a modular production line comprised of 13 automated manufacturing cells, and the Company anticipates it will have annual production capacity of 10,000 vehicle sets by the end of 2022. REE’s Austin, Texas, integration center is also progressing according to plan and is expected to double REE’s production capacity.
Financial Highlights & Outlook
•GAAP net loss was $25.2 million in the second quarter of 2022 compared to $21.5 million in the first quarter of 2022 and $31.2 million in the second quarter of 2021. The increase in GAAP net loss compared to the first quarter of 2022 is driven by lower income from remeasurement of warrants, offset by a reduction in operating expenses. The decrease in GAAP net loss from Q2 2021 is mainly attributed to lower share-based compensation expense.
•Non-GAAP net loss of $21.3 million in the second quarter of 2022 compared to $28.3 million in the first quarter of 2022 and $11.1 million in the second quarter of 2021. The decrease in non-GAAP net loss versus the first quarter of 2022 is attributed to timing of expense recognition related to development and production capacity costs. The year-over-year increase in non-GAAP net loss is primarily related to higher operating expenses related to the Company’s execution of its business plan, including ramping up its capabilities and market penetration towards commercial production in 2023.
•The Company reiterates its 2022 full-year year guidance for non-GAAP operating expenses of between $100 and $120 million and expenses and investments related to the establishment of the Company’s initial production capacity of approximately $30 million. The expense expectations are dependent in part on the timing and achievement of certain milestones related to the Company’s commercial programs and projects.
•As of June 30, 2022, the Company had $206.8 million of liquidity, comprised of cash and short term investments, and no debt. The Company anticipates that it has sufficient liquidity to achieve initial production of its P7 platform and continue to advance other commercial activities set forth above.
•REE today filed a shelf registration statement to allow REE to issue, at its discretion, from time to time in one or more offerings to the public, up to a maximum aggregate offering price of $200 million of REE’s Class A ordinary shares, debt securities, rights, warrants and/or units. REE intends to allocate up to $75 million of the shelf registration to the sale of REE’s Class A ordinary shares in an at-the-market program (the “ATM Facility”) to be entered into once the registration statement is declared effective. The shelf registration has not yet been declared effective, and no sales may be offered or sold under the shelf registration until it becomes effective. REE has no current plans to issue shares under the ATM facility.
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Webcast and Conference Call Information
REE will host a conference call at 8:30 a.m. Eastern Time on Tuesday, August 16, 2022, to discuss results, recent developments and the Company’s commercial roadmap. This press release and the accompanying presentation materials will be accessible prior to the conference call at https://investors.ree.auto/.
The live webcast of the conference call can be accessed on the Events section of the Company’s website at:
https://investors.ree.auto/news-events/events.
The conference call will be accessible domestically or internationally, by preregistering in the following link:
https://register.vevent.com/register/BI210a48cbdf364921ab5fa4d10a7bfd30.
The link will also be provided at https://investors.ree.auto/news-events/events. Upon registering, each participant will be provided with a Participant Dial-in Number, and a unique Personal PIN.
The call will be recorded, and a replay will be available on REE’s Investors website at https://investors.ree.auto/.
Use of Non-GAAP Financial Measures
The Company has disclosed financial measurements in this press release or elsewhere in its earnings materials that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company’s management uses these measurements as an aid in monitoring the Company’s on-going financial performance. Non-GAAP cost of sales, non-GAAP research and development, non-GAAP selling, general and administrative expenses and non-GAAP operating expenses exclude the impact of stock-based compensation. Non-GAAP net loss and non-GAAP loss per share also exclude non-recurring or unusual items that are considered by management to be outside the Company’s standard operations and certain non-cash items. Adjusted EBITDA is a non-GAAP financial measurement that is considered by management to be useful in comparing the profitability among companies by reflecting operating results of the Company excluding such items. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the financial tables that follow.
The Company provides a reconciliation of non-GAAP operating expenses and Non-GAAP net loss for the three and six months ended June 30, 2022 below, however, the Company does not provide guidance on GAAP operating expenses and is unable to provide a reconciliation for its non-GAAP operating expenses guidance range without unreasonable efforts due to high variability and complexity with respect to estimating certain forward-looking amounts. These reconciliations include adjustment for stock-based compensation that are excluded from the calculation of GAAP operating expenses.
There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be comparable to similarly titled measures used by other companies due to potential differences among calculation methodologies. There can be no assurance whether (i) items excluded from the non-GAAP financial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations for the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
No offer of Securities
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A registration statement relating to the shelf registration securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted and no part of the purchase price can be received until the registration statement has become effective, and any such offer may be withdrawn or revoked, without obligation of commitment of any kind, at any time prior to notice of its acceptance given after the effective date.
| Contacts: | |||||
| Investor Relations | Media | ||||
| Limor Gruber | Caroline Hutcheson | ||||
| VP Investor Relations | REE Automotive | Head of Global Communications | REE Automotive | ||||
| +972-50-5239233 | +1-252-314-2028 | ||||
| investors@ree.auto | media@ree.auto | ||||
| Kamal Hamid | |||||
| VP Investor Relations | REE Automotive | |||||
| +1 303-670-7756 | |||||
| investors@ree.auto | |||||
About REE Automotive
REE Automotive (Nasdaq: REE) is an automotive technology company that allows companies to build any size or shape of electric vehicle on their modular platforms. With complete design freedom, vehicles Powered by REE are equipped with the revolutionary REEcorner, which packs critical vehicle components (steering, braking, suspension, powertrain and control) into a single compact module positioned between the chassis and the wheel, enabling REE to build the industry’s flattest EV platforms with more room for passengers, cargo and batteries. REE platforms are future proofed, autonomous capable, offer a low TCO, and drastically reduce the time to market for fleets looking to electrify. To learn more visit www.ree.auto.
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REE AUTOMOTIVE LTD.
Condensed Consolidated Statements of Operations
U.S. dollars in thousands (except share and per share data)
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 30, 2022 | March 31, 2022 (2) | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||
| Revenues | — | — | — | — | 6 | ||||||||||||||||||||||||
| Cost of sales | 9 | 538 | 4 | 547 | 15 | ||||||||||||||||||||||||
| Gross loss | (9) | (538) | (4) | (547) | (9) | ||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Research and development expenses, net | 18,080 | 20,843 | 9,545 | 38,923 | 16,694 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 11,330 | 15,288 | 21,590 | 26,618 | 27,038 | ||||||||||||||||||||||||
| Total operating expenses | 29,410 | 36,131 | 31,135 | 65,541 | 43,732 | ||||||||||||||||||||||||
| Operating loss | (29,419) | (36,669) | (31,139) | (66,088) | (43,741) | ||||||||||||||||||||||||
| (Income) loss from warrants remeasurement | (2,417) | (15,330) | — | (17,747) | — | ||||||||||||||||||||||||
| Financial income, net | (2,373) | (472) | (8) | (2,845) | (12) | ||||||||||||||||||||||||
| Net loss before income tax | (24,629) | (20,867) | (31,131) | (45,496) | (43,729) | ||||||||||||||||||||||||
| Income tax expense | 619 | 594 | 45 | 1,213 | 45 | ||||||||||||||||||||||||
| Net loss | (25,248) | (21,461) | (31,176) | (46,709) | (43,774) | ||||||||||||||||||||||||
| Net comprehensive loss | (25,248) | (21,461) | (31,176) | (46,709) | (43,774) | ||||||||||||||||||||||||
| Basic and diluted net loss per Class A ordinary share | (0.09) | (0.07) | (0.16) | (0.16) | (0.22) | ||||||||||||||||||||||||
Weighted average number of ordinary shares and preferred shares used in computing basic and diluted net loss per share (1) | 292,189,047 | 289,747,646 | 198,999,979 | 290,975,091 | 196,367,365 | ||||||||||||||||||||||||
(1) Prior period results have been retroactively adjusted to reflect the 1:26.7017 stock split and the changes in par value from 0.01 NIS to no par value effected on July 22, 2021.
(2) Prior period results in our Statement of comprehensive loss for the three month period ended March 31, 2022 related to "research and development expenses, net", have been reduced by approximately $1.5 million. This adjustment was to correct our accrual for non-recurring engineering projects.
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REE AUTOMOTIVE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | (Unaudited) | (Audited) | |||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 97,029 | $ | 275,772 | |||||||
| Restricted cash | 136 | 138 | |||||||||
| Short-term investments | 109,802 | — | |||||||||
| Other accounts receivable and prepaid expenses | 15,229 | 12,162 | |||||||||
| Total current assets | 222,196 | 288,072 | |||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Long-term restricted cash | 988 | 1,005 | |||||||||
| Other accounts receivable | 5,166 | 1,184 | |||||||||
| Operating lease right-of-use assets | 18,719 | — | |||||||||
| Property and equipment, net | 4,645 | 2,675 | |||||||||
| Total non-current assets | 29,518 | 4,864 | |||||||||
| TOTAL ASSETS | $ | 251,714 | $ | 292,936 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Trade payables | $ | 936 | $ | 4,538 | |||||||
| Other accounts payable and accrued expenses | 11,322 | 16,018 | |||||||||
| Operating lease liabilities | 1,923 | — | |||||||||
| Total current liabilities | 14,181 | 20,556 | |||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Deferred revenues | 943 | 943 | |||||||||
| Warrants liability | 3,287 | 21,034 | |||||||||
| Operating lease liabilities | 12,692 | — | |||||||||
| Total non-current liabilities | 16,922 | 21,977 | |||||||||
| TOTAL LIABILITIES | 31,103 | 42,533 | |||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
| Ordinary shares | — | — | |||||||||
| Additional paid-in capital | 881,828 | 864,911 | |||||||||
| Accumulated deficit | (661,217) | (614,508) | |||||||||
| Total shareholders’ equity | 220,611 | 250,403 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 251,714 | $ | 292,936 | |||||||
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REE AUTOMOTIVE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
U.S. dollars in thousands
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (46,709) | $ | (43,774) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 1,860 | 169 | |||||||||
| Share-based compensation | 14,809 | 24,133 | |||||||||
| Remeasurement of warrant liability | (17,747) | — | |||||||||
| Decrease in inventory | — | 4 | |||||||||
| Decrease in trade receivables | — | 44 | |||||||||
| Increase in other accounts receivable and prepaid expenses | (7,049) | (1,270) | |||||||||
| Increase in operating lease right-of-use assets and liability, net | (5,382) | — | |||||||||
| Increase in deferred revenues | — | 578 | |||||||||
| Increase (decrease) in trade payables | (3,602) | 1,191 | |||||||||
| Increase (decrease) in other accounts payable and accrued expenses | (4,696) | 1,434 | |||||||||
| Other | 11 | 92 | |||||||||
| Net cash used in operating activities | (68,505) | (17,399) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | (2,563) | (900) | |||||||||
| Investment in short-term investments | (109,802) | — | |||||||||
| Proceeds from bank deposits | — | 1,667 | |||||||||
| Net cash provided by (used in) investing activities | (112,365) | 767 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of options | 2,108 | — | |||||||||
| Proceeds from exercise of warrants to preferred shares | — | 2,657 | |||||||||
| Payments of deferred offering costs | — | (599) | |||||||||
| Net cash provided by financing activities | 2,108 | 2,058 | |||||||||
| Decrease in cash, cash equivalents and restricted cash | (178,762) | (14,574) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of year | 276,915 | 45,507 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 98,153 | $ | 30,933 | |||||||
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Reconciliation of GAAP Financial Metrics to Non-GAAP
U.S. dollars in thousands (except share and per share data)
(Unaudited)
Reconciliation of Net Loss to Adjusted EBITDA
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| Jun 30, 2022 | March 31, 2022 (2) | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | |||||||||||||||||||||||||
| Net Loss on a GAAP Basis | (25,248) | (21,461) | (31,176) | (46,709) | (43,774) | ||||||||||||||||||||||||
| Financial income, net | (2,373) | (472) | (8) | (2,845) | (12) | ||||||||||||||||||||||||
| Income tax expense | 619 | 594 | 45 | 1,213 | 45 | ||||||||||||||||||||||||
| Loss (income) from warrant valuation | (2,417) | (15,330) | — | (17,747) | — | ||||||||||||||||||||||||
| Depreciation and amortization | 1,093 | 767 | 95 | 1,860 | 169 | ||||||||||||||||||||||||
| Share-based compensation | 6,334 | 8,475 | 20,027 | 14,809 | 24,133 | ||||||||||||||||||||||||
Adjusted EBITDA(1) | (21,992) | (27,427) | (11,017) | (49,419) | (19,439) | ||||||||||||||||||||||||
___________________________________________
(1)Adjusted EBITDA excludes adjustments for financial income, net, income tax expense, depreciation and amortization, loss (income) from warrant valuation, and share-based compensation.
(2)Prior period results in our Statement of comprehensive loss for the three month period ended March 31, 2022 related to "research and development expenses, net", have been reduced by approximately $1.5 million. This adjustment was to correct our accrual for non-recurring engineering projects.
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Reconciliation of GAAP cost of goods sold to Non-GAAP cost of goods sold; GAAP research and development expenses to Non-GAAP research and development expenses; GAAP selling, general, and administrative expenses to Non-GAAP selling, general, and administrative expenses; GAAP operating expenses to Non-GAAP operating expenses; GAAP net loss to Non-GAAP net loss, and GAAP net loss per Share, basic and diluted to Non-GAAP net loss per Share, basic and diluted
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| Jun 30, 2022 | March 31, 2022 (3) | Jun 30, 2021 | Jun 30, 2022 | Jun 30, 2021 | |||||||||||||||||||||||||
| GAAP cost of sales expenses | 9 | 538 | 4 | 547 | 15 | ||||||||||||||||||||||||
| Share-based compensation | (2) | (70) | — | (72) | — | ||||||||||||||||||||||||
| Non-GAAP cost of sales expenses | 7 | 468 | 4 | 475 | 15 | ||||||||||||||||||||||||
| GAAP research and development expenses | 18,080 | 20,843 | 9,545 | 38,923 | 16,694 | ||||||||||||||||||||||||
| Share-based compensation | (3,390) | (3,207) | (1,537) | (6,597) | (3,182) | ||||||||||||||||||||||||
| Non-GAAP research and development expenses | 14,690 | 17,636 | 8,008 | 32,326 | 13,512 | ||||||||||||||||||||||||
| GAAP selling, general, and administrative expenses | 11,330 | 15,288 | 21,590 | 26,618 | 27,038 | ||||||||||||||||||||||||
| Share-based compensation | (2,942) | (5,198) | (18,490) | (8,140) | (20,951) | ||||||||||||||||||||||||
| Non-GAAP selling, general, and administrative expenses | 8,388 | 10,090 | 3,100 | 18,478 | 6,087 | ||||||||||||||||||||||||
| GAAP operating expenses | 29,410 | 36,131 | 31,135 | 65,541 | 43,732 | ||||||||||||||||||||||||
| Share-based compensation | (6,332) | (8,405) | (20,027) | (14,737) | (24,133) | ||||||||||||||||||||||||
| Non-GAAP operating expenses | 23,078 | 27,726 | 11,108 | 50,804 | 19,599 | ||||||||||||||||||||||||
| GAAP net loss | (25,248) | (21,461) | (31,176) | (46,709) | (43,774) | ||||||||||||||||||||||||
Loss (income) from warrant valuation (1) | (2,417) | (15,330) | — | (17,747) | — | ||||||||||||||||||||||||
| Share-based compensation | 6,334 | 8,475 | 20,027 | 14,809 | 24,133 | ||||||||||||||||||||||||
| Non-GAAP net loss | (21,331) | (28,316) | (11,149) | (49,647) | (19,641) | ||||||||||||||||||||||||
Weighted average number of ordinary shares and preferred shares used in computing basic and diluted net loss per share (2) | 292,189,047 | 289,747,646 | 198,999,979 | 290,975,091 | 196,367,365 | ||||||||||||||||||||||||
Non-GAAP basic and diluted net loss per share | (0.07) | (0.10) | (0.06) | (0.17) | (0.10) | ||||||||||||||||||||||||
____________________________________________
1)In July 2021, the Company assumed public and private warrants as part of its merger with 10X Capital. For the first half of 2022, the change in fair value of the warrants resulted in the Company recording non-cash income of $17.7 million.
2)Prior period results have been retroactively adjusted to reflect the 1:26.7017 stock split and the changes in par value from 0.01 NIS to no par value effected on July 22, 2021.
3)Prior period results in our Statement of comprehensive loss for the three month period ended March 31, 2022 related to "research and development expenses, net", have been reduced by approximately $1.5 million. This adjustment was to correct our accrual for non-recurring engineering projects.
10
Caution About Forward-Looking Statements
This communication includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding REE or its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “aim” “anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would,” “outlook” and similar expressions (or the negative version of such words or expressions) may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements in this communication may include, among other things, statements about REE’s strategic and business plans, technology, relationships, objectives and expectations for our business, the impact of trends on and interest in our business, intellectual property or product and its financial outlook and future results, operations and financial performance and condition
These forward-looking statements are based on information available as of the date of this communication and current expectations, forecasts, and assumptions. Although REE believes that the expectations reflected in forward-looking statements are reasonable, such statements involve unknown number of risks, uncertainties, judgments, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. These factors are difficult to predict accurately and may be beyond REE’s control. Forward-looking statements in this communication speak only as of the date made and REE undertakes no obligation to update its forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. In light of these risks and uncertainties, investors should keep in mind that results, events or developments discussed in any forward-looking statement made in this communication may not occur.
Uncertainties and risks that could affect REE’s future performance and could cause actual results to differ from those projected in forward-looking statements include, but are not limited to: REE’s ability to commercialize its strategic plan; REE’s ability to maintain and advance relationships with current Tier 1 suppliers and strategic partners; development of REE’s advanced prototypes into marketable products, including its ability to complete testing and subsequently produce and market the Proxima Powered by REE and the REE P7-B; REE’s ability to grow and scale manufacturing capacity through relationships with Tier 1 suppliers; REE’s estimates of unit sales, expenses and profitability and underlying assumptions; REE’s reliance on its UK Engineering Center of Excellence for the design, validation, verification, testing and homologation of its products; REE’s limited operating history; risks associated with plans for REE’s initial commercial production; REE’s dependence on potential suppliers, some of which will be single or limited source; development of the market for commercial EVs; intense competition in the e-mobility space, including with competitors who have significantly more resources; risks related to the fact that REE is incorporated in Israel and governed by Israeli law; REE’s ability to make continued investments in its platform; the impact of the ongoing COVID-19 pandemic and any other worldwide health epidemics or outbreaks that may arise; and adverse global conditions, including macroeconomic and geopolitical uncertainty; the need to attract, train and retain highly-skilled technical workforce; changes in laws and regulations that impact REE; REE’s ability to enforce, protect and maintain intellectual property rights; REE’s ability to retain engineers and other highly qualified employees to further its goals; and other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in REE’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2022 and in subsequent filings with the SEC.
11
REE AUTOMOTIVE LTD.
CONSOLIDATED FINANCIAL STATEMENTS
Exhibit 99.2
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
UNAUDITED
INDEX
INDEX TO FINANCIAL STATEMENTS
| Consolidated Interim Balance Sheet | |||||
Consolidated Interim Statements of Comprehensive Loss | |||||
Consolidated Interim Statement of Changes in Shareholders’ equity | |||||
Consolidated Interim Statement of Cash Flows | |||||
| Notes to the Interim Consolidated Financial Statements | |||||
F-1
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollar in thousands (except share and per share data)
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Short-term investments | |||||||||||
| Other accounts receivable and prepaid expenses | |||||||||||
| Total current assets | |||||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Long-term restricted cash | |||||||||||
| Other accounts receivable | |||||||||||
| Operating lease right-of-use assets | — | ||||||||||
| Property and equipment, net | |||||||||||
| Total non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Trade payables | $ | $ | |||||||||
| Other accounts payable and accrued expenses | |||||||||||
| Operating lease liabilities | — | ||||||||||
| Total current liabilities | |||||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Deferred revenues | |||||||||||
| Warrants liability | |||||||||||
| Operating lease liabilities | — | ||||||||||
| Total non-current liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| Commitments and Contingencies (Note 7) | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
| Ordinary shares | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-2
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
U.S. dollar in thousands (except share and per share data)
| Six Months Ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| Revenues | |||||||||||
| Cost of sales | |||||||||||
| Gross loss | ( | ( | |||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Total operating expenses | |||||||||||
| Operating loss | ( | ( | |||||||||
| Income from warrants remeasurement | ( | ||||||||||
| Financial income, net | ( | ( | |||||||||
| Net loss before income tax | ( | ( | |||||||||
| Income tax expense | |||||||||||
| Net loss | ( | ( | |||||||||
| Net comprehensive loss | ( | ( | |||||||||
| Basic and diluted net loss per Class A ordinary share | ( | ( | |||||||||
Weighted average number of ordinary shares and preferred shares used in computing basic and diluted net loss per share (1) | |||||||||||
(1) Prior period results have been retroactively adjusted to reflect the 1:26.7017 stock split and the changes in par value from 0.01
The accompanying notes are an integral part of the consolidated financial statements.
F-3
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
U.S. dollar in thousands (except share and per share data)
Ordinary shares - Class A (1) | Ordinary shares - Class B (1) | Preferred shares (1) | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2021 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance – June 30, 2022 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
(1) Prior period results have been retroactively adjusted to reflect the 1:26.7017 stock split and the changes in par value from 0.01
The accompanying notes are an integral part of the consolidated financial statements.
F-4
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
U.S. dollar in thousands (except share and per share data)
| Six months ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
| Remeasurement of warrant liability | ( | ||||||||||
| Decrease in inventory | |||||||||||
| Decrease in trade receivables | |||||||||||
| Increase in other accounts receivable and prepaid expenses | ( | ( | |||||||||
| Increase in operating lease right-of-use assets and liability, net | ( | — | |||||||||
| Increase in deferred revenues | |||||||||||
| Increase (decrease) in trade payables | ( | ||||||||||
| Increase (decrease) in other accounts payable and accrued expenses | ( | ||||||||||
| Other | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Investment in short-term investments | ( | ||||||||||
| Proceeds from bank deposits | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of options | |||||||||||
| Proceeds from exercise of warrants to preferred shares | |||||||||||
| Payments of deferred offering costs | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| Decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of year | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-5
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
U.S. dollar in thousands (except share and per share data)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Non-cash activity: | |||||||||||
| Accrued offering costs | $ | $ | |||||||||
| Purchase of property and equipment included in accounts payable or accrued | $ | $ | |||||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Supplemental cash flow: | |||||||||||
| Cash received from interest | $ | $ | |||||||||
| June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Reconciliation of cash, cash equivalents and restricted cash: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Non-current restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
F-6
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 1. GENERAL
REE Automotive Ltd. was incorporated in Israel on January 16, 2011.
REE Automotive Ltd. has established wholly-owned subsidiaries in the United States, Germany, Japan and the United Kingdom (the “Subsidiaries”). REE Automotive Ltd. and its subsidiaries (the “Company” or “we”) is a development stage company actively executing our business plan and establishing strategic collaborations with industry leaders to expand our industry footprint across segments. We are currently developing full vehicle prototypes with REEcornerTM technology, preparing to commence commercial trials of our P7 Platform.
On February 3, 2021, the Company entered into a merger agreement (the “Merger Agreement”) with 10X Capital Venture Acquisition Corp (“10X Capital”), a Delaware corporation and special purpose acquisition company (“SPAC”), and Spark Merger Sub, Inc., a wholly-owned subsidiary of the Company, pursuant to which Merger Sub merged with and into 10X Capital (the “Merger”). The Merger was consummated on July 22, 2021 (the “Closing Date”) with 10X Capital becoming a wholly-owned subsidiary of the Company, and the securityholders of 10X Capital becoming securityholders of the Company.
The Company became a publicly traded company listed on the Nasdaq Stock Exchange on July 23, 2021, with its ordinary shares and its warrants trading under the ticker symbols “REE” and “REEAW”.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited interim consolidated financial statements
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation.
The balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements of the Company at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021.
The significant accounting policies disclosed in the Company’s audited 2021 consolidated financial statements and notes thereto have been applied consistently to these unaudited interim consolidated financial statements except for the application of ASC 842. Results for the six months ended June 30, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022.
Use of estimates
The preparation of the unaudited interim consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. Actual results could differ from those estimates.
The novel coronavirus (“COVID-19”) pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on the Company’s customers and its sales cycles. The Company considered the impact of COVID-19 on the estimates and assumptions and
F-7
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
Cash and cash equivalents
Cash and cash equivalents consist of cash balances and bank deposits, including money market funds, that have a maturity, at the date of purchase, of three months or less.
Investments
The Company accounts for investments in debt securities in accordance with ASC 320, "Investments - Debt Securities". Management determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determinations at each balance sheet date.
Held-to-maturity securities are those securities that the Company has the positive intent and ability to hold until maturity. Trading securities are those securities that the Company intends to sell in the near term. All other securities not included in the held-to-maturity or trading category are classified as available-for-sale. Held-to-maturity securities are recorded at amortized cost. Trading securities are carried at fair value with unrealized gains and losses charged to earnings. Available-for-sale securities are carried at fair value with unrealized gains and losses recorded within accumulated other comprehensive income (loss) as a separate component of shareholders’ equity.
The Company's securities are reviewed for impairment in accordance with ASC 320-10-35. If such assets are considered to be impaired, the impairment charge is recognized in earnings when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and the Company's intent to sell, including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis. For securities with an unrealized loss that the Company intends to sell, or it is more likely than not that the Company will be required to sell before recovery of their amortized cost basis, the entire difference between amortized cost and fair value is recognized in earnings. For securities that do not meet these criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while declines in fair value related to other factors are recognized in accumulated other comprehensive income (loss). As of June 30, 2022, no other-than-temporary impairment had been recognized.
Leases
On January 1, 2022, the Company adopted ASU No. 2016-02, "Leases (Topic 842)",using the modified retrospective method by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2022 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840. The Company has elected the package of practical expedients permitted under the transition guidance, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any expired or existing leases as of the adoption date. The Company elected to not recognize a lease liability and a right-of-use ("ROU") asset for leases with a term of twelve months or less. Lease payments on short-term leases are recognized as an expense on a straight-line basis over the lease term, not included in lease liabilities. Lastly, the Company also elected the practical expedient to not separate lease and non-lease components for its leases.
The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease payments arising from the lease. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is
F-8
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
Fair value of financial instruments
Fair value is defined as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial instruments consist among others of cash equivalents, restricted cash, other accounts receivable, trade payables, and other accounts payable and accrued expenses. The estimated fair values of these financial instruments approximate their carrying value as presented, due to their short term maturities. We consider public warrant liabilities to be Level 1 and private warrants are measured at fair value using Level 3 inputs. The financial liability for the warrant liabilities are accounted for at fair value through profit and loss. For short term investments refer to Note 3 and 11.
Revenue recognition
During 2021, the Company generated revenues from selling its wheels for personal mobility products.
Under ASC 606 “Revenue from contracts with customers”, the Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for contracts that are within the scope of the standard, the Company perform the following five steps: (1) Identify the contract(s) with a customer, (2) Identify the performance obligations in the contract, (3) Determine the transaction price, (4) Allocate the transaction price to the performance obligations in the contract and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.
F-9
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
The Company recognizes revenue at the time when its customer obtains control of the promised goods which is when the performance obligation is satisfied by transferring the promised product to the customer.
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring the products to the customer.
The Company applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component.
Deferred revenues are recognized as (or when) the Company receives consideration prior to performing its obligations under the contract.
In April 2021, the Company entered into a strategic development agreement with a customer, pursuant to which the Company will develop and supply REE platform prototypes. Revenue related to the agreement is deferred and will be recognized upon satisfying performance obligations in the contract. As of June 30, 2022 and December 31, 2021, the Company had deferred revenues recorded of $943 and $943 , respectively. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers.
For contracts in which the performance obligation has an original expected duration of one year or less, the Company does not provide disclosure on its remaining performance obligations.
Fulfillment costs are capitalized up to the amount that is expected to be recovered, and any excess amounts will be expensed as incurred. As of June 30, 2022, the Company recorded capitalized costs of $943 .
Contract liabilities consisted of the following as of June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Deferred revenues, non-current | $ | $ | |||||||||
Remaining Performance Obligation
The Company’s remaining performance obligations are comprised of the delivery of products and a material right for purchases of finished goods not yet delivered. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $943 , which the Company expects to recognize as revenue.
Recently adopted accounting pronouncements
As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
On January 1, 2022, the Company adopted ASU No. 2016-02, "Leases (Topic 842)". Upon adoption, we recognized total right of use (“ROU”) assets and corresponding liabilities of $8,857 on our consolidated balance sheets. The ROU assets include adjustments for prepayments and accrued lease payments. The adoption did not impact the beginning balance of retained earnings, or prior year consolidated statements of income and statements of cash flows.
For information regarding the impact of Topic 842 adoption, see Significant Accounting Policies – Leases above and Note 5 - Leases.
F-10
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
Recently issued accounting pronouncements, not yet adopted
In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes” (“the Update”). ASU 2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The standard will be effective for the Company for fiscal years beginning January 1, 2022, and interim periods in fiscal years beginning January 1, 2023. The Company does not anticipate ASU 2019-12 will have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
The guidance will be effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The Company is currently evaluating the effect that ASU 2016-13 will have on its consolidated financial statements and related disclosures.
NOTE 3. INVESTMENTS
Our investments as of June 30, 2022 are comprised of held-to-maturity securities consisting mainly of U.S. dollar denominated investments primarily in bank deposits, agency bonds, municipal bonds, and commercial paper. Our investment guidelines are to purchase securities that are investment grade at the time of acquisition
Short-term investments consisted of the following:
| June 30, 2022 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Amortized cost basis | Gross unrealized gains | Gross unrealized loss | Fair value | ||||||||||||||||||||
| Bank deposit securities: | |||||||||||||||||||||||
| Bank deposits | $ | $ | $ | ||||||||||||||||||||
| Held-to-maturity marketable securities: | |||||||||||||||||||||||
| Agency bonds | $ | $ | $ | ( | $ | ||||||||||||||||||
| Municipal bonds | ( | ||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Total held-to-maturity marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total short term investments | $ | $ | $ | ( | $ | ||||||||||||||||||
The securities in our portfolio are investment grade and short-term in nature. All held-to-maturity marketable securities are due within 1 year or less. As of June 30, 2022, no continuous unrealized losses for 12 months or greater were identified.
F-11
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 4. OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Government authorities | $ | $ | |||||||||
| Prepaid expenses | |||||||||||
| Advances to suppliers | |||||||||||
| Other receivables | |||||||||||
| Total | $ | $ | |||||||||
F-12
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 5. LEASES
The Company`s leases include offices for its facilities worldwide, as well as car leases, which are all classified as operating leases. Certain leases include renewal options that are under the Company`s sole discretion. The renewal options were included in the right-of-use assets and liabilities calculations if it was reasonably certain that the Company will exercise the option.
| June 30, 2022 | |||||
| (Unaudited) | |||||
| Operating lease cost: | $ | ||||
| Short-term lease cost: | |||||
| Variable lease cost: | |||||
| Net lease cost: | $ | ||||
| June 30, 2022 | |||||
| (Unaudited) | |||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||
| Operating cash flows for operating leases: | $ | ||||
| Supplemental cash flow information related to operating leases: | |||||
| Adoption of "Leases (Topic 842)" | $ | ||||
| Right-of-use assets obtained in exchange for new operating lease liabilities: | $ | ||||
| Adjustment to right-of-use assets upon the resolution of contingent lease payments | $ | ||||
| Weighted average remaining operating lease term | |||||
| Weighted average discount rate operating lease | % | ||||
The following table outlines maturities of the Company’s lease liabilities as of June 30, 2022:
| Operating Leases | |||||
| (Unaudited) | |||||
| 2022 (remainder) | $ | ||||
| 2023 | $ | ||||
| 2024 | $ | ||||
| 2025 | $ | ||||
| 2026 and thereafter | $ | ||||
| Total undiscounted lease payments | $ | ||||
| Less: | |||||
| Imputed interest | $ | ||||
| Present value of lease liabilities | $ | ||||
In March 2022, the Company entered into a lease commitment which has not yet commenced as of June 30, 2022, and is therefore not part of the right-of-use asset and liability. This lease has undiscounted future payments of approximately $11,000 . The lease is expected to commence during the second half of 2022 for a 10 year period.
F-13
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Employees and payroll accruals | $ | $ | |||||||||
| Professional fees | |||||||||||
| Non recurring engineering | |||||||||||
| Government authorities | |||||||||||
| Other payables | |||||||||||
| Total | $ | $ | |||||||||
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
The following table summarizes REE’s contractual obligations and other commitments for cash expenditures as of June 30, 2022, and the years in which these obligations are due. Certain obligations are reflected in our balance sheet, while other are disclosed as future obligations. This table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.
| Purchase commitments | |||||
| (Unaudited) | |||||
| 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 and thereafter | |||||
| Total | $ | ||||
Open purchase orders that are cancellable are not considered unconditional purchase obligations for financial reporting purposes and are not included in the table above. Such purchase orders often represent authorizations to purchase rather than binding agreements.
In addition, REE enters into agreements in the normal course of business with vendors to perform various services, which are generally cancellable upon written notice. These payments are not included in this table of contractual obligations.
Guarantee
A short-term guarantee in the amount of approximately $136 was issued by a bank to secure the Company’s office rent and credit cards payments. Long-term guarantees of $5,001 were recorded within Long-term restricted cash and Other Accounts Receivable to secure the Company’s office and manufacturing locations.
Royalty bearing grants
The Company’s research and development efforts have been partially financed through grants from the Israel Innovation Authority (“IIA”) for the technology related to the Softwheel products. In 2021, the Company applied to the IIA and was approved to update the definition of royalties set for the Company, so that the Company will be obligated to pay royalties solely on revenues generated from Softwheel products (and not the Company’s automotive activity). Under the research
F-14
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
and development agreements with the IIA and pursuant to applicable laws, the Company is required to pay royalties at the rate of 3-5% on sales of products developed with funds provided by the IIA. Such royalties are due up to an amount equal to 100% of the IIA grants received, linked to the U.S. dollar plus interest on the unpaid amount received based on the 12-month LIBOR rate (from the year the grant was approved) applicable to U.S. dollar deposits. If the Company returns to production of these products outside of Israel and generates sales, the ceiling will increase based on the percentage of production that is outside of Israel, up to a maximum of 300% of the IIA grants, linked to the dollar and bearing interest as noted above. If the Company does not generate sales of products developed with funds provided by the IIA, the Company is not obligated to pay royalties or repay the grants. For the six months June 30, 2022 and 2021, the Company had an aggregate of paid and accrued royalties to the IIA, recorded as cost of revenue in the consolidated statement of comprehensive loss in the amount of $0 and less than $1 , respectively.
As of June 30, 2022, the Company’s remaining contingent obligation with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, were $724 , respectively.
In 2018, the Company signed a research and development agreement with the Israel-United States Binational Industrial Research and Development Foundation (“BIRD”) for the technology related to Softwheel products. Under this agreement, the Company is required to pay royalties at a rate of 5% of the sales of products developed with funds provided by BIRD up to an amount equal to 150% of the aggregate dollar amount of the grants received linked to the U.S. consumer price index. For the six months ended June 30, 2022 and 2021, no
As of June 30, 2022, the BIRD contingent liability with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled $433 .
Legal proceedings
In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. Although it cannot predict with assurance the outcome of any litigation, it does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on its financial condition, results of operations, or cash flows.
F-15
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 8. SHAREHOLDERS’ EQUITY
Composition of share capital:
| June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
| (Unaudited) | (Audited) | ||||||||||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | ||||||||||||||||||||
| Number of shares | Number of shares | ||||||||||||||||||||||
Class A Ordinary shares, no par value (1) | |||||||||||||||||||||||
Class B Ordinary shares, no par value (2) | |||||||||||||||||||||||
(1) Each Class A Ordinary Share has the right to exercise one vote, to participate pro rata in all the dividends declared by the Board of Director’s of the Company and the rights in the event of the Company’s winding up are to participate pro-rata in the total assets of the Company.
(2) Class B Ordinary Shares, which are held by the founders, are entitled to cast ten votes per each Class B Ordinary Share held as of the applicable record date. Specific actions set forth in REE’s Amended and Restated Articles may not be effected by REE without the prior affirmative vote of 100 % of the outstanding REE Class B Ordinary Shares, voting as a separate class. Each Class B Ordinary Shares will be automatically suspended upon the tenth anniversary of the closing of the Merger. There are no economic or participating rights to this class of shares.
Equity transactions
In the six months ended June 30, 2021, certain investors exercised their Preferred B warrants at a price of $0.27 per share. Such investors paid a total of $2,657 in exchange for 9,745,415 Preferred B shares of no par value of the Company.
In April 2021, the Company entered into a strategic collaboration agreement with a strategic partner regarding the ability to work with the Company to develop new markets and new business models for REE’s corner module technology and design (the “Strategic Partner”). In June 2021 and August 2021 the Company issued to the Strategic Partner 1,989,622 and 370,479 ordinary shares, respectively, and had agreed to issue additional ordinary shares to be issued to the Strategic Partner upon the achievement of certain revenue and production milestones, which will require the Company to obtain definitive purchase orders from third-party customers. As a result, the Company recorded share-based compensation expenses in the amount of $18,802 in selling, general and administrative expenses.
On August 16, 2021, the Board of Directors approved the issuance of 250,000 shares issued to an affiliate of Cowen and Company, LLC (“Cowen”) in consideration for advisory services provided by Cowen in connection with the Merger Agreement.
F-16
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
| Six months ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Cost of sales | $ | $ | |||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| $ | $ | ||||||||||
NOTE 9. INCOME TAXES
The main reconciling item between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward of the Company due to the uncertainty of the realization of such tax benefits and the unrecognized tax positions recorded in the period.
Income taxes are comprised as follows:
| Six months ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Current | $ | $ | |||||||||
| $ | $ | ||||||||||
| Six months ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Domestic | $ | $ | |||||||||
| Foreign (non-Israeli jurisdictions) | |||||||||||
| $ | $ | ||||||||||
| Net loss before income tax | ( | ( | |||||||||
| Effective tax rate | ( | % | ( | % | |||||||
Uncertain tax positions
A reconciliation of the opening and closing amounts of total unrecognized tax benefits is as follows:
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Opening balance | $ | $ | |||||||||
| Tax positions reversed in current year | ( | ||||||||||
| Tax positions taken in current year | |||||||||||
| Accrued interest | |||||||||||
| Ending balance | $ | $ | |||||||||
F-17
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 10. WARRANT LIABILITIES
Warrants liabilities
As of June 30, 2022, there were 15,562,500 public and private warrants outstanding. The warrants entitle the holder to purchase one Class A ordinary share of REE Automotive Ltd at an exercise price of $11.50 per share. Until warrant holders acquire the Company’s Class A ordinary shares upon exercise of such warrants, they will have no rights with respect to the Company’s ordinary shares. The warrants will expire on July 22, 2026, five years after the Merger closing date, or earlier upon redemption or liquidation in accordance with their terms.
Public Shareholders’ Warrants
Each whole warrant will entitle the registered holder to purchase one share of Class A Ordinary Shares. No fractional warrants will be issued and only whole warrants will trade. The Company is not obligated to deliver any Class A Ordinary Shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A Ordinary Shares underlying the warrants is then effective and a prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue a share of Class A Ordinary Shares upon exercise of a warrant unless the share of Class A Ordinary Shares issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event is the Company required to net cash settle any warrant. During any period if the Company has failed to maintain an effective registration statement, warrant holders will be able to, until such time there is an effective registration statement, exercise their warrants on a “cashless basis.”
Once the warrants become exercisable, the Company may call the warrants for redemption:
•in whole and not in part;
•at a price of $0.01 per warrant;
•upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
•if, and only if, the closing price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 -trading day period ending three business days before the Company sends to the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the warrants for redemption for cash the Company’s management will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” If the Company’s management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A Ordinary Shares equal to the quotient obtained by dividing (x) the product of the number of Class A Ordinary Shares underlying the warrants, multiplied by the excess of the “fair market value” of Class A Ordinary Shares over the exercise price of the warrants by (y) the fair market value. The “fair market value” will mean the average closing price of the Class A Ordinary Shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
F-18
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 10. WARRANT LIABILITIES (cont.)
Private Shareholders’ Warrants
The private warrants are identical to the public warrants. The private warrants (including the Class A Ordinary Shares issuable upon exercise of the private placement warrants) will be exercisable for cash or on a cashless basis, at the holder’s option.
If holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Class A Ordinary Shares equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Ordinary Shares underlying the warrants, multiplied by the excess of the “fair market value” of Class A Ordinary Shares over the exercise price of the warrants by (y) the fair market value. The “fair market value” means the average closing price of the Class A Ordinary Shares for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the transfer agent.
NOTE 11. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities fair value at June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, 2022 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Unaudited) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Money market fund | $ | $ | $ | ||||||||||||||
| Bank deposits | |||||||||||||||||
| Agency bonds | |||||||||||||||||
| Municipal bonds | |||||||||||||||||
| Commercial paper | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
| Liabilities: | |||||||||||||||||
| Warrant liability – Public warrants | $ | $ | $ | ||||||||||||||
| Warrant liability – Private warrants | |||||||||||||||||
| Amounts included in: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Short-term investments | |||||||||||||||||
| Warrant liability | ( | ( | |||||||||||||||
| Total | $ | $ | $ | ( | |||||||||||||
F-19
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 11. FAIR VALUE MEASUREMENTS (cont.)
| December 31, 2021 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Audited) | |||||||||||||||||
| Liabilities: | |||||||||||||||||
| Warrant liability – Public warrants | $ | $ | $ | ||||||||||||||
| Warrant liability – Private warrants | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
| Amounts included in: | |||||||||||||||||
| Warrant liability | $ | ( | $ | $ | ( | ||||||||||||
| Total | $ | ( | $ | $ | ( | ||||||||||||
The fair value of the Public Warrants is determined with reference to the prevailing market price for warrants that are trading on Nasdaq under the ticker REEAW.
The Private warrants were valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private warrants is the expected volatility of the Class A ordinary shares. The expected volatility was implied from a blend of the Company’s own share and Public warrant pricing and the average historical share volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its own business.
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy.
The following table provides the inputs used for Level 3 fair value measurements:
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
Share price | $ | $ | |||||||||
Strike price | $ | $ | |||||||||
Term (in years) | |||||||||||
Volatility | % | % | |||||||||
Risk-free rate | % | % | |||||||||
Dividend yield | % | % | |||||||||
The following table presents the changes in the fair value of Level 3 warrant liabilities:
| Private Placement | |||||
| Fair value as of January 1, 2022 | $ | ||||
| Change in fair value | ( | ||||
| Fair value as of June 30, 2022 | $ | ||||
F-20
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022
U.S. dollars in thousands (except share and per share data)
NOTE 12. FINANCIAL INCOME, NET
| Six months ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Interest income and bank fees, net | $ | ( | $ | ( | |||||||
| Foreign currency translation adjustments - expense (income) | ( | ||||||||||
| Financial income, net | $ | ( | $ | ( | |||||||
NOTE 13. BASIC AND DILUTED NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted losses per share:
| Six months ended | |||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Numerator: | |||||||||||
| Net loss for basic and diluted loss per share | $ | ( | $ | ( | |||||||
| Denominator: | |||||||||||
| Weighted average number of Class A ordinary and preferred shares used in computing basic and diluted net loss per share | |||||||||||
| Basic and diluted net loss per Class A ordinary and preferred shares | $ | ( | $ | ( | |||||||
During the six months ended June 30, 2022 and 2021, the Company was in a loss position and therefore all its potential shares were antidilutive. The total weighted average number of shares related to the outstanding options and warrants excluded from the calculation of diluted loss per share due to their anti-dilutive effect was 74,775,324 and 63,281,734 for the six months ended June 30, 2022 and 2021.
NOTE 14. SUBSEQUENT EVENTS
F-21
Exhibit 99.3
OPERATING AND FINANCIAL REVIEW
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2021 (included in our Annual Report of Foreign Private Issuer on Form 20-F for the year ended December 31, 2021 filed with the Securities and Exchange Commission or SEC, on March 28, 2022 (our “Annual Report”)), and the related notes and the other financial information included elsewhere in this Form 6-K. Unless the context requires otherwise, references in this Report on Form 6-K to the “Company”, “REE,” “we,” “us,” and “our” refer to REE Automotive Ltd. and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This report on Form 6-K (this “Report”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements include, but are not limited to, statements regarding REE or its management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “appear,” “approximate,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “would” and similar expressions (or the negative version of such words or expressions) may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements in this Report may include, among other things, statements about REE’s strategic and business plans, technology, relationships, objectives and expectations for our business, the impact of trends on and interest in our business, intellectual property or product and its future results, operations, and financial performance and condition.
These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts and assumptions. Although REE believes that the expectations reflected in forward-looking statements are reasonable, such statements involve unknown number of risks, uncertainties, judgments and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. These factors are difficult to predict accurately and may be beyond REE’s control. Forward-looking statements in this Report speak only as of the date made and REE undertakes no obligation to update its forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. In light of these risks and uncertainties, investors should keep in mind that results, events or developments discussed in any forward-looking statement made in this Report may not occur.
You should not place undue reliance on these forward looking statements. Some factors that could cause actual results to differ include:
•REE’s ability to commercialize its strategic plan;
•REE’s ability to maintain and advance relationships with current Tier 1 suppliers and strategic partners;
•development of REE’s advanced prototypes into marketable products;
•REE’s ability to grow and scale manufacturing capacity through relationships with Tier 1 suppliers;
•REE’s estimates of unit sales, expenses and profitability and underlying assumptions;
•REE’s reliance on its UK Engineering Center of Excellence for the design, validation, verification, testing and homologation of its products;
•REE’s limited operating history;
•risks associated with plans for REE’s initial commercial production;
•REE’s dependence on potential suppliers, some of which will be single or limited source; development of the market for commercial EVs;
•intense competition in the e-mobility space, including with competitors who have significantly more resources;
•risks related to the fact that REE is incorporated in Israel and governed by Israeli law;
•REE’s ability to make continued investments in its platform;
•the impact of the ongoing COVID-19 pandemic and any other worldwide health epidemics or outbreaks that may arise and adverse global conditions, including macroeconomic and geopolitical uncertainty;
•the need to attract, train and retain highly-skilled technical workforce;
•changes in laws and regulations that impact REE;
•REE’s ability to enforce, protect and maintain intellectual property rights;
•REE’s ability to retain engineers and other highly qualified employees to further its goals; and
•other risks and uncertainties set forth in the section “Risk Factors” in our Annual Report.
Overview
REE is an automotive technology company whose mission is to be the cornerstone on top of which mobility players can build their dreams of future services, unbound by legacy thinking, as we carry the next generation of electric and autonomous vehicles on a truly modular and scalable platform. We aim to empower global mobility companies to build any size or shape of electric or autonomous vehicle – from Class 1 through Class 6 - for any application and target market. We envision a future where electric vehicles (“EV”) and autonomous vehicles (“AV”) will be “Powered by REE™”.
REE is a development stage company actively executing our business plan and establishing strategic collaborations with industry leaders to expand our industry footprint across segments. We are currently developing full vehicle prototypes with REEcornerTM technology, preparing to commence commercial trials of our P7 Platform and developing our currently untested plans to outsource manufacturing and to assemble components at future Integration Centers. Our products are designed to be operated on either battery or fuel cells and in any drive mode, both human-driven and autonomous while affording full design freedom to our potential customers.
As a horizontally integrated player, REE plans to initially target commercial and mobility as a service ("MaaS") markets by commercially engaging auto manufacturers, original equipment manufacturers (“OEMs”), parcel/courier delivery and logistic companies, e-commerce retailers, new mobility players, MaaS providers and autonomous drive companies with its proposed offering to build entire fleets tailored to their exact needs based on REEplatformTM technology without the need to be constrained to off-the-shelf offerings. We offer many customer benefits including complete vehicle design freedom based on exact business requirements, enabling reduction in time-to-market, more space and volume with the smallest footprint, lower total cost of ownership, faster development times, advanced driver-assistance systems (“ADAS”) compatibility, and reduced maintenance and global safety standard compliance.
Additionally, REE is building a partner ecosystem to enable and accelerate adoption of REE’s products. This includes collaborations with partners not only to develop full vehicle offerings but also to provide a comprehensive ecosystem of enabling capabilities and services, such as vehicle financing, batteries, charging infrastructure, aftersales, service and Data-as-a-Service (“DaaS”), for a full turn-key solution intended to enable and expedite a smooth transition for our potential customers from internal combustion engine (“ICE”) vehicles to EV fleets.
Components of Statement of Operations
Revenue
REE has not begun significant commercial operations and currently has no significant revenues. Once REE reaches commercialization and commences production and sales of our products, we expect that the significant majority of our revenue will be derived from direct sales to OEMs, logistics and technology companies and, thereafter, other related products and services within the REE ecosystem.
Cost of Revenue
Cost of revenue relates primarily to share-based compensation expense and expenses related to non-recurring engineering. Once REE reaches commercialization and commences production of our products, we expect cost of revenue to include vehicle components and parts, including batteries, raw materials, direct labor costs, warranty costs and costs related to the operation of manufacturing facilities.
Research and Development Expenses, Net
Research and development expenses consist primarily of costs associated with the employment of REE’s engineering staff, third-party engineering consultants, development projects, such as corners programs and component programs and program consumables, costs related to share based compensation, costs associated with REE’s properties, and depreciation of REE’s fixed assets. REE expects research and development expenses to increase as we continue to develop our products, components, technology and software.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of costs associated with employment of REE’s non-engineering staff, legal, insurance, accounting and consulting expenses, travel and marketing expenses such as public relations activities and trade shows, costs related to share based compensation, costs associated with REE’s properties, and depreciation of REE’s fixed assets. REE expects selling, general and administrative expenses to increase as our overall activity levels increase due to the construction and operation of facilities and costs associated with being a public company.
Finance Income (Expense), Net
Finance income (expense), net consists primarily of interest income and foreign exchange gains or losses offset by bank fees. Foreign currency exchange gains or losses related to changes in the value of our non-U.S. denominated financial assets, primarily cash and cash equivalents. As of June 30, 2022, we did not have any indebtedness for borrowed amounts. Interest income consists of interest earned on our cash, cash equivalents, and short-term investments. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period.
Results of Operations
Three Months Ended March 31, 2022
Our results of operations for the three months ended March 31, 2022 have been adjusted to recast previously issued research and development expenses, net to reflect a reduction of $1.5 million. This adjustment was to correct an error in the Company's accrual of non-recurring engineering projects. We are providing the recast results in this Report to facilitate accurate comparisons between our first quarter and second quarter results of operations.
| Three Months Ended March 31, 2022 | |||||
| USD in thousands | |||||
| Revenues | $ | — | |||
| Cost of sales | 538 | ||||
| Gross loss | (538) | ||||
| Operating expenses: | |||||
| Research and development expenses, net | 20,843 | ||||
| Selling, general and administrative expenses | 15,288 | ||||
| Total operating expenses | 36,131 | ||||
| Operating loss | (36,669) | ||||
| (Income) loss from warrants remeasurement | (15,330) | ||||
| Financial income, net | (472) | ||||
| Net loss before income tax | $ | (20,867) | |||
| Income tax expense | 594 | ||||
| Net loss | $ | (21,461) | |||
Comparison of Three Months Ended June 30, 2022 and 2021
The following table sets forth REE’s historical operating results for the periods indicated:
| Three Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | $ | — | $ | — | |||||||
| Cost of sales | 9 | 4 | |||||||||
| Gross loss | (9) | (4) | |||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 18,080 | 9,545 | |||||||||
| Selling, general and administrative expenses | 11,330 | 21,590 | |||||||||
| Total operating expenses | 29,410 | 31,135 | |||||||||
| Operating loss | (29,419) | (31,139) | |||||||||
| (Income) loss from warrants remeasurement | (2,417) | — | |||||||||
| Financial income, net | (2,373) | (8) | |||||||||
| Net loss before income tax | $ | (24,629) | $ | (31,131) | |||||||
| Income tax expense | 619 | 45 | |||||||||
| Net loss | $ | (25,248) | $ | (31,176) | |||||||
Revenue
There was no revenue for the three months ended June 30, 2021 or the three months ended June 30, 2022. As previously noted, REE has not begun significant commercial operations and currently has no significant revenues.
Cost of Sales
Cost of sales changed negligibly from $4.0 thousand for the three months ended June 30, 2021 to $9.0 thousand for the three months ended June 30, 2022.
Research and Development Expenses, Net
R&D expenses increased by $8.6 million from $9.5 million for the three months ended June 30, 2021 to $18.1 million for the three months ended June 30, 2022. R&D expenses include increases share based compensation expense of $1.9 million from $1.5 million for the three months ended June 30, 2021 to $3.4 million for the three months ended June 30, 2022. Excluding share based compensation, R&D expenses increased $6.7 million from $8.0 million for the three months ended June 30, 2021 to $14.7 million for the three months ended June 30, 2022. This increase was primarily due to increased wages and salaries as we expanded our R&D employee headcount to support our expanding R&D programs and UK Engineering Center.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $10.3 million from $21.6 million for the three months ended June 30, 2021 to $11.3 million for the three months ended June 30, 2022. This decrease is primarily due to the decrease in share based compensation expense of $15.6 million from $18.5 million for the three months ended June 30, 2021 to $2.9 million for the three months ended June 30, 2022. The decrease in share based compensation expense results from the Company issuing ordinary shares to a strategic partner during Q2 2021, which resulted in share-based compensation expense of $15.9 million during the three months ended June 30, 2021. Excluding share based compensation, SG&A expenses increased $5.3 million from $3.1 million for the three months ended June 30, 2021 to $8.4 million for the three months ended June 30, 2022. This increase was primarily due to increased wages and salaries as we expanded our non-R&D employee headcount, invested in marketing programs, and began to incur rent payments for our new facilities.
(Income) Loss from Warrants Remeasurement
We recognized income of $2.4 million from the remeasurement of the value of warrants for the three months ended June 30, 2022. The warrants were not assumed by the Company until the consummation of the merger on July 22,
2021. The income from warrants remeasurement is from the change in fair value during the period recognized in our statement of comprehensive loss.
Financial Income, Net
Financial income, net was $2.4 million for the three months ended June 30, 2022 compared to financial income, net of $8.0 thousand for the three months ended June 30, 2021. The increase in financial income, net was primarily comprised of bank deposit and short term investment income and foreign currency gains.
Income tax expense
Income tax expense increased by $0.6 million from $45.0 thousand for the three months ended June 30, 2021 to by $0.6 million for the three months ended June 30, 2022. This increase was primarily due to the recognition of an uncertain tax position.
Comparison of Six Months Ended June 30, 2022 and 2021
The following table sets forth REE’s historical operating results for the periods indicated:
| Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | $ | — | $ | 6 | |||||||
| Cost of sales | 547 | 15 | |||||||||
| Gross loss | (547) | (9) | |||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 38,923 | 16,694 | |||||||||
| Selling, general and administrative expenses | 26,618 | 27,038 | |||||||||
| Total operating expenses | 65,541 | 43,732 | |||||||||
| Operating loss | (66,088) | (43,741) | |||||||||
| (Income) loss from warrants remeasurement | (17,747) | — | |||||||||
| Financial income, net | (2,845) | (12) | |||||||||
| Net loss before income tax | $ | (45,496) | $ | (43,729) | |||||||
| Income tax expense | 1,213 | 45 | |||||||||
| Net loss | $ | (46,709) | $ | (43,774) | |||||||
Revenue
There was no revenue for the six months ended June 30, 2022 and negligible revenue for the six months ended June 30, 2021, which related to the sales of wheels with wheel-based suspension technologies for wheelchairs. As previously noted, REE has not begun significant commercial operations and currently has no significant revenues.
Cost of Sales
Cost of sales increased by $0.5 million, from $15.0 thousand for the six months ended June 30, 2021 to $0.5 million for the six months ended June 30, 2022. This increase was primarily due to the inclusion of share-based compensation expense and costs associated to a strategic development agreement in the cost of revenue.
Research and Development Expenses, Net
R&D expenses, net, increased by $22.2 million, from $16.7 million for the six months ended June 30, 2021 to $38.9 million for the six months ended June 30, 2022. R&D expenses, net include increased share based compensation expense of $3.4 million from $3.2 million for the six months ended June 30, 2021 to $6.6 million for the six months
ended June 30, 2022. Excluding share based compensation, R&D expenses increased $18.8 million from $13.5 million for the six months ended June 30, 2021 to $32.3 million for the six months ended June 30, 2022. This increase was primarily due to increased wages and salaries as we expanded our R&D employee headcount to support our expanding R&D programs and UK Engineering Center.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $0.4 million, from $27.0 million for the six months ended June 30, 2021 to $26.6 million for the six months ended June 30, 2022. Share based compensation expense decreased by $12.8 million from $21.0 million for the six months ended June 30, 2021 to $8.1 million for the six months ended June 30, 2022. The decrease in share based compensation expense results from the Company issuing ordinary shares to a strategic partner during Q2 2021, resulting in share-based compensation expenses in the amount of $15.9 million in selling, general and administrative expenses during the six months ended June 30, 2021. Excluding share based compensation, selling, general and administrative expenses increased $12.4 million from $6.1 million for the six months ended June 30, 2021 to $18.5 million for the six months ended June 30, 2022. This increase was primarily due to increased wages and salaries as we expanded our non-R&D employee headcount, as well as increased marketing costs, increased rent expense due to moving into new facilities, and overall higher costs of being a public company.
(Income) Loss from Warrants Remeasurement
We recognized income of $17.7 million from the remeasurement of the value of warrants for the six months ended June 30, 2022 compared to $0.0 million for the six months ended June 30, 2021. The income from warrants remeasurement is from the change in fair value during the period recognized in our statement of comprehensive loss.
Financial Income, Net
Financial income, net was $2.8 million for the six months ended June 30, 2022 compared to financial income, net of $12.0 thousand for the six months ended June 30, 2021. The increase in financial income, net was primarily comprised of bank deposit and short term investment income and foreign currency gains.
Income tax expense
Income tax expense increased by $1.2 million from $45.0 thousand for the six months ended June 30, 2021 to $1.2 million for the six months ended June 30, 2022. This increase was primarily due to the recognition of an uncertain tax position.
Liquidity, Capital Resources and Financial Condition
As of the date of this Report, REE has yet to generate significant revenues from its principal business operations. We do not expect to generate significant revenues from the sale of our products in the near future. Since inception, REE has incurred losses and generated negative cash flows from operations and has funded its operations, capital expenditure and working capital requirements through capital contributions, private placements of equity securities, investments from certain strategic partners, and from the consummation of a merger by and among REE, Spark Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of REE (“Merger Sub”), and 10X Capital Venture Acquisition Corp, a Delaware corporation (“10X”), whereby Merger Sub merged with and into 10X, with 10X surviving as a wholly-owned subsidiary of REE, and with the securityholders of 10X becoming securityholders of REE (the “Merger”).
As of June 30, 2022, REE’s cash and cash equivalents were $97.0 million, with $206.8 million of liquidity comprised of cash and short-term investments, and no debt. We expect that our existing cash and cash equivalents are sufficient to fund our strategic plans and ongoing R&D programs. However, additional funding may be required for a variety of reasons, including, but not limited to, delays in anticipated schedule to complete the design of the REE products, or tooling needed to start vehicle production as currently contemplated. In addition, REE’s budget projections may be subject to cost overruns for reasons outside of its control and it may experience slower sales growth than anticipated, which would pose a risk to REE achieving cash flow positivity.
If REE were to require additional funding or otherwise determined it was beneficial to seek additional sources of financing, REE believes that its debt-free balance sheet would enable REE to access financing on reasonable terms. However, there can be no assurance that such financing would be available to REE on favorable terms or at all. If the financing is not available, or if the terms of financing are less desirable than REE expects, REE may be forced to decrease its level of investment in product development, renegotiated development agreements with collaboration partners or scale back its operations, which could have an adverse impact on its business and financial prospects.
Additionally, any funding raised through the issuance of equity or equity-linked securities may result in the issuance of securities with have rights, preferences or privileges senior to those of our Class A Ordinary Shares or the dilution of our existing shareholders.
As an early-stage growth company in the pre-commercialization stage of development, the net losses REE has incurred since inception are consistent with REE’s strategy and budget. REE will continue to incur net losses in accordance with its operating plan as REE continues to expand its operations to meet anticipated demand.
Cash Flows Summary
Presented below is a summary of REE’s operating, investing and financing cash flows for the six months ended June 30, 2022 and 2021:
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| USD in thousands | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | (68,505) | $ | (17,399) | |||||||
| Investing activities | (112,365) | 767 | |||||||||
| Financing activities | 2,108 | 2,058 | |||||||||
| Net change in cash and cash equivalents and restricted cash | $ | (178,762) | $ | (14,574) | |||||||
Cash Flows from Operating Activities
REE’s cash flows used in operating activities to date have primarily resulted from costs related to development of its products, payroll, fluctuations in accounts payable and other current assets and liabilities. REE expects its cash used in operating activities to increase before it starts to generate any material cash flows from its business.
During the six months ended June 30, 2022, operating activities used $68.5 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $46.7 million and changes in working capital and operating lease right of use assets and liabilities of $20.7 million before adding non-cash charges of $1.1 million, consisting primarily of share based compensation of $14.8 million offset by the change in warrant valuation of $17.7 million.
During the six months ended June 30, 2021, operating activities used $17.4 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $43.8 million before deducting non-cash charges consisting mainly of share based compensation of $24.1 million, and a decrease in working capital of $1.9 million.
Cash Flows from Investing Activities
REE’s cash flows used in investing activities to date have been primarily comprised of short term investments and cash outflows for tangible fixed assets (plant and equipment). REE expects investing activities to include cash inflows from maturities of short term investments offset by costs related to our integration centers.
Net cash used in investing activities was $112.4 million for the six months ended June 30, 2022, which was primarily due to the investment of $109.8 million in short-term investments as well as $2.6 million cash outflows for fixed assets (plant and equipment).
Net cash provided by investing activities was $0.8 million for the six months ended June 30, 2021, which was primarily due to proceeds from bank deposits of $1.7M offset by $0.9 million cash outflows for fixed assets (plant and equipment) in support of R&D programs.
Cash Flows from Financing Activities
Net cash provided by financing activities was $2.1 million for the six months ended June 30, 2022, which was due the proceeds from the exercise of options in the amount of $2.1 million.
Net cash provided by financing activities was $2.1 million for the six months ended June 30, 2021, which was primarily due to proceeds from the exercise of warrants of $2.7 million offset by a payment of deferred offering costs of $0.6 million.
Debt
Currently, REE has no third-party debt. Although REE has no current plans to incur debt, it may determine, based on changes in its expected cash flow needs or because it deems it beneficial, to incur debt in the future.