REE Automotive Ltd 6-K, filed Sep 26, 2024
REE Automotive Ltd. (REEAF)
6-K
2024-09-26
For: 2024-06-30
View Original
Added on
April 06, 2026
About this 6-K
REE Automotive Ltd filed this 6-K on September 26, 2024.
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 September 2024 (Report No. 2)
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
EXPLANATORY NOTE
This Report of Foreign Private Issuer consists of: (i) REE Automotive Ltd.’s (the “Company”) press release, issued on September 26, 2024 and titled “REE Automotive Provides Corporate and Business Updates and Reports Second Quarter 2024 Financial Results,” a copy of which is furnished as Exhibit 99.1; (ii) the Interim Consolidated Financial Statements (unaudited) as of and for the six months ended June 30, 2024, attached as Exhibit 99.2 hereto, and (iii) the Company’s operating and financial review (unaudited) as of and for the three and six months ended June 30, 2024, attached as Exhibit 99.3 hereto.
The first paragraph, the sections titled “Recent Highlights,” and “Forward-Looking Statements,” and the U.S. GAAP financial statements in the press release attached as Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3 shall be deemed to be filed with the SEC and incorporated by reference into the Company’s registration statements, including its registration statements on Form S-8 (File No. 333-261130, File No. 333-272145 and File No. 333-278319) and registration statements on Form F-3 (File Nos. 333-266902 and 333-276757), and shall be a part thereof, to the extent not superseded by documents or reports subsequently filed or furnished.
1
EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
2
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/ Avital Futterman | |||||||
| Name: | Avital Futterman | |||||||
| Title: | General Counsel | |||||||
Date: September 26, 2024
3
REE Automotive Provides Corporate and Business Updates and Reports Second Quarter 2024 Financial Results $45.35 Million Funding Secured, Strategic Manufacturing Agreement with Motherson, U.S. Production Kicked Off, Continued Demand Drives Orderbook to $60 Million • Completed $45.35 million Registered Direct offering led by M&G and Motherson securing production capital needs • Signed strategic agreement with Motherson, a global automotive supplier, to strengthen REE’s supply chain management and cost structure, improve working capital efficiencies and expand outreach to global OEMs • Kicked-off U.S. production in Michigan with Roush as contract manufacturer for full vehicle assembly, with start of production planned for Q4 2024 and deliveries in 2025 • Narrowed Q2 2024 net loss by 57% QoQ while concurrently reducing free cash flow burn by 19% QoQ • Increased order book by 15% QoQ, and by 289% YoY, which is valued at approximately $60 million to date as demand for Powered by REE vehicles continues to grow; REE’s dealership network expands to 78 sales and service location in the U.S. • Observed significant growth of OEM interest in REE’s software-defined EV technology • Company will hold a conference call at 8:30 a.m. ET today, September 26, 2024, which can be accessed via webcast at investors.ree.auto or web registration; and via conference call dial-in TEL AVIV (September 26, 2024) – REE Automotive Ltd. (Nasdaq: REE) (“REE” or the “Company”), an automotive technology company and provider of full by-wire electric trucks and platforms, today announced financial results for the three months ended June 30, 2024 alongside significant updates. “The past few months have been pivotal for REE, marking key milestones we’ve worked toward for years. Our strategic manufacturing agreement with Motherson Group (IN: MOTHERSON) (“Motherson”), a global leader in engineering and automotive supply, is transformational, which we believe will enable us to scale faster while avoiding common operational challenges faced by others in the EV space,” said Daniel Barel, Co-founder and CEO of REE. “We believe our product offering is the best in an underserved market, and demand continues to grow from fleets and OEMs. With our recent investment round, our funding is solid, and we’ve begun U.S. production of our P7 line with Roush. We’re executing our strategy, focusing on technology leadership and cost reduction. I’m grateful to Motherson, M&G, and our long-term investors for their support, and to our global teams for their dedication.” Recent Highlights: Operations: • Strategic partnership with Motherson to allow faster and more stable production scaleup alongside improvement to working capital. REE will leverage the extensive experience and capabilities of Motherson, a global engineering and manufacturing specialist and one of the world’s leading automotive suppliers. For FY24, Motherson achieved gross revenue of $17.2 billion. Motherson will manage sourcing and supply chain of all production parts and support the assembly of the REEcorner® and REE P7 electric trucks, the first full by-wire (“XBW”), software-driven certified medium duty electric truck available on the market today. The collaboration with Motherson is expected to drive operational and manufacturing improvements to REE’s production line, supply chain management, lower bill of materials (BOM), improved productivity and cost structure. • Contract manufacturing kickoff with Roush for full vehicle assembly for North America. During Q2 2024 REE signed a contract with Roush, a leading global product development supplier operating across more
than 30 countries and subsequent to quarter end the Company has kicked off production and is preparing Roush’s Michigan based facility to begin assembly of Powered by REE vehicles in Q4 2024. Roush will be supported by a joint Motherson and REE team, who will be responsible for quality checks, logistics and testing. REE will continue to manufacture its proprietary REEcorner® technology in its Coventry Integration Center in the UK where it already kicked off REEcorner production. • Production plan updates to address strong customer pull and capitalize on savings and efficiencies. The strategic supply chain management agreement with Motherson and the U.S. production kickoff at Roush, are expected to materially accelerate our ability to service customers at scale. Given the unmet market need and customer feedback on our superior product and technology we anticipate significant order growth. Now that we have secured the capital required for production, the execution of the strategic agreement with Motherson and the production kickoff at Roush, we are updating our production plan to start deliveries in 2025 in order to utilize our renewed capabilities while addressing the strong customer- pull we see and to capitalize on the significant saving and efficiencies our collaboration with Motherson is expected to enable. We believe the revised production and revenue plan will benefit our ability to address larger follow-on orders from fleets and OEMs and, coupled with the expected improved unit costs, accelerate the road to meaningful free-cash flow generation. Business: • Orderbook increased by 15% QoQ, and by 289% YoY, valued today at approximately $60 million representing more than 400 P7 EVs ordered from 24 different customers across North America. This diverse orderbook allows REE access to more than 200 fleets. In addition, 50,000+ government and education entities can now purchase REE’s software-defined electric trucks through a 4 years Sourcewell contract. We continue to receive strong positive customer feedback from our demo program as we continue to deliver more and more P7-C demo trucks to our dealers across the U.S. • REEcorner business line continues to show strong potential with now three OEMs considering integrating our REEcorners. We continue to see growing interest in our software defined technology by traditional and new OEMs considering integrating our REEcorners into their product line-ups thus gaining access to software-defined EV technology. We believe that, although this is a long-cycle business, continued expansion of our market leadership and continued execution on our strategic vision will result in the opportunity to license our XBW technology across vehicle classes and categories, making REE the “intel Inside” of automotive. • REE’s authorized dealer network, one of North America’s largest of pure commercial EVs, continues to expand now covering 78 sales and service points. This is a key strength for our fleet-customers who seek nationwide service and support. • Programs are ongoing with Penske and U-Haul. During Q2 2024, REE delivered a P7-C upfitted with a 16- foot Wabash DuraPlate® body to Penske Trucks Leasing which began to offer Powered by REE electric vehicles to its customers for demos and orders across North America. Concurrently, U-Haul received the first P7-S platform and is evaluating it as the first solution to support the electrification of its fleet. • Airbus autonomous program. Airbus (AIR.PA) has fitted Powered by REE® truck with basic A350 airliner controls to demonstrate the first ever an autonomous drive on runways in France as part of Airbus’ three- year "Optimate" project. According to Airbus, they expect to see this technology tested in a full flight within one year in the A350 with more platforms to come. This project further improves the future of aviation, airport ground traffic management and safety, and REE’s technology is in its core.
Financials: • Secured $45.35 million (gross) registered direct offering led by M&G and Motherson priced at $4.122 per share, a 39% premium to the closing price on September 13, 2024. • Second quarter net loss narrowed by 57% QoQ to $10.8 million compared to $25.2 million in Q1 2024 and narrowed by 59% year-over-year (YoY) compared to $26.2 million in Q2 2023. The QoQ decrease was mainly driven by an increase in recognition of grants from the UK government, income from remeasurement of warrants and derivative liabilities, lower engineering costs related to the development of the P7 EV Platform, a decrease in income tax expenses as well as other operational efficiencies. The YoY decrease was mainly driven by an increase in recognition of grants from the UK government, income from remeasurement of warrants and derivative liabilities, lower engineering costs related to the development of the P7 EV Platform, lower share-based compensation expense as well as other operational efficiencies. • Non-generally accepted accounting principles (non-GAAP) net loss in the quarter narrowed by 41% QoQ to $12.4 million compared to $21.2 million in Q1 2024 and narrowed by 43% from $22.0 million in Q2 2023. • Free cash flow (FCF) burn continued to narrow in Q2 2024, with a 19% reduction from Q1 2024, consistent with the trend in full year 2023 when REE reported a 25% YoY decrease in FCF burn. • REE ended Q2 2024 with liquidity of $60.5 million comprised of cash and cash equivalents and short-term investments, inclusive of a $15 million credit facility. • REE raised approximately $1.4 million in proceeds between April 1, 2024 and September 26, 2024 by issuing 263,455 Class A Ordinary Shares under the At the Market Offering Agreement with H.C. Wainwright & Co., LLC. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
4 REE AUTOMOTIVE LTD. Condensed Consolidated Statements of Comprehensive Loss U.S. dollars in thousands (except share and per share data) (Unaudited) Three Months Ended Six Months Ended June 30, 2024 March 31, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Revenues $ — $ 160 $ 943 $ 160 $ 943 Cost of revenues 651 804 943 1,455 943 Gross loss $ (651) $ (644) $ — $ (1,295) $ — Operating expenses: Research and development expenses, net 8,063 15,358 19,337 23,421 38,211 Selling, general and administrative expenses 6,931 7,170 8,087 14,101 18,930 Total operating expenses 14,994 22,528 27,424 37,522 57,141 Operating loss $ (15,645) $ (23,172) $ (27,424) $ (38,817) $ (57,141) Income (loss) from warrants remeasurement 2,586 (706) — 1,880 — Financial income, net 2,130 131 1,076 2,261 2,137 Net loss before income tax (10,929) (23,747) (26,348) (34,676) (55,004) Income tax expense (income) (142) 1,436 (137) 1,294 (171) Net loss $ (10,787) $ (25,183) $ (26,211) $ (35,970) $ (54,833) Net comprehensive loss $ (10,787) $ (25,183) $ (26,211) $ (35,970) $ (54,833) Basic and diluted net loss per Class A ordinary share (1) $ (0.84) $ (2.28) $ (2.61) $ (3.01) $ (5.49) Weighted average number of ordinary shares used in computing basic and diluted net loss per share (1) 12,844,769 11,023,880 10,031,625 11,934,325 9,996,616 (1) On October 18, 2023, the Company effected a reverse share split of the Company’s Class A ordinary shares and Class B ordinary shares at the ratio of 1-for-30. As a result, all Ordinary Class A shares, Ordinary Class B shares, options for Ordinary Class A Shares, exercise price and net loss per share amounts were adjusted retroactively for all periods presented above as if the stock reverse split had been in effect as of the date of these periods. For further details, see the Company’s 20-F filed with SEC on March 27, 2024.
5 REE AUTOMOTIVE LTD. Condensed Consolidated Balance Sheets U.S. dollars in thousands (except share and per share data) June 30, 2024 December 31, 2023 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 36,274 $ 41,232 Short-term investments 24,227 44,395 Accounts receivable — 455 Inventory 2,048 463 Other accounts receivable and prepaid expenses 12,435 6,959 Total current assets 74,984 93,504 NON-CURRENT ASSETS: Non-current restricted cash 2,481 3,008 Other accounts receivable and prepaid expenses 2,224 2,871 Operating lease right-of-use assets 19,826 21,418 Property and equipment, net 17,407 17,099 Total non-current assets 41,938 44,396 TOTAL ASSETS $ 116,922 $ 137,900 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Short term loan $ 15,015 $ 15,019 Trade payables 4,209 3,703 Other accounts payable and accrued expenses 11,132 14,046 Operating lease liabilities 3,640 2,411 Total current liabilities 33,996 35,179 NON-CURRENT LIABILITIES: Warrants liability 1,520 3,400 Convertible promissory notes 4,019 4,806 Deferred tax liability 436 — Operating lease liabilities 14,068 16,440 Total non-current liabilities 20,043 24,646 TOTAL LIABILITIES 54,039 59,825 SHAREHOLDERS’ EQUITY: Ordinary shares of no par value — — Additional paid-in capital 934,989 914,211 Accumulated deficit (872,106) (836,136) Total shareholders’ equity 62,883 78,075 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 116,922 $ 137,900
6 REE AUTOMOTIVE LTD. Condensed Consolidated Statements of Cash Flows U.S. dollars in thousands (Unaudited) Six Months Ended June 30, 2024 June 30, 2023 Cash flows from operating activities: Net loss $ (35,970) $ (54,833) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,608 1,085 Accretion income on short-term investments — (588) Share-based compensation 5,638 8,870 Change in fair value of warrants liability (1,880) — Change in fair value of derivative liability (1,448) — Amortization of discount of convertible promissory note 224 — Interest expenses 433 — Decrease in accrued interest on short-term investments 168 333 Increase in inventory (1,585) — Decrease in accounts receivable 455 — Increase in other accounts receivable and prepaid expenses (4,829) (205) Change in operating lease right-of-use assets and liabilities, net 449 176 Increase (decrease) in trade payables 506 (197) Decrease in other accounts payable and accrued expenses (2,237) (256) Increase in deferred tax liability 436 — Decrease in deferred revenue — (943) Other — 103 Net cash used in operating activities (38,032) (46,455) Cash flows from investing activities: Purchase of property and equipment (1,916) (2,743) Purchases of short-term investments — (66,864) Proceeds from short-term investments 20,000 96,516 Net cash provided by investing activities 18,084 26,909 Cash flows from financing activities: Proceeds from issuance of Ordinary shares, net 14,463 — Proceeds from exercise of options — 119 Repayment of short term loan (15,000) — Proceeds from short term loan 15,000 — Net cash provided by financing activities 14,463 119 Decrease in cash, cash equivalents and restricted cash (5,485) (19,427) Cash, cash equivalents and restricted cash at beginning of year 44,240 59,925 Cash, cash equivalents and restricted cash at end of period $ 38,755 $ 40,498
7 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, 2024 Mar 31, 2024 Jun 30, 2023 Jun 30, 2024 Jun 30, 2023 Net Loss on a GAAP Basis $ (10,787) $ (25,183) $ (26,211) $ (35,970) $ (54,833) Financial income, net (2,130) (131) (1,076) (2,261) (2,137) Income tax expense (income) (142) 1,436 (137) 1,294 (171) Loss (income) from warrants remeasurement (2,586) 706 — (1,880) — Depreciation, amortization and accretion 1,633 1,640 1,235 3,273 2,295 Share-based compensation 2,815 2,823 4,212 5,638 8,870 Adjusted EBITDA $ (11,197) $ (18,709) $ (21,977) $ (29,906) $ (45,976) Reconciliation of net cash used in operating activities to Free Cash Flow Three Months Ended Six Months Ended Jun 30, 2024 Mar 31, 2024 Jun 30, 2023 Jun 30, 2024 Jun 30, 2023 Net cash used in operating activities (16,807) (21,225) (20,025) (38,032) (46,455) Purchase of property and equipment (1,051) (865) (1,474) (1,916) (2,743) Free Cash Flow (17,858) (22,090) (21,499) (39,948) (49,198)
8 Reconciliation of GAAP operating expenses to Non-GAAP operating expenses; GAAP net loss to Non-GAAP net loss, and presentation of Non-GAAP net loss per Share, basic and diluted: Three Months Ended Six Months Ended Jun 30, 2024 Mar 31, 2024 Jun 30, 2023 Jun 30, 2024 Jun 30, 2023 GAAP operating expenses 14,994 22,528 27,424 37,522 57,141 Share-based compensation (2,815) (2,823) (4,212) (5,638) (8,870) Non-GAAP operating expenses 12,179 19,705 23,212 31,884 48,271 GAAP net loss (10,787) (25,183) (26,211) (35,970) (54,833) Loss (income) from warrants remeasurement (2,586) 706 — (1,880) — Income (loss) from derivatives remeasurement (2) (1,889) 441 — (1,448) — Share-based compensation 2,815 2,823 4,212 5,638 8,870 Non-GAAP net loss $ (12,447) $ (21,213) $ (21,999) $ (33,660) $ (45,963) Weighted average number of ordinary shares used in computing basic and diluted net loss per share (1) 12,844,769 11,023,880 10,031,625 11,934,325 9,996,616 Non-GAAP basic and diluted net loss per share (1) (2) $ (0.97) $ (1.92) $ (2.19) $ (2.82) $ (4.60) (1) On October 18, 2023, the Company effected a reverse share split of the Company’s Class A ordinary shares and Class B ordinary shares at the ratio of 1-for-30. As a result, all Ordinary Class A shares, Ordinary Class B shares, options for Ordinary Class A Shares, exercise price and net loss per share amounts were adjusted retroactively for all periods presented above as if the stock reverse split had been in effect as of the date of these periods. For further details, see the Company’s 20-F filed with SEC on March 27, 2024. (2) Non-GAAP net loss and non-GAAP net loss per share for the three months ended March 31, 2024 were retroactively adjusted from $21,654 to $21,213 and from $1.96 to $1.92, respectively, to reflect the adjustment of Income from derivatives remeasurement to non-GAAP net loss.
9 Non-GAAP Financial Measures We have provided in this release financial information that has not been prepared in accordance with (GAAP. These non- GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below. We believe that adjusted EBITDA, non-GAAP net loss, non-GAAP operating expenses, non-GAAP basic and diluted net loss per share, reflect additional means of evaluating REE’s ongoing operating results and trends. We believe that these non- GAAP measures provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We believe that Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash used in our operational activities and capital expenditures. Free Cash flow burn represents the negative cash outflow used in our activities as explained above. To learn more about REE Automotive’s patented technology and unique value proposition that positions the company to break new ground in e-mobility, visit www.ree.auto. About REE Automotive REE Automotive (Nasdaq: REE) is an automotive technology company that allows companies to build electric vehicles of various shapes and sizes 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. As the first company to FMVSS certify a full by-wire vehicle in the U.S., REE’s proprietary by-wire technology for drive, steer and brake control eliminates the need for mechanical connection. Using four identical REEcorners® enables REE to make the industry’s flattest EV platforms with more room for passengers, cargo and batteries. REE platforms are future proofed, autonomous capable, offer a low total cost of ownership (TCO), and drastically reduce the time to market for fleets looking to electrify. To learn more visit www.ree.auto. Media Contact Malory Van Guilder Skyya PR for REE Automotive +1 651-335-0585 ree@skyya.com Investor Contact Dana Rubinstein Chief Strategy Officer | REE Automotive investors@ree.auto
10 Caution About Forward-Looking Statements This communication includes certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. For example, REE is using forward-looking statements when it discusses its belief that the strategic manufacturing agreement with Motherson will enable it to scale faster while avoiding common operational challenges faced by start-ups, that it expects to start U.S. production in Michigan with Roush as contract manufacturer for full vehicle assembly in Q4 2024 and deliveries in 2025, its belief that its product offering is the best in an underserved market, and demand continues to grow from fleets and OEMs, that the collaboration with Motherson is expected to drive operational and manufacturing improvements to REE’s production line, supply chain management, lower bill of materials (BOM), improved productivity and cost structure, that the strategic supply chain management agreement with Motherson and the U.S. production kickoff at Roush are expected to materially accelerate its ability to service customers at scale, its anticipation of significant order growth, the update on its production plan and the timing thereof, its belief that its continued expansion of its market leadership and continued execution on its strategic vision will result in the opportunity to license our XBW technology, making REE the “intel Inside” of automotive and Airbus’ expectation to see Powered by REE® tested in a full flight in 2 years in the A350 with more platforms to come. In addition, any statements that refer to plans, 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”, “designed,” “target” 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 and objectives, including its ability to meet certification requirements, the impact of trends on and interest in our business, or product, intellectual property, REE’s expectation for growth, and its future results, operations and financial performance and condition. These forward-looking statements are based on REE’s current expectations and assumptions about future events and are based on currently available information 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 an 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 risk factors that could affect REE’s future performance and could cause actual results to differ include, but are not limited to: REE’s ability to commercialize its strategic plan, including its plan to successfully evaluate, obtain regulatory approval, produce and market its P7 lineup; 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 building out of REE’s supply chain; 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; risks associated with data security breach, failure of information security systems and privacy concerns; risks related to lack of compliance with Nasdaq’s minimum bid price requirement; future sales of our securities by existing material shareholders or by us could cause the market price for the Class A Ordinary Shares to decline; potential disruption of shipping routes due to accidents, political events, international hostilities and instability, piracy or acts by terrorists; 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
11 of the COVID-19 pandemic, interest rate changes, the ongoing conflict between Ukraine and Russia and any other worldwide health epidemics or outbreaks that may arise and adverse global conditions, including macroeconomic and geopolitical uncertainty; the global economic environment, the general market, political and economic conditions in the countries in which we operate; the ongoing military conflict in Israel; fluctuations in interest rates and foreign exchange rates; 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 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 27, 2024 and in subsequent filings with the SEC.
REE AUTOMOTIVE LTD.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Exhibit 99.2
REE AUTOMOTIVE LTD AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
UNAUDITED
INDEX
INDEX TO FINANCIAL STATEMENTS
Consolidated Interim Balance Sheets | |||||
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, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable | |||||||||||
| Inventory | |||||||||||
| Other accounts receivable and prepaid expenses | |||||||||||
| Total current assets | |||||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Non-current restricted cash | |||||||||||
| Other accounts receivable and prepaid expenses | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Property and equipment, net | |||||||||||
| Total non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Short term loan | $ | $ | |||||||||
| Trade payables | |||||||||||
| Other accounts payable and accrued expenses | |||||||||||
| Operating lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Warrants liability | |||||||||||
| Convertible promissory notes | |||||||||||
| Deferred tax liability | |||||||||||
| Operating lease liabilities | |||||||||||
| Total non-current liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| Commitments and Contingencies (Note 7) | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
Class A Ordinary shares of no par value: Authorized: | |||||||||||
Class B Ordinary shares of no par value: Authorized, issued and outstanding: | |||||||||||
| 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 STATEMENT OF COMPREHENSIVE LOSS (Unaudited)
U.S. dollar in thousands (except share and per share data)
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Cost of revenues | |||||||||||
| 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 (income) | ( | ||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Net comprehensive loss | $ | ( | $ | ( | |||||||
| Basic and diluted net loss per Class A ordinary share (1) | $ | ( | $ | ( | |||||||
| Weighted average number of ordinary shares used in computing basic and diluted net loss per share (1) | |||||||||||
(1) Prior period results have been retroactively adjusted to reflect the 1:30 stock reverse split effected on October 18, 2023. See also Note 1 General, for details.
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) | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Exercise of options and vesting of RSUs | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Balance – January 1, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Issuance of Ordinary shares, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Exercise of options and vesting of RSUs | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
(1) Prior period results have been retroactively adjusted to reflect the 1:30 stock reverse split effected on October 18, 2023. See also Note 1 General, for details.
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, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation | |||||||||||
| Accretion income on short-term investments | ( | ||||||||||
| Share-based compensation | |||||||||||
| Change in fair value of warrants liability | ( | ||||||||||
| Change in fair value of derivative liability | ( | ||||||||||
| Amortization of discount of convertible promissory note | |||||||||||
| Interest expenses | |||||||||||
| Decrease in accrued interest on short-term investments | |||||||||||
| Increase in inventory | ( | ||||||||||
| Decrease in accounts receivable | |||||||||||
| Increase in other accounts receivable and prepaid expenses | ( | ( | |||||||||
| Change in operating lease right-of-use assets and liabilities, net | |||||||||||
| Increase (decrease) in trade payables | ( | ||||||||||
| Decrease in other accounts payable and accrued expenses | ( | ( | |||||||||
| Increase in deferred tax liability | |||||||||||
| Decrease in deferred revenue | ( | ||||||||||
| Other | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Purchases of short-term investments | ( | ||||||||||
| Proceeds from short-term investments | |||||||||||
| Net cash provided by investing activities | |||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of Ordinary shares, net | |||||||||||
| Proceeds from exercise of options | |||||||||||
| Repayment of short term loan | ( | ||||||||||
| Proceeds from short term loan | |||||||||||
| 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, | |||||||||||
| 2024 | 2023 | ||||||||||
| Non-cash activity: | |||||||||||
| Purchase of property and equipment | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for lease obligations | $ | $ | |||||||||
| Share settlement of employee liability | $ | $ | |||||||||
| Issuance costs in other accounts payable and accrued expenses | $ | $ | |||||||||
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Supplemental cash flow: | |||||||||||
| Cash received from interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
Interest paid | $ | $ | |||||||||
| June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| 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 INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
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. is an automotive technology company focused on building commercial electric vehicles controlled fully by-wire. 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”, “REE”, or “we”) is in the early stages of commercialization and is currently developing its core REEcornerTM technology which packs critical vehicle components into a single compact module positioned between the chassis and the wheel as well as building commercial Electric Vehicles (“EV”) leveraging REEcornerTM technology. The Company has commenced initial production components at its Launch Factory in Coventry, United Kingdom.
On October 18, 2023, the Company effected a reverse share split of the Company’s Class A ordinary shares and Class B ordinary shares at the ratio of 1-for-30. As a result, all Ordinary Class A shares, Ordinary Class B shares, options for Ordinary Class A Shares, exercise price and net loss per share amounts were adjusted retroactively for all periods presented in these consolidated financial statements as if the stock reverse split had been in effect as of the date of these consolidated financial statements. Following the reverse share split an additional amount of 15,890 shares were issued to reflect rounding differences resulting from fractional Class A ordinary shares.
As of June 30, 2024, the Company’s principal source of liquidity includes its unrestricted cash balance in the amount of $36,274 and its short term investments in the amount of $24,227 . As of June 30, 2024, the Company had an accumulated deficit of $872,106 since inception and had negative cash flows from operating activities of $38,032 for the six months ended June 30, 2024. The Company expects to continue to incur net losses and negative cash flows from operating activities.
In September 2024, the company completed an equity transaction in the total net amount of $45,135 (see also note 13, subsequent events, for details).
Based on the equity transaction described above, the Company intends to kick off its production plan by the end of the year and to start delivering its commercial electric vehicles to customers in 2025.
The Company expects that it will need to raise additional capital to support its production plan, respond to customer demands, business opportunities, challenges, technological advancements or unforeseen circumstances. If the Company is unable to raise capital when and if needed, it may need to modify its production plan, reduce costs, or both, in order to conserve cash and improve its liquidity position.
F-7
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
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, 2023 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, 2023.
The significant accounting policies disclosed in the Company’s audited 2023 consolidated financial statements and notes thereto have been applied consistently to these unaudited interim consolidated financial statements. Results for the six months ended June 30, 2024 are not necessarily indicative of results that may be expected for the year ending December 31, 2024.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and expenses during the reporting period and accompanying notes. Actual results could differ from those estimates. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made.
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.
Short-term investments
Short-term investments consist of bank deposits with original maturities of more than three months and up to twelve months.
Non-current restricted cash
Non-current restricted cash represents restricted bank deposits which are primarily used as a security for the Company’s operating lease agreements.
F-8
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 of cash equivalents, short-term investments, non-current restricted cash, accounts receivable, other accounts receivable, short-term loan, trade payables, 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.
The warrants liability and derivative liabilities are measured at fair value using Level 3 inputs. The warrants liability and derivative liabilities are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter (see also note 10).
Inventory
The Company’s inventory, which includes raw materials, work in-process, and finished goods, is carried at the lower of cost or net realizable value. Inventory cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on operating capacity.
At the end of each reporting period, the Company evaluates whether its inventories are damaged, obsolete, or have material changes in price or other causes, and if so, a loss is recognized in the period in which it occurs. Inventory write-downs are also based on reviews for any excess or obsolescence.
The Company also reviews its inventory to determine whether its carrying value exceeds the Net Realizable Value (“NRV”) upon the ultimate sale of the inventory. NRV is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. At the end of each reporting period, the Company determines the estimated selling price of its inventory based on market conditions. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
F-9
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Convertible Promissory Notes
The Company applies ASC 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”). In accordance with ASC 470-20 the Company first allocates the proceeds to freestanding liability instrument that are measured at fair value at each reporting date, based on their fair value. The remaining proceeds are allocated between the convertible debt and any bifurcated embedded derivatives. In accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), the Company bifurcates embedded derivatives that require bifurcation and accounts for them separately from the convertible debt.
The Company applies ASC 815, “Derivatives and Hedging” to all features related to convertible debt. When features meet the definition of a derivative, are not clearly and closely related to the characteristics of the convertible debt, and do not qualify for any scope exceptions within ASC 815, they are required to be accounted for separately from the debt instrument and recorded as derivative instrument liabilities. The fair value assigned to the embedded derivative instruments is marked to market in each reporting period. The Company has recorded embedded derivative liabilities related to the convertible promissory notes.
R&D tax credit
Revenue recognition
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.
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.
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 agreed to develop and supply REE platform prototypes. Revenue related to the agreement was deferred and will be recognized upon satisfying performance obligations in the contract. 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 the six months ended on June 30, 2023, the Company recorded revenues in the amount of $943 upon the termination of the agreement with the customer and recorded capitalized expenses in the amount of $943 in cost of revenues.
F-10
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In addition, for the six months ended on June 30, 2024, the Company recorded revenues from sales of EV prototypes in the amount of $160 . Revenue from sales of EV prototypes is recognized at a point in time when the control of the goods is transferred to the customer, upon delivery.
The Company applies the practical expedient and does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
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.
Cost of revenues
Cost of revenues primarily comprised from the cost of EVs and includes direct parts, material and labor costs, share-based compensation expenses, manufacturing overhead (e.g., depreciation of machinery and tooling), shipping and logistics costs, and reserves including for estimated warranty costs related to the production of EVs and adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value (“NRV”).
NOTE 3. INVENTORY
Inventory consisted of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Raw materials and work in progress | $ | $ | |||||||||
| Finished goods | |||||||||||
Total inventory | $ | $ | |||||||||
During the six months ended June 30, 2024 and 2023, the Company recorded inventory write-downs of $750 and zero , respectively, to reduce inventories to their net realizable values and for any excess or obsolete inventories.
NOTE 4. OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
Other accounts receivable and prepaid expenses consisted of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Government authorities | $ | $ | |||||||||
| Prepaid expenses | |||||||||||
| Advances to suppliers | |||||||||||
R&D tax credit | |||||||||||
| Other receivables | |||||||||||
| Total | $ | $ | |||||||||
F-11
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 5. OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other accounts payables and accrued expenses consisted of the following at June 30, 2024 and December 31, 2023, respectively:
| June 30, 2024 | December 31, 2023 | ||||||||||
| (Unaudited) | |||||||||||
| Employees and payroll accruals | $ | $ | |||||||||
| Professional fees | |||||||||||
| Non recurring engineering | |||||||||||
| Government authorities | |||||||||||
| Other payables | |||||||||||
| Total | $ | $ | |||||||||
NOTE 6. CREDIT FACILITY
On August 14, 2023, the Company entered into an agreement with a leading Israeli commercial bank to establish a revolving credit line facility (the “Credit Facility”) in the amount of $15,000 which the bank is committed to until December 31, 2024. In December 2023, the terms of the Credit Facility were extended through June 30, 2025. In March 2024, the terms of the credit facility were extended through December 31, 2025. Outstanding loans under the Credit Facility bear a variable interest at the rate of Monthly Term Secured Overnight Financing Rate (“SOFR”) plus an annual margin of 3.5 %. The interest is payable on a monthly basis. Under the terms of the Credit Facility, the Company is required to keep unsecured deposits in the aforementioned bank in the amount of $20,000 . Under certain terms, the bank has the right to offset loans drawn under the Credit Facility with the deposits kept in the bank. The Company is charged a fee of 0.25 % per annum on amounts available for draw that are undrawn under the Credit Facility.
As of June 30, 2024 and December 31, 2023 the Company has utilized $15,000 8.84 % and 8.86 %, respectively.
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, 2024, and the years in which these obligations are due. The following table present the Company’s commitments and unrecorded contractual obligations.This table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.
F-12
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
| Purchase commitments | |||||
| (Unaudited) | |||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 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, the Company 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
Long-term guarantees in the amount of $2,481 were issued by a bank to secure leasehold commitments.
Royalty bearing grants
The Company’s research and development efforts have been partially financed through grants from the IIA for the technology related to the Softwheel segment. Under the research 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. Until October 25, 2023, the interest was calculated at a rate based on 12-month LIBOR applicable to U.S. Dollar deposits on the unpaid amount received. However, on October 25, 2023, the IIA published a directive concerning changes in royalties to address the expiration of the LIBOR. Under such directive, regarding IIA grants approved by the IIA prior to January 1, 2024 but which are outstanding thereafter, as of January 1, 2024 the annual interest is calculated at a rate based on 12-month SOFR, or at an alternative rate published by the Bank of Israel plus 0.72 %; and, for grants approved on or following January 1, 2024 the annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1 %, or (ii) a fixed annual interest rate of 4 %. 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 ended June 30, 2024 and 2023, The Company did not
As of June 30, 2024, the Company’s remaining contingent obligations with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, were $733 .
F-13
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES (cont.)
In 2018, the Company signed a research and development agreement with the Israel-United States Binational Industrial Research and Development Foundation (“BIRD”). 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 U.S. Dollar amount of the grants received linked to the U.S. consumer price index. The Company did not
As of June 30, 2024, the BIRD contingent liability with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled $433 .
Legal proceedings
On December 16, 2022, a lawsuit was filed to the court in Texas, Austin Division, against REE and its US subsidiaries (in this section, the “Group”), by OSR Group alleging that the Group stole OSR Group’s trade secrets. The OSR Group requested the court to grant them the following: (a) a request for an injunction pertaining to the use of such trade secrets; (b) affirmative action to protect the OSR Group’s alleged trade secrets; (c) the establishment of a constructive trust to transfer all the relevant Group’s legal title and intellectual property to the OSR Group; (d) an award to the OSR Group of monetary damages in an amount of no less than USD 2.6 billion together with exemplary damages in an amount of no less than USD 5.2 billion, such amounts to be determined in the trial, plus interest; (e) an award to the OSR Group for all of its expenses relating to the action; (f) an award to the OSR Group of pre-judgment interest on all damages; and (g) an award of other relief as the court deem fit. On January 4, 2024, the Magistrate Judge entered a Report and Recommendation, or the Report, recommending dismissal of the lawsuit based on forum non conveniens, such that OSR could pursue its claims in an Israeli forum rather than in the United States, assuming that OSR chooses to do so after dismissal. On August 26, 2024, the District Judge adopted the Report, granting REE’s motion to dismiss for forum non conveniens and ordering the clerk of the court to close the case. OSR has not filed an appeal on this ruling but it is possible that it may do so. As of June 30, 2024 and December 31, 2023 the Company did not
Notwithstanding the foregoing, from time to time, REE may become involved in actions, claims, suits, and other legal proceedings, such as requests to disclose information before initiating derivative cases, arising in the ordinary course of our business, including but not limited to claims related to employment, intellectual property and shareholder matters.
NOTE 8. SHAREHOLDERS’ EQUITY
Composition of share capital
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 directors 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.
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 on July 22, 2031. There are no economic or participating rights to this class of shares.
F-14
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 8. SHAREHOLDERS’ EQUITY (cont.)
Equity transactions
On July 14, 2023, the Company entered into the H.C. Wainwright Agreement with H.C. Wainwright, pursuant to which the Company may offer and sell, at its option, up to $35,000 of Class A Ordinary Shares through an “at-the-market” equity program under which H.C. Wainwright act as the Company’s sales agent. During the six-month period ended June 30, 2024 the Company sold 54,938 Class A Ordinary Shares under the ATM Sales Agreement for total gross proceeds of approximately $304 and total net proceeds of approximately $293 .
On March 1, 2024, the Company executed an underwriting agreement (the “Underwriting Agreement”) between the Company and Roth Capital Partners LLC (the “Underwriter”) pursuant to which the Company conducted an underwritten public offering (the “Public Offering”) of 2,000,000 Class A Ordinary Shares, no par value per share (the “Ordinary Shares”), at a purchase price of $6.50 per share, for aggregate gross proceeds of approximately $13 million. Pursuant to the terms of the Underwriting Agreement, the Company has also granted the Underwriter a 20-day option to purchase Ordinary Shares of up to 300,000 Ordinary Shares, or 15 % of the number of Ordinary Shares sold in the Public Offering, solely to cover over-allotments, if any. On March 4, 2024, the Underwriter exercised its overallotment option to purchase an additional 300,000 Ordinary Shares in full. The Public Offering, including the shares issuable upon the exercise of the overallotment option, closed on March 5, 2024 (the “Closing Date”).
At the Closing Date, the Company issued 2,300,000 Ordinary Shares, for aggregate net proceeds of approximately $14,150 to the Company, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by the Company.
Share-based compensation
During the six months ended on June 30, 2024, the Company granted 249,201 options and 438,890 RSUs to its employees, officers, directors and consultants. The weighted average grant date fair value of the options and RSUs were $5.80 and $5.75 , respectively.
The share-based compensation expense recognized in the Company’s consolidated statements of operations are as follow:
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| $ | $ | ||||||||||
F-15
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
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.
The components of income tax expense (income) are as follows:
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Current | $ | $ | ( | ||||||||
| Deferred | |||||||||||
| $ | $ | ( | |||||||||
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Domestic | $ | $ | |||||||||
| Foreign | ( | ||||||||||
| $ | $ | ( | |||||||||
NOTE 10. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities fair value at June 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, 2024 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Unaudited) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Money market fund | $ | $ | $ | ||||||||||||||
| Bank deposits | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Amounts included in: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
F-16
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 10. FAIR VALUE MEASUREMENTS (cont.)
| June 30, 2024 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Unaudited) | |||||||||||||||||
| Liabilities: | |||||||||||||||||
| Warrants liability | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| December 31, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | |||||||||||||||||
| Money market fund | $ | $ | $ | ||||||||||||||
| Bank deposits | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Amounts included in: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| December 31, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Liabilities: | |||||||||||||||||
| Warrants liability | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The following table provides the change in the fair value of Level 3 liabilities:
| Total Level 3 Financial Liabilities | |||||
Balance as of December 31, 2023 | $ | ||||
| ( | |||||
| ( | |||||
Balance as of June 30, 2024 | $ | ||||
There were no transfers from or into Level 3 during the six ended months ended June 30, 2024 and June 30, 2023.
F-17
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 10. FAIR VALUE MEASUREMENTS (cont.)
The following table provides the inputs used for Level 3 fair value measurements of warrants liability:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
| Stock price | $ | $ | |||||||||||||||||||||
| Strike price | $ | - | $ | $ | - | $ | |||||||||||||||||
| Term (in years) | - | - | |||||||||||||||||||||
| Volatility | - | - | |||||||||||||||||||||
| Risk-free rate | - | - | |||||||||||||||||||||
| Dividend yield | |||||||||||||||||||||||
The following table provides the inputs used for Level 3 fair value measurements of derivative liability:
| June 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
| Stock price | $ | $ | |||||||||||||||||||||
| Term (in years) | - | - | |||||||||||||||||||||
| Volatility | - | - | |||||||||||||||||||||
| Risk-free rate | - | - | |||||||||||||||||||||
| Cost of Debt (Rd) | - | - | |||||||||||||||||||||
| Dividend yield | |||||||||||||||||||||||
NOTE 11. FINANCIAL INCOME, NET
The components of financial income, net are as follows:
| Six Months Ended | |||||||||||
| June 30, 2024 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Interest income | $ | $ | |||||||||
| Foreign currency translation adjustments | $ | ||||||||||
| Interest expenses | $ | ( | |||||||||
| Income from derivatives remeasurement | $ | ||||||||||
| Other expenses | $ | ( | |||||||||
| Financial income, net | $ | $ | |||||||||
F-18
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
U.S. dollars in thousands (except share and per share data)
NOTE 12. 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, 2024 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Numerator: | |||||||||||
| Net loss for basic and diluted loss per share | $ | ( | $ | ( | |||||||
| Denominator: | |||||||||||
| Weighted average number of Class A ordinary shares used in computing basic and diluted net loss per share | |||||||||||
| Basic and diluted net loss per Class A ordinary shares | $ | ( | $ | ( | |||||||
During the six months ended June 30, 2024 and 2023, 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, unvested RSUs, warrants and convertible promissory notes excluded from the calculation of diluted loss per share due to their anti-dilutive effect was 6,503,966 and 2,104,132 for the six months ended June 30, 2024 and 2023, respectively.
NOTE 13. SUBSEQUENT EVENTS
a.On September 15, 2024, the Company has entered into Securities Purchase Agreements with certain investors for the issuance of 7,362,930 of its Class A Ordinary Shares at a price of $4.122 per share and, to certain investors in lieu of Class A Ordinary Shares, pre-funded warrants to purchase 3,639,893 at a price of $4.121 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share offering price of $4.122 per Class A Ordinary Share, minus the $0.001 per share exercise price of such pre-funded warrant. The total net proceeds were approximately $45,135 after deducting applicable fees and expenses.
b.In September 2024, the Company issued 253,485 Class A Ordinary Shares under the ATM Sales Agreement for total net proceeds of approximately $1,270 . For further information regarding the ATM Sales Agreement, see Note 8.
F-19
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, 2023 (included in our Annual Report of Foreign Private Issuer on Form 20-F for the year ended December 31, 2023 filed with the Securities and Exchange Commission or SEC, on March 27, 2024, or the 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, or 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, including its ability to meet certification requirements, technology, relationships, objectives and expectations for our business, the impact of trends on and interest in our business or product, intellectual property, REE’s expectation for growth, 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, including its plan to successfully evaluate, obtain regulatory approval, produce and market its P7 lineup;
•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 building out of REE’s supply chain;
•risks associated with plans for REE’s initial commercial production;
•REE’s dependence on suppliers, some of which are or will be single or limited source;
•development of the market for commercial electric vehicles, or EVs;
•risks associated with data security breach, failure of information security systems and privacy concerns;
•future sales of our securities by existing material shareholders or by us could cause the market price for Class A Ordinary Shares, without par value, or the Class A Ordinary Shares, to decline;
•potential disruption of shipping routes due to accidents, political events, international hostilities and instability, piracy or acts by terrorists;
•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 global economic environment;
•general market, political and economic conditions in the countries in which we operate, including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East, such as the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them;
•fluctuations in interest rates and foreign exchange rates;
•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 and to defend itself from claims that it infringed on third party 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
We are an automotive technology company focused on building commercial electric vehicles controlled fully by wire, what we call X-by-Wire. Unbound by legacy thinking, we created the world’s first Federal Motor Vehicle Safety Standards, or FMVSS, certified, software-driven, fully by-wire electric truck, built around its proprietary REEcorner® which packs critical vehicle components into a single compact module positioned between the chassis and the wheel.
The REEcorner, our proprietary by-wire technology for drive, steer and brake control, enables X-by-Wire vehicle control and is designed to allow for key benefits for building commercial electric trucks, such as reduction in total cost of ownership, or TCO, operational efficiency, and many other benefits as described below.
Our technology, which is patent protected, and design make it possible for original equipment manufacturers, or OEMs, delivery and logistics fleets, dealers, e-commerce retailers, Mobility-as-a-Service providers and others, to build any size or shape of electric vehicle. With the first FMVSS certified full by-wire electric truck, we are currently focused primarily on the North American medium-duty truck segment due to the large total addressable market, increased tax incentives for customers, and strong demand from fleets to electrify their fleets.
We are targeting delivery and logistic fleets, dealers, e-commerce retailers, new mobility players, MaaS providers and autonomous drive companies. Our business plan is geared to allow these companies to build entire fleets based on REEcorner technology and Powered by REE® platforms. We aim to offer many customer benefits including reduction in TCO, lower maintenance and spare-part inventory management costs, higher active and passive safety, improved vehicle efficiency, advanced driver-assistance systems, or ADAS, compatibility.
By completing and not competing, we believe that we can partner with other vehicle manufacturers in the automotive industry where electric and autonomous vehicles will be “powered by REE”, allowing faster and larger adaption of our X-by-Wire technology and electrification scale.
Key Components of Statements of Operations
Revenues
We have not begun significant commercial operations and currently has no significant revenues. Once we reach 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, dealers, logistics and technology companies and, thereafter, other related products and services within the REE ecosystem. In 2023, we recognized revenues with respect to previously deferred revenues following a termination of a strategic development agreement with a customer and in respect to sale of electric vehicle, or EV, prototypes.
Cost of Revenues
Cost of revenues are primarily comprised from the cost of EVs and includes direct parts, material and labor costs, share-based compensation expenses, manufacturing overhead (e.g., depreciation of machinery and tooling), shipping and logistics costs, and reserves including for estimated warranty costs related to the production of EVs and adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value, or NRV. In 2023, cost of revenues also included expensing of deferred expenses related to the strategic development agreement with a customer which was terminated as described above.
Research and Development Expenses, Net
Research and development, or R&D, expenses consist of costs associated with the employment of our engineering staff, including share-based compensation, third-party engineering consultants, development projects such as corners
programs and component programs and program consumables, UK R&D tax credit and grants received for R&D programs and projects, costs associated with our properties, and depreciation of our fixed assets. We expect 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 of costs associated with employment of our non-engineering staff, including share based compensation, legal, insurance, accounting and consulting expenses, travel and marketing expenses such as public relations activities and trade shows, costs associated with REE’s properties, and depreciation of our fixed assets. We expect selling, general and administrative expenses to increase as our overall activity levels increase over time once we will start mass production of our vehicles.
Finance Income, Net
Finance income, net consists primarily of interest income, foreign exchange gains or losses, and the change in fair value of derivatives liabilities offset by bank fees. Foreign currency exchange gains or losses are related to changes in the value of our non-U.S. denominated financial assets and liabilities, primarily cash and cash equivalents and operating lease liabilities related to our leased properties in Israel and the UK. 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. Derivative liabilities at fair value are related to our convertible promissory notes. Fair value of derivative liabilities is expected to vary depending on the change in stock price, volatility, risk-free rate, cost of debt and other inputs used for the fair value measurements.
Results of Operations
Comparison of Three Months Ended June 30, 2024 and 2023
The following table sets forth our historical operating results for the periods indicated:
| Three Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | $ | — | $ | 943 | |||||||
| Cost of revenues | 651 | 943 | |||||||||
| Gross loss | $ | (651) | $ | — | |||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 8,063 | 19,337 | |||||||||
| Selling, general and administrative expenses | 6,931 | 8,087 | |||||||||
| Total operating expenses | 14,994 | 27,424 | |||||||||
| Operating loss | $ | (15,645) | $ | (27,424) | |||||||
| Income from warrants remeasurement | 2,586 | — | |||||||||
| Financial income, net | 2,130 | 1,076 | |||||||||
| Net loss before income tax | (10,929) | (26,348) | |||||||||
| Income tax expense (income) | (142) | (137) | |||||||||
| Net loss | $ | (10,787) | $ | (26,211) | |||||||
Revenues
As previously noted, we have not begun significant commercial operations and currently have not recognized significant revenues to date. We recorded no revenue for the three months ended June 30, 2024 and recognized revenue of $0.9 million for the three months ended June 30, 2023. In April 2021, we entered into a strategic development agreement with a customer, pursuant to which we agreed to develop and supply our platform prototypes. In 2021, revenue in the amount of $0.9 million related to the agreement was deferred. For the three months ended June 30, 2023, we recorded revenue in the amount of $0.9 million upon the termination of the agreement with the customer.
Cost of Revenues
Cost of revenues decreased by $0.2 million, from $0.9 million for the three months ended June 30, 2023 to $0.7 million for the three months ended June 30, 2024. In the three months ended on June 30, 2024 cost of revenues was impacted primarily by adjustments to a write down of the carrying value of inventory which exceeded its estimated NRV as part of material purchasing for preparation of the production of EVs. In the three months ended June 30, 2023 cost of revenues included expensing of deferred expenses related to the strategic development agreement with a customer which was terminated as described above.
Research and Development Expenses, Net
Research and development expenses, net decreased by $11.2 million, from $19.3 million for the three months ended June 30, 2023 to $8.1 million for the three months ended June 30, 2024. The decrease was primarily due to an increase in the recognition of a UK R&D tax credit and grants from the UK government, lower engineering costs related to the development of the P7 EV Platform, lower share based compensation expense as well as other efficiencies in R&D expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $1.2 million, from $8.1 million for the three months ended June 30, 2023 to $6.9 million for the three months ended June 30, 2024. The decrease was primarily due to a decrease in director and officers insurance expenses and lower share based compensation expenses.
Income from Warrants Remeasurement
We recognized income of $2.6 million from the remeasurement of the value of warrants for the three months ended June 30, 2024. For the three months ended June 30, 2023 we had no income or loss from the remeasurement of the value of warrants since we did not have warrants during that period.
Financial Income, Net
Financial income, net was $2.1 million for the three months ended June 30, 2024 compared to financial income, net of $1.1 million for the three months ended June 30, 2023. The increase in financial income, net was primarily due to income from the remeasurement of the value of derivative liabilities for the three months ended June 30, 2024, partially offset by a decrease in interest income due to a decrease in cash and cash equivalents and short-term investments balances year-over-year and by interest expenses related to convertible promissory notes issued in December 2023.
Income tax expense (income)
Income tax income for the three months ended June 30, 2024 was $0.1 million, unchanged from the income tax income for the three months ended June 30, 2023.
Comparison of Six Months Ended June 30, 2024 and 2023
The following table sets forth our historical operating results for the periods indicated:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | $ | 160 | $ | 943 | |||||||
| Cost of revenues | 1,455 | 943 | |||||||||
| Gross loss | $ | (1,295) | $ | — | |||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 23,421 | 38,211 | |||||||||
| Selling, general and administrative expenses | 14,101 | 18,930 | |||||||||
| Total operating expenses | 37,522 | 57,141 | |||||||||
| Operating loss | $ | (38,817) | $ | (57,141) | |||||||
| Income from warrants remeasurement | 1,880 | — | |||||||||
| Financial income, net | 2,261 | 2,137 | |||||||||
| Net loss before income tax | (34,676) | (55,004) | |||||||||
| Income tax expense (income) | 1,294 | (171) | |||||||||
| Net loss | $ | (35,970) | $ | (54,833) | |||||||
Revenues
As previously noted, we have not begun significant commercial operations and currently have no significant revenues. For the six months ended June 30, 2024, we recorded revenues in the amount of $0.2 million with respect to the sale of EV prototypes to a potential customer. In April 2021, we entered into a strategic development agreement with a customer, pursuant to which we agreed to develop and supply our platform prototypes. In 2021, revenue in the amount of $0.9 million related to the agreement was deferred. For the six months ended June 30, 2023, we recorded revenue in the amount of $0.9 million upon the termination of the agreement with the customer.
Cost of Revenues
Cost of revenues increased by $0.6 million, from $0.9 million for the six months ended June 30, 2023 to $1.5 million for the six months ended June 30, 2024. In the six months ended on June 30, 2024, cost of revenues was impacted primarily by adjustments to a write down of the carrying value of inventory which exceeded its estimated NRV as a part of material purchasing for preparation to the production of EVs. In the six months ended June 30, 2023, cost of revenues included the expensing of deferred expenses related to the strategic development agreement with a customer which was terminated as described above.
Research and Development Expenses, Net
Research and development expenses, net, decreased by $14.8 million, from $38.2 million for the six months ended June 30, 2023 to $23.4 million for the six months ended June 30, 2024. The decrease was primarily due to an increase in the recognition of a UK R&D tax credit and grants from the UK government, lower engineering costs related to the development of the P7 EV Platform, lower share based compensation expense, a decrease in R&D headcount resulting in a decrease in payroll costs, as well as other efficiencies in R&D expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $4.8 million, from $18.9 million for the six months ended June 30, 2023 to $14.1 million for the six months ended June 30, 2024. The decrease was primarily due to a decrease in professional fees, a decrease in director and officers insurance expenses and lower share-based compensation expenses.
Income from Warrants Remeasurement
We recognized income of $1.9 million from the remeasurement of the value of warrants for the six months ended June 30, 2024. For the six months ended June 30, 2023, we had no income or loss from the remeasurement of the value of warrants since we did not have warrants during that period.
Financial Income, Net
Financial income, net was $2.3 million for the six months ended June 30, 2024 compared to financial income, net of $2.1 million for the six months ended June 30, 2023. The increase in financial income, net was primarily due to income from the remeasurement of the value of derivative liabilities for the six months ended June 30, 2024, partially offset by a decrease in interest income due to a decrease in cash and cash equivalents and short-term investments balances year-over-year and by interest expenses related to convertible promissory notes issued in December 2023.
Income tax expense (income)
Income tax expense increased by $1.5 million, from income tax income of $0.2 million for the six months ended June 30, 2023 to income tax expense of $1.3 million for the six months ended June 30, 2024. This increase was primarily due to the recognition of deferred tax liability for the six months ended June 30, 2024.
Liquidity, Capital Resources and Financial Condition
As of the date of this Report, we have not yet to generate significant revenues from our principal business operations and has generated minimal revenues and does not expect to generate sufficient revenues from the sale of products in the near future to cover our costs and capital expenditures. Since inception, we have incurred losses and generated negative cash flows from operations and have funded our operations, capital expenditure and working capital requirements through capital contributions, private placements of equity securities, issuance of private warrants, convertible promissory notes, investments from certain strategic partners, and from the consummation of the merger whereby 10X Capital Venture Acquisition Corp (“10X Capital”), a Delaware corporation and special purpose acquisition company, and Spark Merger Sub, Inc. (“Merger Sub”), our wholly-owned subsidiary, pursuant to which Merger Sub merged with and into 10X Capital.
We expect our capital expenditures and working capital requirements to continue in the near future, as we seek to produce our products, develop our customer support and marketing infrastructure and continue our R&D efforts. As of June 30, 2024, our cash and cash equivalents were $36.3 million and our short term investments were $24.2 million.
On September 15, 2024, we announced a pricing of an equity financing transaction, for the sale of 7,362,930 shares of our Class A ordinary shares at a purchase price of $4.122 per share and, to certain investors in lieu of Class A Ordinary Shares, pre-funded warrants to purchase 3,639,893 at a price of $4.121 per pre-funded warrant, in a registered direct offering. The purchase price per share of each pre-funded warrant represents the per share offering price of $4.122 per Class A Ordinary Share, minus the $0.001 per share exercise price of such pre-funded warrant. The total net proceeds were $45.14 million after deducting applicable fees and expenses.
Based on the proceeds received pursuant to the equity transaction described above, we intend to kick off our production plan by the end of the year and to start delivering commercial EVs to customers in 2025.
We expect that we will need to raise additional capital to support our production plan, respond to customer demands, business opportunities, challenges, technological advancements or unforeseen circumstances. If we are unable to raise capital when and if needed, we may need to modify our production plan, reduce costs, or both, in order to conserve cash and improve its liquidity position.
If we are to require additional funding or otherwise determined it was beneficial to seek additional sources of financing, we believe that our balance sheet would enable us to access financing on reasonable terms. However, there can be no assurance that such financing would be available to us on favorable terms or at all. If the financing is not available, or if the terms of financing are less desirable than we expect, we will be forced to change our business plan, including, among other changes, decreasing our level of investment in product development, renegotiating development agreements with collaboration partners and/or scaling back our operations, which could have an adverse impact on our business and financial prospects. Additionally, any funding raised through the issuance of equity or equity-linked securities may result in the issuance of securities that have rights, preferences or privileges senior to those of our Class A Ordinary Shares or the dilution of our existing shareholders.
ATM Agreements
On August 16, 2022, we entered into the ATM Equity Offering Sales Agreement, or the BofA Agreement, with BofA Securities Inc., or BofA, pursuant to which we may offer and sell, at our option, up to $75.0 million of our Class A Ordinary Shares through an “at-the-market” equity program under which BofA agreed to act as sales agent. As of June 30, 2024, we had not sold any of our Class A Ordinary Shares under the BofA Agreement.
On July 14, 2023, we entered into the At the Market Offering Agreement, or the HCW Agreement, with H.C. Wainwright & Co., LLC, pursuant to which we may offer and sell, at our option, up to $35 million of Class A Ordinary Shares through an “at-the-market” equity program under which HCW agreed to act as our sales agent. As of June 30, 2024, we sold 54,938 Class A Ordinary Shares under the HCW Agreement for total net proceeds of approximately $0.3 million.
In September 2024, we sold 253,485 Class A Ordinary Shares under the ATM Sales Agreement for total net proceeds of approximately $1.3 million.
Convertible Promissory Notes and Warrants
On November 27, 2023, we entered into securities purchase agreements, or the November Purchase Agreements, with certain investors, pursuant to which we agreed to issue and sell convertible promissory notes, or the November Notes, in the principal amount of $8,000,000, in the aggregate, at a conversion price of $5.09 per share (subject to adjustment as provided therein), and warrants, or the November Warrants, to purchase up to an aggregate of 1,571,710 of Class A Ordinary Shares at an exercise price of $4.42 per share (subject to adjustment as provided therein). Closing under the November Purchase Agreements occurred on December 3, 2023, pursuant to which the November Notes and November Warrants were issued to the investors.
In addition, on December 6, 2023, we entered into a subsequent securities purchase agreement, or the December Purchase Agreement, dated December 2, 2023, with a certain accredited investor, pursuant to which we agreed to issue and sell an additional convertible promissory note, or the December Note, in the principal amount of $750,000 at a conversion price of $5.74 per share (subject to adjustment as provided therein), and an additional warrant, or the December Warrant, to purchase up to 130,662 Class A Ordinary Shares, at an exercise price of $5.74 per share (subject to adjustment as provided therein). Closing under the December Purchase Agreement occurred on December 20, 2023, pursuant to which December Note and December Warrant were issued to the applicable investor.
Pursuant to the November Purchase Agreement and December Purchase Agreement, the November Notes and December Note, or together the Notes, each have a term of five years from the date of issuance, accrue interest at a
rate of ten percent per annum (compounding annually) and are convertible into Class A Ordinary Shares at conversion prices of $5.09 and $5.74 per share, respectively. We may not repay any portion of the outstanding principal amount of the November Notes or December Note (or any interest accrued thereon) prior to the maturity date. The conversion price of November Notes and December Note is subject to customary adjustments, and the Notes contain customary anti-dilution protections (including in the event of (i) certain equity issuances by us at a price less than the conversion price then in effect, provided that the conversion price shall in no event be reduced to less than $1.02 and $1.15 per share, respectively; (ii) stock splits and combinations; and (iii) certain dividends or distributions).
The November Warrants to purchase up to 1,571,710 Class A Ordinary Shares are exercisable at an exercise price of $4.42 per Class A Ordinary Share (subject to customary adjustments) and have a term of five years from the date of issuance, which was December 3, 2023. The December Warrant to purchase up to 130,662 Class A Ordinary Shares are exercisable at an exercise price of $5.74 per Class A Ordinary Share (subject to customary adjustments) and has a term of five years from the date of issuance, which was December 20, 2023.
Public Offering
On March 1, 2024, we executed an underwriting agreement with Roth Capital Partners LLC, or Roth, pursuant to which we conducted an underwritten public offering of 2,000,000 Class A Ordinary Shares at a purchase price of $6.50 per share, for aggregate gross proceeds of approximately $13 million. Pursuant to the terms of the underwriting agreement, we also granted Roth a 20-day option to purchase Class A Ordinary Shares of up to 300,000 Ordinary Shares, or 15% of the number of Ordinary Shares sold in the public offering, solely to cover over-allotments, if any. On March 4, 2024, Roth exercised its overallotment option to purchase an additional 300,000 Class A Ordinary Shares in full. The Public Offering, including the shares issuable upon the exercise of the overallotment option, closed on March 5, 2024.
At the closing of the public offering, we issued 2,300,000 Class A Ordinary Shares, for aggregate net proceeds of approximately $14.15 million to Roth, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by us.
Registered Direct Offering
On September 15, 2024, we entered into Securities Purchase Agreements with certain investors for the issuance of 7,362,930 of our Class A Ordinary Shares at a price of $4.122 per share and, to certain investors in lieu of Class A Ordinary Shares, pre-funded warrants to purchase 3,639,893 at a price of $4.121 per pre-funded warrant. The purchase price per share of each pre-funded warrant represents the per share offering price of $4.122 per Class A Ordinary Share, minus the $0.001 per share exercise price of such pre-funded warrant. The total net proceeds were $45.14 million after deducting applicable fees and expenses.
Loan under Credit Facility
On August 14, 2023, we entered into an agreement with a leading Israeli commercial bank to establish a revolving credit line facility, or the Credit Facility, in the amount of $15 million, pursuant to which the bank is committed to until December 31, 2024. In December 2023, the terms of the Credit Facility were extended through June 30, 2025. In March 2024, the terms of the credit facility were extended through December 31, 2025. Outstanding loans under the Credit Facility bear a variable interest at the rate of the Monthly Term Secured Overnight Financing Rate plus an annual margin of 3.5%. The interest is payable on a monthly basis. Under the terms of the Credit Facility, we are required to keep unsecured deposits in the aforementioned bank in the amount of $20 million. Under certain terms, the bank has the right to offset loans drawn under the Credit Facility with the deposits kept in the bank. We are charged a fee of 0.25% per annum on amounts available for draw that are undrawn under the Credit Facility. As of June 30, 2024, we have utilized $15 million under its Credit Facility for a short-term loan. In July 2024, the short-term loan was fully repaid by us.
As an early-stage growth company in the early commercialization stage, the net losses we have incurred since inception are consistent with our strategy and budget. We will continue to incur net losses in accordance with its operating plan as we continue to expand its operations to meet anticipated demand.
Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows for the six months ended June 30, 2024 and 2023:
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| USD in thousands | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | (38,032) | (46,455) | |||||||||
| Investing activities | 18,084 | 26,909 | |||||||||
| Financing activities | 14,463 | 119 | |||||||||
| Net change in cash and cash equivalents and restricted cash | (5,485) | (19,427) | |||||||||
Cash Flows from Operating Activities
Our 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. We expect to continue incurring expenses on operating activities until it begins to generate sufficient cash flows from its business.
During the six months ended June 30, 2024, operating activities used $38.0 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $36.0 million and an increase in operating working capital of $7.7 million mainly due to recognition of a UK R&D tax credit and grants from the UK government. These factors were offset by non-cash charges consisting primarily of share-based compensation expenses of $5.6 million and depreciation expenses of $1.6 million, offset by a change in fair value of financial liabilities of $3.3 million.
During the six months ended June 30, 2023, operating activities used $46.5 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $54.8 million and a decrease in deferred revenue of $0.9 million following the revenue recognition with a customer (as described above in the revenue section), which were offset by non-cash charges consisting primarily of share-based compensation expenses of $8.9 million and depreciation expenses of $1.1 million.
Cash Flows from Investing Activities
Our cash flows used in or provided by investing activities to date have been primarily comprised of short-term investments and cash outflows for tangible fixed assets (plant and equipment). We expect investing activities to include cash inflows from maturities of short-term investments offset by costs related to production related tangible fixed assets.
Net cash provided by investing activities for the six months ended June 30, 2024 was $18.1 million, which resulted from maturity of short-term investments of $20.0 million, partially offset by purchases of property and equipment in the amount of $1.9 million.
Net cash provided by investing activities for the six months ended June 30, 2023 was $26.9 million, which resulted from maturity of short-term investments of $96.5 million, partially offset by investments of $66.9 million in short-term investments as well as purchases of property and equipment in the amount of $2.7 million.
Cash Flows from Financing Activities
Net cash provided by financing activities was $14.5 million for the six months ended June 30, 2024, due to net proceeds of $14.15 million following the issuance of Ordinary Shares as part of the public offering in March 2024 and net proceeds in the amount of $0.3 million from Ordinary Share issuances pursuant to the HCW Agreement under the Company’s ATM program.
Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2023, resulting from proceeds from exercise of stock options.
Debt
As of September 26, 2024, except for the Credit Facility, the November Note and the December Note, we had no third-party debt although it may determine, based on changes in its expected cash flow needs or because it deems it beneficial, to incur debt in the future.
Recent Developments
Motherson Supply Chain Support Agreement
In conjunction with the execution of the securities purchase agreement, dated September 15, 2024, between us and certain Investors relating to this offering of our Class A Ordinary Shares and Pre-Funded Warrants, on September 15, 2024, we executed a Supply Chain Management Services Agreement, or the Motherson Agreement, with Samvardhana Motherson International Limited, a corporation organized under the laws of the India, or Motherson, pursuant to which we appointed Motherson (including any of its affiliates) to provide certain services to us on an exclusive basis. In that regard, Motherson has agreed to provide services relating to development, management, and optimization of our supply chain which shall also include supplier development and management, part development cost management, contract and purchase order management, supply chain management including logistics, compliance and regulatory adherence, crises and risk management, resource planning, and information and technology system integration. We have agreed to pay Motherson, on a quarterly basis, an amount equal to fifty percent (50%) of certain cost improvements that would be achieved under the Motherson Agreement, or the Quarterly Fees, in addition to annual payments for such resources required to be deployed by Motherson for the purpose of rendering the services under the Motherson Agreement, which shall be agreed upon by us and Motherson.
In addition, we agreed to permit Motherson to nominate a director to join our board of directors.
The Motherson Agreement will terminate upon the later of three (3) years or on when Motherson has received an amount equal to $30 million in Quarterly Fees. In addition, the Motherson Agreement will automatically renew for consecutive one (1) year terms unless either party provides notice of termination within one hundred eighty (180) days prior to the end of a term. In addition, Motherson may terminate the Motherson Agreement for any reason upon providing one hundred eighty (180) day written prior notice.