REE Automotive Ltd 6-K, filed Aug 29, 2023
REE Automotive Ltd. (REEAF)
6-K
2023-08-29
For: 2023-06-30
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Added on
April 06, 2026
About this 6-K
REE Automotive Ltd filed this 6-K on August 29, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023
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
On August 29, 2023, REE Automotive Ltd. (the “Company”) issued a press release titled “REE Confirms FMVSS Certification Feasibility of its Full by-Wire Systems ahead of Q4 2023 Vehicle Certification”. A copy of such press release is furnished as Exhibit 99.1 hereto.
Additionally, on August 29, 2023, the Company issued a separate press release and shareholder letter in which the Company reported its financial results for the quarter ended June 30, 2023. A copy of such press release and shareholder letter are furnished as Exhibits 99.2 and 99.3, respectively, hereto.
The Interim Consolidated Financial Statements (unaudited) as of and for the six months ended June 30, 2023 are attached as Exhibit 99.4 hereto.
The Company’s operating and financial review (unaudited) as of and for the three and six months ended June 30, 2023 are attached as Exhibit 99.5 hereto.
The information contained in Exhibits 99.4 and 99.5 to this Form 6-K 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 and File No. 333-272145) and registration statements on Form F-3 (File Nos. 333-266902 and 333-258963), and shall be a part thereof, to the extent not superseded by documents or reports subsequently filed or furnished.
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EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 99.4 | ||||||||
| 99.5 | ||||||||
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: August 29, 2023
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REE Confirms FMVSS Certification Feasibility of its X-by-Wire Systems Ahead of Q4 2023 Vehicle Certification - Joint testing with HORIBA-MIRA confirms the feasibility of REE’s x-by-wire vehicle control system to pass FMVSS certification requirements - REE intends to fully certify its Powered by REE P7 electric truck lineup by the end of 2023, including FMVSS, CARB and EPA certification - Achievement of full certification will align with previously announced plan to deliver US incentive eligible vehicles - Both the P7-C Chassis Cab and the P7-S Stripped Chassis are powered by the same REEcornerTM full by-wire tech for steering, braking and drive control TEL AVIV, ISRAEL (Aug. 29, 2023) – GlobeNewswire – REE Automotive Ltd. (Nasdaq: REE), an automotive technology company and provider of full by-wire electric trucks and platforms, today announced a major milestone in the REE’s plan to certify and bring to market a steer-by-wire, brake-by-wire and drive-by- wire commercial truck. REE contracted HORIBA-MIRA, a world-leader in testing, to perform internal tests, modeling certain Federal Motor Vehicle Safety Standards (FMVSS) certification requirements upon which REE has determined the feasibility of P7 to meet the requirements of certification. REE plans to fully certify its P7-C and P7-S products by the end of 2023, including FMVSS, CARB and EPA certification, aligning with planned vehicle deliveries to dealers and eligibility for government incentives. “FMVSS certification of our core by-wire system is feasible based on the tests we have conducted in the past several months” said Ahishay Sardes, co-founder and CTO of REE. “This milestone is important as we set out to be the first to certify a fully by-wire system. Now that we have confirmed feasibility, the most novel step of this process is behind us, and we are confident that our P7 will pass the design- agnostic and performance-based FMVSS certification process”. Based on initial tests with HORIBA-MIRA, a professional third party and expert in testing, MIRA’s test engineers and drivers successfully executed REE’s feasibility test plan at MIRA’s advanced testing grounds in Coventry, UK. Peter Dow, VP of Engineering at REE said “Our experienced certification and regulatory teams are ensuring Powered by REE vehicles exceed minimum standards and this testing has shown that it is possible for the full by-wire system to be certified. I am very proud of our strong software and engineering teams for their great work getting us to this point”. To learn more about REE Automotive’s patented technology and unique value proposition that position the company to break new ground in e-mobility, visit www.ree.auto.
Media Contact Malory Van Guilder Skyya PR for REE Automotive +1 651-335-0585 ree@skyya.com Investor Contact Kamal Hamid VP Investor Relations | REE Automotive +1 303-670-7756 investors@ree.auto About REE Automotive REE Automotive (Nasdaq: REE) is an automotive technology company that allows companies to build 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. With proprietary by-wire technology for drive, steer and brake control that eliminate the need for mechanic connections, all four identical REEcornersTM enable REE to build the industry’s flattest EV platforms with more room for passengers, cargo and batteries. REE platforms are future proofed, autonomous capable, offer a low TCO, and drastically reduce the time to market for fleets looking to electrify. To learn more visit www.ree.auto. 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. 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 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; 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 28, 2023 and in subsequent filings with the SEC.
REE Automotive Announces Second Quarter 2023 Financial Results TEL AVIV, ISRAEL (Aug. 29, 2023) – GlobeNewswire – REE Automotive Ltd. (Nasdaq: REE), an automotive technology company and provider of full by-wire electric trucks and platforms, today announced its financial results for the second quarter ended June 30, 2023, through a shareholder letter posted on the company’s investor relations website at https://ree.auto/lp/shareholders-letter-2q23/ The company will also hold a conference call today, August 29, 2023 at 8:30 a.m. ET. The live webcast of the conference call can be accessed on the Investors section of the Company’s website. Click here for webcast URL. For the telephone conference online registration click here. Q2 23 Highlights: ● REE confirms Federal Motor Vehicle Safety Standards (FMVSS) certification-feasibility for its x-by-wire systems; intends to fully certify its Powered by REE P7 electric truck lineup including FMVSS, CARB and EPA certification and reaffirms its plan to start customer deliveries by the end of 2023. ● New collaborations between REE and market leading work-truck body manufacturers, such as Knapheide and Morgan Truck Body, provide a complete vehicle Powered by REE to customers with new design applications, including boxes, service bodies, and platform bodies, all planned to be available in 2024. ● REE is targeting $1 billion in cumulative sales in 2024-2026 based on execution of P7 production roadmap. The plan is expected to reach production of up to 300 vehicles in 2024, targets ramping up to low-thousands of vehicles in 2025 and to mid-thousands of vehicles in 2026 without the need for heavy CAPEX investment through the use of a US contract manufacturer for complete vehicle and platform assembly. ● REE ended fiscal 2Q 2023 as planned with liquidity of $105 million with no debt. As part of REE’s efforts to secure 2024 capital needs in advance, after the end of the quarter, REE established a $35 million ATM program and secured a bank facility of $15 million. REE’s 2025 capital needs are estimated at an additional $50 million in order to ramp up production.
Media Contact Malory Van Guilder Skyya PR for REE Automotive +1 651-335-0585 ree@skyya.com Investor Contact Kamal Hamid VP Investor Relations | REE Automotive +1 303-670-7756 investors@ree.auto About REE Automotive REE Automotive (Nasdaq: REE) is an automotive technology company that allows companies to build any size or shape of electric vehicle on their modular platforms. With complete design freedom, vehicles Powered by REE are equipped with the revolutionary REEcorner, which packs critical vehicle components (steering, braking, suspension, powertrain and control) into a single compact module positioned between the chassis and the wheel. With proprietary by-wire technology for drive, steer and brake control that eliminate the need for mechanic connections, all four identical REEcornersTM enable REE to build the industry’s flattest EV platforms with more room for passengers, cargo and batteries. REE platforms are future proofed, autonomous capable, offer a low TCO, and drastically reduce the time to market for fleets looking to electrify. To learn more visit www.ree.auto. 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. 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 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; 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 28, 2023 and in subsequent filings with the SEC.
Q2 2023 REE Shareholder letter
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 2 REE reveals its 3-year production plan for 2024-2026 and confirms FMVSS certification-feasibility for its x-by-wire systems • REE confirms Federal Motor Vehicle Safety Standards (FMVSS) certification-feasibility for its x-by-wire systems; intends to fully certify its Powered by REE P7 electric truck lineup including FMVSS, CARB and EPA certification and reaffirms its plan to start customer deliveries by the end of 2023. • New collaborations between REE and market leading work-truck body manufacturers, such as Knapheide and Morgan Truck Body, provide a complete vehicle Powered by REE to customers with new design applications, including boxes, service bodies, and platform bodies all planned to be available in 2024. • REE is targeting $1 billion in cumulative sales in 2024-2026 based on execution of the P7 production roadmap. The plan is expected to reach production of up to 300 vehicles in 2024, targets ramping up to low-thousands of vehicles in 2025 and to mid-thousands of vehicles in 2026 without the need for heavy CAPEX investment, through the use of a US contract manufacturer for complete vehicle and platform assembly. • REE ended fiscal Q2 2023 as planned with liquidity of $105 million with no debt. As part of REE’s efforts to secure 2024 capital needs in advance, after the end of the quarter, REE established a $35 million ATM program and secured a bank facility of $15 million. REE’s 2025 capital needs are estimated at an additional $50 million in order to ramp up production.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 3 CEO Commentary Halfway through 2023, we continue to make steady progress on our path to production, while we remain disciplined both operationally and financially. As we continue to execute our CAPEX-light production plan, we move towards securing our capital needs for 2024 through the establishment of an ATM program and a bank facility. Today we announced that we have confirmed the feasibility of our x-by-wire system to pass the required Federal Motor Vehicle Safety Standards (FMVSS) certification. This milestone aims to clear the way to full vehicle certification by the end of 2023. Since FMVSS standards contain objective performance tests that are design-neutral; the certification feasibility testing shows our x-by-wire system can be certified according to the applicable FMVSS standard. We have been testing our by-wire system for months with the aim to be the to the market. Therefore, we set a high bar by contracting HORIBA MIRA, a global leader in testing and certifications, to conduct internal tests on braking, steering and fault injection, modeling certain FMVSS certification requirements, based on which we can now confirm the feasibility to certify our x-by-wire system. We have already begun the build of our first certification intent P7 fleet and we are on track to initiate the next phase of the full certification process of P7 vehicles. We continue to build out our dealer network, which covers the entire US and we have now expended into Canada. We see demand for our commercial EVs coming from both incentivized and non-incentivized states as efficient charging infrastructure becomes more accessible to fleet owners. In addition, the demand growth is supported by our ability to simplify after-sales service with our quick REEcorner™ swap, which allows fleets and dealers to service the P7 with locally available REEcorner™ and ensures increased uptime of our trucks intending to lower the cost of customer inventory and its cost of management. We have delivered our first P7-S (strip chassis) prototype to one of our existing US fleet customers for their internal closed-track tests with the help of our on-site and remote support team, as we jointly develop a complete electric work truck and potential future purchases. We are firm in our commitment to begin deliveries of initial pilot vehicles to customers by the end of 2023, while ensuring they are safe, reliable electric trucks that dealers, fleet owners and customers can depend on. We are pleased by the feedback we have received from our customers so far. As part of our philosophy of “complete not compete” we continue to partner with the best upfitters in the industry, such as Knapheide and Morgan Truck Body, to expand our P7 offering and provide a complete vehicle to our customers. As we gear up to start deliveries, we are adding valuable members to our team in customer experience, service and support. We have also added new capabilities to our board of directors with the recent appointments of Carlton Rose former, Global President of Fleet and Maintenance of UPS and Hicham Abdessamad, President and CEO of Hitachi America, to ensure we have the right people, products and partners in place to make REE the leader of the future of commercial electric vehicles. Finally, I would like to acknowledge our teams around the world for their devotion and dedication to bring our P7 lineup to market. We are getting closer every day. I am confident that we have what it takes to deliver the best electric trucks available on the market. We believe our vehicles, patents, differentiated technology and disciplined two phase production plan will result in long term value creation for all of our stakeholders including customers and investors. Daniel Barel, REE’s co-founder and CEO
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 4
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 5 P7 Platforms on track to be certified and eligible for US incentives by the end of the year. Together with our partners at HORIBA MIRA, a world leader engineering, testing and certification, we have conducted a range of testing in line with FMVSS safety requirements. These internal tests have confirmed the FMVSS certification-feasibility of our x-by-wire systems – an important milestone in our journey. We continue to collect evidence and data on the safety, performance and reliability of the x-by-wire system on our path to full vehicle certification. Achieving this milestone aligns with our previously announced Q4 2023 planned P7 deliveries and eligibility for US vehicle incentives.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 6 Dealership network continues to expand thoughtfully and purposefully. We continue to grow our dealer network from one in December 2022 to 12 authorized dealers covering the US and expanding into Canada in addition to three large fleets we work with directly. These dealers and fleets are committed to electrification and have already placed initial orders of approximately 155 P7 lineup units, which are included in our current order book1. These numbers reflect initial vehicle orders and support our growing pipeline, and we believe our current customers could purchase hundreds or thousands of units per year. Through our growing North American network, we see strong demand for our entire P7 product line. Part of the demand is driven by the state incentives and the federal tax credit for electric commercial vehicles that was introduced as part of the Inflation Reduction Act. We are focusing on designing our vehicles to help fleets meet requirements for federal and state tax incentives. These incentives can provide up to $140,0002 in credits to offset the purchase price of an electric vehicle. 1 The Company’s order book is determined by management based on purchase orders received by the Company. The number of P7 units included in the order book as of August 28, 2023 includes 129 P7 units under firm orders (i.e. binding orders) and the remaining of units ordered that are binding orders with certain additional conditions as set forth in the order. 2 New York state incentive of $100,000 + IRS Commercial Tax Credit of $40,000
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 7 Nat ional North American Dealer Network* Electric Commercial Vehicle Incentives** • Federal tax credit1 Up to $40k for Class 4 & 5 • New York (NYSERDA) 2 Up to $100k for Class 4 Up to $110k for Class 5 • New York City (NYCCT) 3 $100k for Class 4 $110k for Class 5 • New Jersey (NJ-ZIP) 4 $50k Class 3 $65k for Class 4 $75k for Class 5 • Massachusetts (MOR-EV) 5 Up to $90k for class 3-8 • California HVIP 6 Up to $45k for Class 3 Up to $60k for Class 4 & 5 • Nevada Clean Truck 7 $50k for Class 3 $65k for Class 4 $75k for Class 5 1 IRS 45 W https://irc.bloombergtax.com/public/uscode/doc/irc/section_45w 2 New York NYSERDA https://www.nyserda.ny.gov/All-Programs/Truck-Voucher-Program 3 New York City Clean Trucks https://www.nycctp.com/available-funding/ 4 New Jersey ZIP https://www.njeda.gov/njzip/ 5 Massachusetts Mor-EV https://mor-ev.org/mor-ev-trucks 6 California HVIP https://californiahvip.org/; the website provides information about incentives applicable to specific models 7 Nevada Clean Truck https://www.leg.state.nv.us/App/NELIS/REL/82nd2023/Bill/9886/Text * Dealers are authorized to sell at their PoS and vicinity ** This section contains information regarding federal and state tax incentives as of August, 2023 The California Air Resource Board’s (CARB) Advanced Clean Truck (ACT) rule is designed to accelerate a large-scale transition of zero-emission medium-and heavy-duty vehicles from 2024 to 2035. The rule has two components, a manufacturer sales requirement for the sale of zero-emission trucks of Class 2b to Class 8 as an increasing percentage of their annual California sales from 2024 to 2035, and in addition their large employers including retailers, manufacturers, brokers and others are required to report information about shipments and shuttle service. CARB’s Advanced Clean Fleets (ACF) regulation is a fleet regulation with a similar objective of accelerating large scale transition to zero-emission medium- and heavy- duty vehicles by defining minimum ZEV requirements for fleet purchases.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 8 Customer and dealer endorsements We receive consistent endorsements from dealers and fleets who recognize the distinct advantages of our innovative design and technology. One standout class-exclusive feature that receives consistent praise is our utilization of all-wheel steer and all-wheel drive based on REEcorner™ technology. A winning combination of hardware and software that enables our vehicles to perform optimally in all-weather and challenging environmental conditions such as the often harsh snow and ice encountered in northern states and Canada and provide enhanced maneuverability. Our driver-focused cab design has also garnered widespread appreciation. Our cab provides low step-in heights for ergonomic advantages and a full-height interior that allows drivers to stand up inside the cabin comfortably – these benefits are vital to drivers. In addition to these features, our REEcorner™ modules have been a significant factor in driving purchase decisions. Dealers and fleets recognize the substantial serviceability advantages offered by the REEcorner™ modules. In the event of maintenance needs, these modules can quickly be replaced in under an hour, minimizing vehicle downtime and maximizing operational efficiencies by driving down Total Cost of Ownership (TCO). Since all four REEcorners™ on a Powered by REE vehicle are the same, maintenance is especially efficient with each service center only needing to carry one unique part for all maintenance needs. In addition to these advantages, the P7 lineup uses software-based x-by-wire systems, which use over the air (OTA) capabilities that allow for: • continuous vehicle improvements and updates; • continuous rolling out of new features and options; and • remote diagnosis - even before returning to a service center to further improve uptime. Our system architecture coupled with data-as-a-service (DaaS) capabilities is intended to allow customers to manage fleet performance, gather any data required for incentive compliance and forecast and predict maintenance. We firmly believe that our unique value proposition, coupled with the enthusiastic support from our dealer network and fleets will position us as a leader in the electric commercial vehicle industry. As we look forward to the exciting times ahead, we remain committed to delivering innovation and excellence in our offerings to our portfolio of dealers and fleets as we continue to work diligently toward strengthening the inventory and ultimately profitability of our dealer network across North America.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 9 Production plan targeting accumulated $1 billion in sales in years 2024-2026 We have progressed with the certification plan and are targeting the delivery of our first pilot vehicles by the end of this year. This combined with our discussions with dealers and fleets, makes us confident in our business plan, which aims to reach cumulative sales of $1 billion over 2024-2026 by executing on our production plan. As part of our disciplined and risk-averse approach, we plan to enter into an agreement with a US contract manufacturer which we believe will enable us to bring vehicles with numbers in the mid thousands to market without the need for heavy CAPEX investment allowing us to concentrate on our current CAPEX-light REEcorner™ integration centers and shift full vehicle assembly to the contract manufacturer. We believe this approach will yield operational and cost benefits as it will allow us to utilize available tools and capabilities of the contract manufacturer, while at the same time allowing us to focus our resources on building the REEcorner™ modules in our existing integration center in the UK.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 10 Financial Outlook Our second quarter GAAP net loss was $26.2 million compared to $28.6 million in Q1 2023 and $25.2 million in Q2 2022. The year-over-year change was mainly driven by the income from remeasurement of warrants in Q2 2022 and lower financial income in Q2 2023, partially offset by a decrease in share-based compensation expenses. Our non-GAAP net loss in the quarter was $22.0 million compared to $24.0 million in Q1 2023 and $21.3 million in Q2 2022. We ended the second quarter with liquidity of $105 million, comprised of cash, cash equivalents and short-term investments. As part of our efforts to secure year 2024 capital needs in advance, after the end of the quarter, we established a $35 million ATM program (out of which we sold approximately 2.28 million shares for gross proceeds of approximately $0.7 million) and secured a bank credit facility of $15 million. Capital needs for 2025 are estimated at an additional $50 million in order to ramp up production. We plan to continue exploring options to secure the capital needs for execution of our plans over time as we may require in a disciplined manner.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 11 Use of Non-GAAP Financial Measures The Company has disclosed financial measurements in this shareholders’ letter that present financial information is considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company’s management uses these measurements as an aid in monitoring the Company’s on-going financial performance. Non-GAAP research and development, non-GAAP selling, general and administrative expenses and non-GAAP operating expenses exclude the impact of stock-based compensation. Non-GAAP net loss and non-GAAP loss per share also exclude non-recurring or unusual items that are considered by management to be outside the Company’s standard operations and certain non-cash items. Adjusted EBITDA is a non-GAAP financial measurement that is considered by management to be useful in comparing the profitability among companies by reflecting operating results of the Company excluding such items. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be comparable to similarly titled measures used by other companies due to potential differences among calculation methodologies. Thus, there can be no assurance whether (i) items excluded from the non-GAAP financial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non- GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations for the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 12 REE AUTOMOTIVE LTD. Condensed Consolidated Statements of Operations U.S. dollars in thousands (except share and per share data) (Unaudited) Three Months Ended Six Months Ended June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Revenues 943 — — 943 — Cost of sales 943 — 9 943 547 Gross loss — — (9) — (547) Operating expenses: Research and development expenses, net 19,337 18,874 18,080 38,211 38,923 Selling, general and administrative expenses 8,087 10,843 11,330 18,930 26,618 Total operating expenses 27,424 29,717 29,410 57,141 65,541 Operating loss (27,424) (29,717) (29,419) (57,141) (66,088) Income from warrants remeasurement — — 2,417 — 17,747 Financial income, net 1,076 1,061 2,373 2,137 2,845 Net loss before income tax (26,348) (28,656) (24,629) (55,004) (45,496) Income tax expense (income) (137) (34) 619 (171) 1,213 Net loss $(26,211) $(28,622) $(25,248) $(54,833) $(46,709) Net comprehensive loss $(26,211) $(28,622) $(25,248) $(54,833) $(46,709) Basic and diluted net loss per Class A ordinary share $(0.09) $(0.10) $(0.09) $(0.18) $(0.16) Weighted average number of ordinary shares and preferred shares used in computing basic and diluted net loss per share 300,948,736 298,836,526 292,189,047 299,898,466 290,975,091
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 13 REE AUTOMOTIVE LTD. Condensed Consolidated Balance Sheets U.S. dollars in thousands (except share and per share data) (Unaudited) June 30, 2023 December 31, 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $37,488 $56,762 Restricted cash 11 162 Short-term investments 67,460 96,857 Other accounts receivable and prepaid expenses 12,769 11,894 Total current assets 117,728 165,675 NON-CURRENT ASSETS: Non-current restricted cash 2,999 3,001 Other accounts receivable 2,667 3,337 Operating lease right-of-use asset 24,784 26,061 Property and equipment, net 17,337 16,939 Total non-current assets 47,787 49,338 TOTAL ASSETS $165,515 $215,013 CURRENT LIABILITIES: Trade payables $4,818 $6,172 Other accounts payable and accrued expenses 10,862 11,118 Operating lease liability 2,592 2,748 Total current liabilities 18,272 20,038 NON-CURRENT LIABILITIES: Deferred revenues — 943 Operating lease liability 17,678 18,623 Total non-current liabilities 17,678 19,566 TOTAL LIABILITIES 35,950 39,604 LIABILITIES AND SHAREHOLDERS’ EQUITY SHAREHOLDERS’ EQUITY: Ordinary and preferred shares — — Additional paid-in capital 906,326 897,337 Accumulated deficit (776,761) (721,928) Total shareholders’ equity 129,565 175,409 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $165,515 $215,013
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 14 REE AUTOMOTIVE LTD. Condensed Consolidated Statements of Cash Flow U.S. dollars in thousands (except share and per share data) (Unaudited) Six Months Ended June 30, 2023 June 30, 2022 Cash flows from operating activities: Net loss $(54,833) $(46,709) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,085 582 Amortization of operating lease right of use asset 1,798 1,278 Accretion income on short-term investments (588) (90) Share-based compensation 8,870 14,809 Remeasurement of warrant liability — (17,747) Decrease (increase) in accrued interest on short-term investments 333 (140) Increase in other accounts receivable and prepaid expenses (205) (7,049) Decrease in operating lease liability (1,622) (5,382) Decrease in trade payables (197) (3,602) Decrease in other accounts payable and accrued expenses (256) (4,696) Decrease in deferred revenue (943) — Other 103 11 Net cash used in operating activities (46,455) (68,735) Cash flows from investing activities: Purchase of property and equipment (2,743) (2,563) Purchase of short-term investments (66,864) (109,572) Proceeds from short-term investments 96,516 — Net cash provided by (used in) investing activities 26,909 (112,135) Cash flows from financing activities: Proceeds from exercise of options and warrants 119 2,108 Net cash provided by financing activities 119 2,108 Increase (decrease) in cash, cash equivalents and restricted cash (19,427) (178,762) Cash, cash equivalents and restricted cash at beginning of year 59,925 276,915 Cash, cash equivalents and restricted cash at end of period $ 40,498 $ 98,153
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 15 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, 2023 Mar 31, 2023 Jun 30, 2022 Jun 30, 2023 Jun 30, 2022 Net Loss on a GAAP Basis $(26,211) $(28,622) $(25,248) $(54,833) $(46,709) Financial income, net (1,076) (1,061) (2,373) (2,137) (2,845) Income tax expense (income) (137) (34) 619 (171) 1,213 Income from warrant valuation — — (2,417) — (17,747) Depreciation, amortization, and accretion 1,235 1,060 1,093 2,295 1,860 Share-based compensation 4,212 4,658 6,334 8,870 14,809 Adjusted EBITDA(1) $(21,977) $(23,999) $(21,992) $(45,976) $(49,419) 1. Adjusted EBITDA excludes adjustments for financial income, net, income tax expense, depreciation, amortization, and accretion, income from warrant valuation, and share-based compensation.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 16 Three Months Ended Six Months Ended Jun 30, 2023 Mar 31, 2023 Jun 30, 2022 Jun 30, 2023 Jun 30, 2022 GAAP cost of sales $943 $— $9 $943 $547 Share-based compensation — — (2) — (72) Non-GAAP cost of sales 943 — 7 943 475 GAAP research and development expenses 19,337 18,874 18,080 38,211 38,923 Share-based compensation (2,250) (2,551) (3,390) (4,801) (6,597) Non-GAAP research and development expenses 17,087 16,323 14,690 33,410 32,326 GAAP selling, general, and administrative expenses 8,087 10,843 11,330 18,930 26,618 Share-based compensation (1,962) (2,107) (2,942) (4,069) (8,140) Non-GAAP selling, general, and administrative expenses 6,125 8,736 8,388 14,861 18,478 GAAP operating expenses 27,424 29,717 29,410 57,141 65,541 Share-based compensation (4,212) (4,658) (6,332) (8,870) (14,737) Non-GAAP operating expenses 23,212 25,059 23,078 48,271 50,804 GAAP net loss (26,211) (28,622) (25,248) (54,833) (46,709) Income from warrant valuation — — (2,417) — (17,747) Share-based compensation 4,212 4,658 6,334 8,870 14,809 Non-GAAP net loss $(21,999) $(23,964) $(21,331) $(45,963) $(49,647) Weighted average number of ordinary shares used in computing basic and diluted net loss per share 300,948,736 298,836,526 292,189,047 299,898,466 290,975,091 Non-GAAP basic and diluted net loss per Class A ordinary share $(0.07) $(0.08) $(0.07) $(0.15) $(0.17) Reconciliation of GAAP cost of sales to Non-GAAP cost of sales; Reconciliation of GAAP research and development expenses to Non-GAAP research and development expenses; GAAP selling, general, and administrative expenses to Non-GAAP selling, general, and administrative expenses; GAAP operating expenses to Non-GAAP operating expenses; GAAP net loss to Non- GAAP net loss; and presentation of Non-GAAP net loss per Share, basic and diluted:
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved. 17 About REE Automotive REE Automotive (Nasdaq: REE) is an automotive technology company that allows companies to build any size or shape of electric vehicle on their modular platforms. With complete design freedom, vehicles Powered by REE are equipped with the revolutionary REEcorner, which packs critical vehicle components (steering, braking, suspension, powertrain and control) into a single compact module positioned between the chassis and the wheel. With proprietary by-wire technology for drive, steer and brake control that eliminate the need for mechanic connection, all four identical REEcorners™ enable REE to build the industry’s flattest EV platforms with more room for passengers, cargo and batteries. REE platforms are future proofed, autonomous capable, offer a low TCO, and drastically reduce the time to market for fleets looking to electrify. To learn more visit www.ree.auto. 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. 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 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; 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 28, 2023 and in subsequent filings with the SEC.
Q2 2023 REE Shareholder letter © 2023 REE. All rights reserved.
REE AUTOMOTIVE LTD.
CONSOLIDATED FINANCIAL STATEMENTS
Exhibit 99.4
REE AUTOMOTIVE LTD AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023
UNAUDITED
INDEX
INDEX TO FINANCIAL STATEMENTS
| Consolidated Interim Balance Sheet | |||||
Consolidated Interim Statements of Comprehensive Loss | |||||
Consolidated Interim Statement of Changes in Shareholders’ equity | |||||
Consolidated Interim Statement of Cash Flows | |||||
| Notes to the Interim Consolidated Financial Statements | |||||
F-1
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollar in thousands (except share and per share data)
| June 30, 2023 | December 31, 2022 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Short-term investments | |||||||||||
| Other accounts receivable and prepaid expenses | |||||||||||
| Total current assets | |||||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Non-current restricted cash | |||||||||||
| Other accounts receivable | |||||||||||
| Operating lease right-of-use asset | |||||||||||
| Property and equipment, net | |||||||||||
| Total non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Trade payables | $ | $ | |||||||||
| Other accounts payable and accrued expenses | |||||||||||
| Operating lease liability | |||||||||||
| Total current liabilities | |||||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Deferred revenues | |||||||||||
| Operating lease liability | |||||||||||
| Total non-current liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| Commitments and Contingencies (Note 6) | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
| Ordinary shares | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-2
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)
U.S. dollar in thousands (except share and per share data)
| Six Months Ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| Revenues | $ | $ | |||||||||
| Cost of sales | |||||||||||
| Gross loss | $ | $ | ( | ||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Total operating expenses | |||||||||||
| Operating loss | $ | ( | $ | ( | |||||||
| Income from warrants remeasurement | |||||||||||
| Financial income, net | |||||||||||
| Net loss before income tax | ( | ( | |||||||||
| Income tax expense (income) | ( | ||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Net comprehensive loss | $ | ( | $ | ( | |||||||
| Basic and diluted net loss per Class A ordinary share | $ | ( | $ | ( | |||||||
| Weighted average number of ordinary shares used in computing basic and diluted net loss per share | |||||||||||
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 | Ordinary shares - Class B | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance – January 1, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance – June 30, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Balance – January 1, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of operating lease right of use asset | |||||||||||
| Accretion income on short-term investments | ( | ( | |||||||||
| Share-based compensation | |||||||||||
| Remeasurement of warrant liability | ( | ||||||||||
| Decrease (increase) in accrued interest on short-term investments | ( | ||||||||||
| Increase in other accounts receivable and prepaid expenses | ( | ( | |||||||||
| Decrease in operating lease liability | ( | ( | |||||||||
| Decrease in trade payables | ( | ( | |||||||||
| Decrease in other accounts payable and accrued expenses | ( | ( | |||||||||
| 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 (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of options and warrants | |||||||||||
| 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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Non-cash activity: | |||||||||||
| Purchase of property and equipment included in accounts payable or accrued | $ | $ | |||||||||
| Right-of-use assets from operating leases liability | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Supplemental cash flow: | |||||||||||
| Cash received from interest | $ | $ | |||||||||
| Cash paid for income taxes | |||||||||||
| June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Reconciliation of cash, cash equivalents and restricted cash: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Non-current restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
F-6
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 1. GENERAL
REE Automotive Ltd. was incorporated in Israel on January 16, 2011.
REE Automotive Ltd. has established wholly-owned subsidiaries in the United States, Germany, Japan and the United Kingdom (the “Subsidiaries”). REE Automotive Ltd. and its subsidiaries (the “Company”, “REE”, or “we”) is in the early stages of commercialization and is actively executing its business plan and establishing strategic collaborations with industry leaders to expand its industry footprint across segments. The Company is currently developing its core REEcornerTM technology and EV platforms, as well as full vehicles leveraging REEcornerTM technology. The Company has commenced initial production components at its Integration Center in Coventry, United Kingdom.
On February 3, 2021, the Company entered into a merger agreement (the “Merger Agreement”) with 10X Capital Venture Acquisition Corp (“10X Capital”), a Delaware corporation and special purpose acquisition company (“SPAC”), and Spark Merger Sub, Inc., a wholly-owned subsidiary of the Company, pursuant to which Merger Sub merged with and into 10X Capital (the “Merger”). The Merger was consummated on July 22, 2021 (the “Closing Date”) with 10X Capital becoming a wholly-owned subsidiary of the Company, and the securityholders of 10X Capital becoming securityholders of the Company.
The Company became a Nasdaq listed publicly traded company on July 23, 2021, with its Class A ordinary shares, without par value (the “Class A Ordinary Shares”) trading under the ticker symbol “REE” (for further information see Note 7). The Company also has Class B ordinary shares, without par value, having 10 votes per share (the “Class B Ordinary Shares” and together with the Class A Ordinary Shares, the “Ordinary Shares”) that include voting rights only and are not listed on the Nasdaq.
As of June 30, 2023, the Company’s principal source of liquidity includes its unrestricted cash balance in the amount of $37,488 and its short term investments in the amount of $67,460 . The Company has incurred losses since inception and had negative cash flows used in operating activities of $46,455 for the six months ended June 30, 2023. The Company expects to continue to incur net losses and negative cash flows from operating activities. The Company’s ability to successfully carry out its business plan is primarily dependent upon its ability to raise sufficient additional capital. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed to support its operations. If the Company is unable to maintain sufficient financial resources its business, financial condition and results of operations will be materially and adversely affected. The Company has approved a plan, to improve its available cash balances, liquidity and cash flows generated from operations.
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, 2022 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.
F-7
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
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, 2022.
The significant accounting policies disclosed in the Company’s audited 2022 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, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023.
Use of estimates
The preparation of the unaudited interim consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash balances and bank deposits, including money market funds, that have a maturity, at the date of purchase, of three months or less.
Investments
The Company accounts for investments in debt securities in accordance with ASC 320, "Investments - Debt Securities". Management determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determinations at each balance sheet date.
Held-to-maturity securities are those securities that the Company has the positive intent and ability to hold until maturity and are recorded at amortized cost and adjusted for amortization of premiums and accretion of discounts.
Trading securities are those securities that the Company intends to sell in the near term and are carried at fair value with unrealized gains and losses charged to earnings.
All other securities not included in the held-to-maturity or trading category are classified as available-for-sale and are carried to fair value with unrealized gains and losses recorded within accumulated other comprehensive income (loss) as a separate component of shareholders’ equity.
Generally, premiums are amortized to call date and discounts are accreted to maturity, on a level yield basis.
The Company’s investment securities as of the purchase date and as of June 30, 2023 are classified as held-to-maturity.
F-8
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
Fair value of financial instruments
Fair value is defined as the exchange price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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.
F-9
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring the products to the customer.
The Company applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component.
Deferred revenues are recognized as (or when) the Company receives consideration prior to performing its obligations under the contract.
In April 2021, the Company entered into a strategic development agreement with a customer, pursuant to which the Company agreed to develop and supply REE platform prototypes. Revenue related to the agreement is deferred and will be recognized upon satisfying performance obligations in the contract. As of June 30, 2023 and December 31, 2022, the Company recorded deferred revenues of $0 and $943 , respectively. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers. For 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.
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.
Contract liabilities consisted of the following as of June 30, 2023 and December 31, 2022:
| June 30, 2023 | December 31, 2022 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Deferred revenues, non-current | $ | $ | |||||||||
Remaining Performance Obligation
The Company’s remaining performance obligations are comprised of the delivery products and a material right for purchases of finished goods not yet delivered. As of June 30, 2023 and December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $0 and $943 , respectively.
Recently adopted accounting pronouncements
As an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), the Company may take advantage of certain exemptions, including delaying the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election.
F-10
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments.” This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for the Company beginning January 1, 2023, and interim periods therein. Early adoption is permitted. The company adopted this ASU, but the standard did not have a material impact on the Company’s consolidated financial statements.
NOTE 3. INVESTMENTS
The Company’s investments as of June 30, 2023 are comprised of held-to-maturity securities consisting mainly of U.S. dollar denominated investments primarily in bank deposits, agency bonds, municipal bonds, commercial paper, and treasury bills. The Company’s investment guidelines are to purchase securities that are investment grade at the time of acquisition.
Short-term investments consisted of the following:
| June 30, 2023 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Amortized cost basis | Gross unrealized gains | Gross unrealized loss | Fair value | ||||||||||||||||||||
| Bank deposit securities: | |||||||||||||||||||||||
| Bank deposits | $ | $ | $ | $ | |||||||||||||||||||
| Held-to-maturity marketable securities: | |||||||||||||||||||||||
| Agency bonds | $ | $ | $ | ( | $ | ||||||||||||||||||
| Treasury bills | ( | ||||||||||||||||||||||
| Total held-to-maturity marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total short term investments | $ | $ | $ | ( | $ | ||||||||||||||||||
F-11
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 3. INVESTMENTS (cont.)
| December 31, 2022 | |||||||||||||||||||||||
| (Audited) | |||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||
| Amortized cost basis | Gross unrealized gains | Gross unrealized loss | Fair value | ||||||||||||||||||||
| Bank deposit securities: | |||||||||||||||||||||||
| Bank deposits | $ | $ | $ | $ | |||||||||||||||||||
| Held-to-maturity marketable securities: | |||||||||||||||||||||||
| Agency bonds | $ | $ | $ | ( | $ | ||||||||||||||||||
| Municipal bonds | ( | ||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Treasury bills | |||||||||||||||||||||||
| Total held-to-maturity marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total short term investments | $ | $ | $ | ( | $ | ||||||||||||||||||
The securities in the Company’s portfolio are investment grade and short-term in nature. All held-to-maturity marketable securities are due within 1 year or less. As of June 30, 2023, no continuous unrealized losses for 12 months or greater were identified.
NOTE 4. OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
| June 30, 2023 | December 31, 2022 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Government authorities | $ | $ | |||||||||
| Prepaid expenses | |||||||||||
| Advances to suppliers | |||||||||||
| Other receivables | |||||||||||
| Total | $ | $ | |||||||||
NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
| June 30, 2023 | December 31, 2022 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| Employees and payroll accruals | $ | $ | |||||||||
| Professional fees | |||||||||||
| Non recurring engineering | |||||||||||
| Government authorities | |||||||||||
| Other payables | |||||||||||
| Total | $ | $ | |||||||||
F-12
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 6. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
The following table summarizes REE’s contractual obligations and other commitments for cash expenditures as of June 30, 2023, 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.
| Purchase commitments | |||||
| (Unaudited) | |||||
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 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
A short-term guarantee in the amount of approximately $11 was issued by a bank to secure the Company’s office rent and credit cards payments. A long-term guarantee in the amount of approximately $2,999 were recorded within Long-term restricted cash to secure the Company’s office and manufacturing locations.
Royalty bearing grants
The Company’s research and development efforts have been partially financed through grants from the Israel Innovation Authority (“IIA”) for the technology related to the Softwheel 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 on the unpaid amount received based on the 12-month LIBOR rate (from the year the grant was approved) applicable to U.S. dollar deposits. If the Company returns to production of these products outside of Israel and generates sales, the ceiling will increase based on the percentage of production that is outside of Israel, up to a maximum of 300 % of the IIA grants, linked to the U.S. 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, 2023 and 2022, no
As of June 30, 2023, the Company’s remaining contingent obligations with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, were $730 .
F-13
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 6. 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 dollar amount of the grants received linked to the U.S. consumer price index. For the six months ended June 30, 2023 and 2022, no
As of June 30, 2023, 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 U.S. 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. REE believes that the lawsuit is without merit and is defending itself vigorously. REE denies any wrongdoing, and has filed a motion to dismiss for inconvenient forum. Consistent with REE's request to the Court, the Court has stayed all substantive discovery in the case pending a ruling on dismissal. Given the uncertainty of litigation and the preliminary stage of the lawsuit, the Company cannot estimate the reasonably possible loss or range of loss that may result from this lawsuit. As of June 30, 2023, the Company did not record a loss contingency.
F-14
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 7. SHAREHOLDERS’ EQUITY
Composition of share capital
| June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| (Unaudited) | (Audited) | ||||||||||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | ||||||||||||||||||||
| Number of shares | Number of shares | ||||||||||||||||||||||
Class A Ordinary shares, no par value (1) | |||||||||||||||||||||||
Class B Ordinary shares, no par value (2) | |||||||||||||||||||||||
(1) Each Class A Ordinary Share has the right to exercise one vote, to participate pro rata in all the dividends declared by the board of 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.
(2) Class B Ordinary Shares, which are held by the Company’s 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 of Association may not be effected by REE without the prior affirmative vote of 100 % of the outstanding REE Class B Ordinary Shares, voting as a separate class. Each Class B Ordinary Shares will be automatically suspended upon the tenth anniversary of the closing of the Merger. There are no economic or participating rights to Class B Ordinary Shares.
Equity transactions
On August 16, 2022, the Company entered into the ATM Sales Agreement with BofA Securities, Inc., or BofA, pursuant to which we may offer and sell, at our option, up to $75,000 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, 2023, the Company has not sold any of our Class A Ordinary Shares under the ATM Sales Agreement.
On July 14, 2023, the Company entered into an at-the-market offering agreement with H.C. Wainwright (the “H.C. Wainwright ATM Agreement”). For further information regarding the H.C. Wainwright ATM Agreement, see Note 12.
F-15
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 7. SHAREHOLDERS’ EQUITY (cont.)
Share-based compensation
During the first half of 2023, the Company granted options and RSU’s to its employees, officers, directors and consultants in the amount of 7,855,000 and 16,984,086 , respectively. The weighted average grant date fair value of the options and RSU’s were $0.38 and $0.37 , respectively.
The share-based compensation expense recognized in the Company’s consolidated statements of operations are as follow:
| Six months ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Cost of sales | $ | $ | |||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| $ | $ | ||||||||||
F-16
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 8. INCOME TAXES
The main reconciling item between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward of the Company due to the uncertainty of the realization of such tax benefits and the unrecognized tax positions recorded in the period.
Income taxes are comprised as follows:
| Six months ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Current | $ | ( | $ | ||||||||
| $ | ( | $ | |||||||||
| Six months ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Domestic | $ | $ | |||||||||
| Foreign (non-Israeli jurisdictions) | $ | ( | $ | ||||||||
| $ | ( | $ | |||||||||
| Net loss before income tax | ( | ( | |||||||||
| Effective tax rate | % | ( | % | ||||||||
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities fair value at June 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| June 30, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Unaudited) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Money market fund | $ | $ | $ | ||||||||||||||
| Bank deposits | |||||||||||||||||
| Agency bonds | |||||||||||||||||
| Treasury bills | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Amounts included in: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
F-17
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 9. FAIR VALUE MEASUREMENTS (cont.)
| December 31, 2022 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| (Audited) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Money market fund | $ | $ | $ | ||||||||||||||
| Bank deposits | |||||||||||||||||
| Agency bonds | |||||||||||||||||
| Municipal bonds | |||||||||||||||||
| Commercial paper | |||||||||||||||||
| Treasury bills | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Amounts included in: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Short-term investments | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
F-18
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 10. FINANCIAL INCOME, NET
| Six months ended | |||||||||||
| June 30, 2023 | June 30, 2022 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Interest income and bank fees, net | $ | $ | |||||||||
| Foreign currency translation adjustments | |||||||||||
| Financial income, net | $ | $ | |||||||||
NOTE 11. 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, 2023 | June 30, 2022 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Numerator: | |||||||||||
| Net loss for basic and diluted loss per share | $ | ( | $ | ( | |||||||
| Denominator: | |||||||||||
| Weighted average number of Class A ordinary and preferred shares used in computing basic and diluted net loss per share | |||||||||||
| Basic and diluted net loss per Class A ordinary and preferred shares | $ | ( | $ | ( | |||||||
During the six months ended June 30, 2023 and 2022, the Company was in a loss position and therefore all its potential shares were antidilutive. The total weighted average number of shares related to the outstanding options and warrants excluded from the calculation of diluted loss per share due to their anti-dilutive effect was 63,123,946 and 74,775,324 for the six months ended June 30, 2023 and 2022.
NOTE 12. SUBSEQUENT EVENTS
F-19
Table of Contents
REE AUTOMOTIVE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
U.S. dollars in thousands (except share and per share data)
NOTE 12. SUBSEQUENT EVENTS (cont.)
b. On August 14, 2023, the Company established a credit facility with a leading Israeli commercial bank in the amount of $15,000 which the bank is committed to until December 31, 2024 (under certain conditions, the bank has the right to terminate the credit facility on December 31, 2023). The credit facility bears a variable interest at the rate of Monthly Term SOFR (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, the Company has to keep unsecured deposits in the aforementioned bank in the amount of $20,000 . As of August 28, 2023 no amounts had been drawn under this credit facility.
F-20
Exhibit 99.5
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, 2022 (included in our Annual Report of Foreign Private Issuer on Form 20-F for the year ended December 31, 2022 filed with the Securities and Exchange Commission or SEC, on March 28, 2023, 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, or the UK Engineering Center, 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 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 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 impact of any resurgence of the COVID-19 pandemic, inflation, 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;
•general market, political and economic conditions in the countries in which we operate;
•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
REE is an automotive technology company whose mission is to be the cornerstone for zero-emission electric and autonomous vehicles. We aim to empower global companies, such as original equipment manufacturers, or OEMs, delivery and logistics fleets, dealers, e-commerce retailers, new mobility players, Mobility-as-a-Service, or MaaS, providers and autonomous drive companies, in the build-out of any size or shape of electric or autonomous vehicle – from Class 1 through Class 6, focusing primarily on Class 3 through 5 platform models on the P7 EV platform. We envision a future where electric vehicles, or EV, and autonomous vehicles, or AV, will be “Powered by REE™”.
We are in the early stages of commercialization and are actively executing our business plan and establishing strategic collaborations with industry leaders to expand our industry footprint across segments. We are currently developing our core REEcornerTM technology and EV platforms, as well as full vehicles leveraging REEcornerTM technology.
We are targeting OEMs, delivery and logistic fleets, dealers, e-commerce retailers, new mobility players, MaaS providers and autonomous drive companies. Our proposed offering is geared to allow these companies to build entire fleets tailored to their exact needs based on REEcornerTM technology and Powered by REE platforms without the need to be constrained to traditional off-the-shelf EV offerings. We offer many customer benefits including vehicle design freedom based on exact business requirements, enabling reductions in time-to-market, more space and volume on a given footprint, potentially lowering total cost of ownership, faster development times, advanced driver-assistance systems, or ADAS, compatibility, and reduced maintenance costs and times and compliance with global safety standards.
Recently, we started establishing a dealership network across North America. We have entered into agreements with twelve authorized dealers. Each of these dealers has placed initial orders, which are included in our current order book. These dealers also facilitate relationships and adoption by fleets, which we believe could purchase hundreds or thousands of vehicles per year. We plan to offer training to authorized dealers to certify technicians to provide service on REE vehicles, facilitating adoption by each dealer’s fleet. As we seek to further expand our dealer network in the United States, we offer financing solutions for our dealers through an agreement with Mitsubishi HC Capital America to provide financing solutions to dealers in the REE network. This agreement is designed to streamline the process of obtaining the financing required for the purchase of our vehicles.
In addition to our dealer network, we are working with our three fleet customers, which we believe over time have the potential to translate to orders in the thousands. Additionally, we are pursuing multiple go-to-market paths to significantly accelerate the adoption of EVs by commercial fleet owners and operators. This includes collaborations with partners not only to develop full vehicle offerings, but also to provide a comprehensive ecosystem of enabling capabilities and services, such as vehicle financing, batteries, charging infrastructure, after-sales service and Data-as-a-Service, or DaaS, for a full turn-key solution that is intended to enable and expedite a smooth transition for our potential customers from internal combustion engine, or ICE, vehicles to EV fleets.
We are working closely with those customers who require a testing phase in order to optimize this important process and advance to firm fleet orders. Existing orders include both the Class 3-4 P7-B and Class 5 Proxima Powered by REE. Orders for the P7-B are for cab chassis configurations, while orders for Proxima Powered by REETM are for stripped chassis and a full vehicle via partnerships with body upfitters. As part of our philosophy of “complete not compete”, we continue to partner with the best upfitters in the industry, such as Knapheide and Morgan Truck Body, to expand our P7 offering and provide a complete vehicle to our customers.
Our full by-wire vehicle control system, x-by-wire, is intended to give electric vehicle operators the ability to steer and break Powered by REE vehicles fully by-wire, without any mechanical connection. We have contracted HORIBA MIRA, a world-leader in testing, to perform internal tests, modeling certain Federal Motor Vehicle Safety Standards (FMVSS) certification requirements based on which we have determined the feasibility of our x-by-wire system to meet the requirements of FMVSS certification.
We are implementing a two phase production plan. Phase I of our production plan, which is expected to run through the third quarter of 2024, is focused on pilot production of vehicles from our UK integration center. In July 2023, we initiated a $15 million production tooling program. We are targeting the delivery of our first pilot vehicles at the end
of this year, subject to certification and are taking a measured approach to allow time for customer feedback, stabilizing production processes and, most importantly, optimizing our bill of material and production costs. We believe this deliberate approach will reduce risks associated with premature production ramp up and the resulting extensive costs, allowing us to incorporate feedback from early customers and ensure the quality and safety of our vehicles. Phase II is currently planned to commence in the fourth quarter of 2024 which is expected to result in a total production plan of up to 300 vehicles during 2024 ramping up to low thousands of vehicles in 2025 and mid thousands of vehicles in 2026.
As part of our disciplined and risk-averse approach, we plan to enter into an agreement with a US contract manufacturer which we believe will enable us to bring vehicles with numbers in the mid thousands to market without the need for heavy capital expenditure investment by allowing us to concentrate on our current Capex-light REEcornerTM Integration Centers and shifting full vehicle assembly to the contract manufacturer as part of our strategy.
Key Components of Statement of Operations
Revenue
We are in the early stages of commercialization and currently have no significant revenues. 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.
Cost of Sales
We are in the early stages of commercialization and currently have no significant cost of sales. We expect that the significant majority of our cost of sales will include vehicle components and parts, including batteries, raw materials, direct labor costs, warranty costs and costs related to the operation of manufacturing facilities.
Research and Development Expenses, Net
Research and development expenses consist 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, 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 our properties, and depreciation of our fixed assets. We expect selling, general and administrative expenses to increase as our overall activity levels increase due to the construction and operation of facilities and costs associated with being a public company.
Finance Income, Net
Finance income, net consists primarily of interest income and foreign exchange gains or losses offset by bank fees. Foreign currency exchange gains or losses related to changes in the value of our non-U.S. denominated financial assets, primarily cash and cash equivalents. As of June 30, 2023, we did not have any indebtedness for borrowed amounts. Interest income consists of interest earned on our cash, cash equivalents, and short-term investments. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period.
Results of Operations
Comparison of Three Months Ended June 30, 2023 and 2022
The following table sets forth our historical operating results for the periods indicated:
| Three Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | 943 | — | |||||||||
| Cost of sales | 943 | 9 | |||||||||
| Gross loss | — | (9) | |||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 19,337 | 18,080 | |||||||||
| Selling, general and administrative expenses | 8,087 | 11,330 | |||||||||
| Total operating expenses | 27,424 | 29,410 | |||||||||
| Operating loss | (27,424) | (29,419) | |||||||||
| Income from warrants remeasurement | — | 2,417 | |||||||||
| Financial income, net | 1,076 | 2,373 | |||||||||
| Net loss before income tax | $ | (26,348) | $ | (24,629) | |||||||
| Income tax expense (income) | (137) | 619 | |||||||||
| Net loss | $ | (26,211) | $ | (25,248) | |||||||
Revenue
We recorded revenue of $0.9 million for the three months ended June 30, 2023 and no revenue for the three months ended June 30, 2022. As previously noted, we are in the early stages of commercialization and currently have no significant revenues. 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 Sales
Cost of sales increased by $0.9 million, from an immaterial amount for the three months ended June 30, 2022 to $0.9 million for the three months ended June 30, 2023. The increase was due to 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 increased by $1.2 million, from $18.1 million for the three months ended June 30, 2022 to $19.3 million for the three months ended June 30, 2023. The increase was primarily due to a decrease in grants received from the UK government, higher expenses related to R&D for the P7 platform and an increase in lease and related expenses in respect of our facility in Austin, Texas. These increases were partially offset by a decrease in share based compensation expense of $1.1 million, from $3.4 million for the three months ended June 30, 2022 to $2.25 million for the three months ended June 30, 2023, as well as a decrease in salaries and
related expenses related to a decrease in R&D employee headcount. Excluding share-based compensation, R&D expenses increased by $2.4 million, or 16%, from $14.7 million for the three months ended June 30, 2022 to $17.1 million for the three months ended June 30, 2023.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $3.2 million, from $11.3 million for the three months ended June 30, 2022 to $8.1 million for the three months ended June 30, 2023. The decrease was primarily due to a decrease in share based compensation expense of $0.9 million, from $2.9 million for the three months ended June 30, 2022 to $2.0 million for the three months ended June 30, 2023, as well as a decrease in director and officers insurance expenses and in professional fees. Excluding share-based compensation, selling, general and administrative expenses decreased by $2.3 million, or 27%, from $8.4 million for the three months ended June 30, 2022 to $6.1 million for the three months ended June 30, 2023.
Income from Warrants Remeasurement
We had no income or loss from the remeasurement of the value of warrants for the three months ended
June 30, 2023 following the registered exchange offer of our outstanding warrants that we completed in September 2022 and the subsequent removal of the warrants from listing. We recognized income of $2.4 million from the remeasurement of the value of warrants for the three months ended June 30, 2022. The income from warrants remeasurement is from the change in fair value prior to the settlement of the warrant liability recognized in our statement of comprehensive loss.
Financial Income, Net
Financial income, net was $1.1 million for the three months ended June 30, 2023 compared to financial income, net of $2.4 million for the three months ended June 30, 2022. The decrease in financial income, net was primarily due to decrease in foreign currency gains, partially offset by an increase in income from short term investments.
Income tax expense
Income tax expense decreased by $0.7 million from $0.6 million for the three months ended June 30, 2022 to income tax income of $0.1 million for the three months ended June 30, 2023. This decrease was primarily due to the recognition of an uncertain tax position for the three months ended June 30, 2022.
Comparison of Six Months Ended June 30, 2023 and 2022
The following table sets forth our historical operating results for the periods indicated:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| USD in thousands | |||||||||||
| Revenues | 943 | — | |||||||||
| Cost of sales | 943 | 547 | |||||||||
| Gross loss | — | (547) | |||||||||
| Operating expenses: | |||||||||||
| Research and development expenses, net | 38,211 | 38,923 | |||||||||
| Selling, general and administrative expenses | 18,930 | 26,618 | |||||||||
| Total operating expenses | 57,141 | 65,541 | |||||||||
| Operating loss | (57,141) | (66,088) | |||||||||
| Income from warrants remeasurement | — | 17,747 | |||||||||
| Financial income, net | 2,137 | 2,845 | |||||||||
| Net loss before income tax | $ | (55,004) | $ | (45,496) | |||||||
| Income tax expense (income) | (171) | 1,213 | |||||||||
| Net loss | $ | (54,833) | $ | (46,709) | |||||||
Revenue
We recorded revenue of $0.9 million for the six months ended June 30, 2023 and no revenue for the six months ended June 30, 2022. As previously noted, we are in the early stages of commercialization and currently have no significant revenues. 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 Sales
Cost of sales increased by $0.4 million, from $0.5 million for the six months ended June 30, 2022 to $0.9 million for the six months ended June 30, 2023. The increase was due to expensing of deferred expenses related to the strategic development agreement with a customer which was terminated as described above, partially offset by the expenses incurred for the work with the above mentioned strategic partner during for the six months ended June 30, 2022.
Research and Development Expenses, Net
Research and development expenses, net, decreased by $0.7 million, from $38.9 million for the six months ended June 30, 2022 to $38.2 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in share based compensation expense of $1.8 million, from $6.6 million for the six months ended June 30, 2022 to $4.8 million for the six months ended June 30, 2023, as well as a decrease in salaries and related expenses related to a decrease in R&D employee headcount and costs incurred in the first half of 2022 related to opening of our UK Engineering Center. The decrease was partially offset by a decrease in grants received from the UK government. Excluding share-based compensation, R&D expenses increased by $1.1 million, or 3% from $32.3 million for the six months ended June 30, 2022 to $33.4 million for the six months ended June 30, 2023.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $7.7 million, from $26.6 million for the six months ended June 30, 2022 to $18.9 million for the six months ended June 30, 2023. The decrease was primarily due to a decrease in share based compensation expense of $4.0 million from $8.1 million for the six months ended June 30, 2022 to $4.1 million for the six months ended June 30, 2023, as well as lower marketing expenses, a decrease in director and officers insurance expenses and lower salaries and related expenses due to reduction of our non-R&D employee headcount. Excluding share-based compensation, selling, general and administrative expenses decreased by $3.6 million, or 20%, from $18.5 million for the six months ended June 30, 2022 to $14.9 million for the six months ended June 30, 2023.
Income from Warrants Remeasurement
We had no income or loss from the remeasurement of the value of warrants for the six months ended
June 30, 2023, following the registered exchange offer of our outstanding warrants that we completed in September 2022 and the subsequent removal of the warrants from listing.We recognized income of $17.7 million from the remeasurement of the value of warrants for the six months ended June 30, 2022. The income from warrants remeasurement is from the change in fair value prior to the settlement of the warrant liability recognized in our statement of comprehensive loss.
Financial Income, Net
Financial income, net was $2.1 million for the six months ended June 30, 2023 compared to financial income, net of $2.8 million for the six months ended June 30, 2022. The decrease in financial income, net was primarily due to lower foreign currency gains, partially offset by an increase in income from short term investments.
Income tax expense (income)
Income tax expense decreased by $1.4 million, from $1.2 million for the six months ended June 30, 2022 to income tax income of $0.2 million for the six months ended June 30, 2023. This decrease was primarily due to the recognition of an uncertain tax position for the six months ended June 30, 2022.
Liquidity, Capital Resources and Financial Condition
As of the date of this Report, we have yet to generate significant revenues from our principal business operations and has generated minimal revenues and we do not expect to generate significant revenues from the sale of our products in the upcoming quarters. 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 and public offerings of our equity securities, investments from certain strategic partners, and from the consummation of a merger by and among REE, Spark Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of REE, or the Merger Sub, and 10X Capital Venture Acquisition Corp, a Delaware corporation or 10X, whereby Merger Sub merged with and into 10X, with 10X surviving as a wholly-owned subsidiary of REE, and with the securityholders of 10X becoming securityholders of REE, or the Merger.
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, 2023, our cash and cash equivalents were $37.5 million and our short term investments were $67.5 million. We expect that our existing cash and cash equivalents and short term investments will be sufficient to achieve initial production of our P7 platform and continue to advance other commercial activities. However, additional funding will be required for a variety of reasons, including, but not limited to, the ramping up phase of our production plan and any delays in the anticipated schedule to complete the design, certification or delivery of
our products. In addition, our budget projections may be subject to cost overruns for reasons outside of our control and we may experience slower sales growth than anticipated, which would pose a risk to us achieving cash flow positivity. We have approved a plan, to improve our available cash balances, liquidity and cash flows generated from operations. The above mentioned alleviates the substantial doubt about our ability to continue as a going concern for at least twelve months from the date of this Report on Form 6-K.
There can be no assurance that any financing would be available to us on favorable terms or at all. If the financing is not available, or if the terms of the financing are less desirable than we expect, we may be forced to decrease our level of investment in production, product development, renegotiate development agreements with collaboration partners or scale back our operations, which could have a material adverse impact on our business and financial prospects. Additionally, any funds 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.
On August 16, 2022, we entered into the ATM Sales Agreement, or the BofA ATM Sales 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 the date of this report, we have not sold any of our Class A Ordinary Shares under the BofA ATM Sales Agreement. In addition, on July 14, 2023, we entered into an at-the-market offering agreement, or the Wainwright ATM Sales Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which we may offer and sell, at our option, up to $35.0 million of our Class A Ordinary Shares through an “at-the-market” equity program under which Wainwright acts as sales agent. As of the date of this report, we have sold 2,277,355 Class A Ordinary Shares under the Wainwright ATM Sales Agreement for total gross proceeds of approximately $0.7 million.
In addition, in August 2023, we established a credit facility with a leading Israeli commercial bank in the amount of $15 million. Under the terms, the bank is committed to fund the credit facility until December 31, 2024 (under certain conditions, the bank has the right to terminate the credit facility on December 31, 2023). The credit facility bears a variable interest at the rate of Monthly Term SOFR (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 $20.0 million. As of the date of this report, no amounts have been drawn under this credit facility.
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 our operating plan as we continue to expand our 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, 2023 and 2022:
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| USD in thousands | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | (46,455) | (68,735) | |||||||||
| Investing activities | 26,909 | (112,135) | |||||||||
| Financing activities | 119 | 2,108 | |||||||||
| Net change in cash and cash equivalents and restricted cash | (19,427) | (178,762) | |||||||||
Cash Flows from Operating Activities
Our cash flows used in operating activities to date have primarily resulted from costs related to development of our products, payroll, fluctuations in accounts payable and other current assets and liabilities. We expect to continue incurring expenses on operating activities until we begin to generate sufficient cash flows from our business.
During the six months ended June 30, 2023, cash used in operating activities was $46.5 million. 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), offset by share-based compensation expenses of $8.9 million and depreciation expenses of $1.1 million.
During the six months ended June 30, 2022, cash used in operating activities was $68.7 million. The primary factors affecting operating cash flows during this period were a net loss of $46.7 million, changes in operating working capital and operating lease right of use asset and liability, net of $19.4 million and income from warrant valuation of $17.7 million, offset by share based compensation expenses of $14.8 million.
Cash Flows from Investing Activities
Our cash flows used in investing activities to date have been primarily comprised of investments and maturities of short term investments and cash outflows for tangible fixed assets (plant and equipment).
Net cash provided by investing activities for the six months ended June 30, 2023 was $26.9 million, which was due to maturity of short-term investments of $96.5 million, which was partially offset by investments of $66.9 million in short-term investments as well as $2.7 million cash outflows for fixed assets (plant and equipment).
Net cash used in investing activities was $112.1 million for the six months ended June 30, 2022, which was due to investment of $109.6 million in short-term investments as well as $2.6 million cash outflows for fixed assets (plant and equipment).
Cash Flows from Financing Activities
Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2023, which was due to proceeds from exercise of options.
Net cash provided by financing activities was $2.1 million for the six months ended June 30, 2022, which was due to proceeds from exercise of options.
Debt
Except with respect to the credit facility described above, we have no third-party debt although we may determine, based on changes in our expected cash flow needs or because we deem it beneficial, to incur debt in the future.