{"url_path":"/sec/ree/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 Operating and Financial Review and Prospects","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1843588/0001628280-26-035308-index.html","accession_number":"0001628280-26-035308","cik":"0001843588","ticker":"REE","issuer_name":"REE Automotive Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1843588/0001628280-26-035308-index.html","primary_entity_key":"0001843588","primary_entity_name":"REE Automotive Ltd."},"word_count":11410,"has_tables":true,"body_markdown":"Item 5. Operating and Financial Review and Prospects\n\nThe following discussion and analysis should be read in conjunction with the section titled “Key Components of Statements of Operations” of this Annual Report and our consolidated financial statements and the related notes contained elsewhere in this Annual Report. This discussion and analysis may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Item 3.D. Risk Factors” of this Annual Report.\n\nA. Operating results.\n\nThe information contained in this section should be read in conjunction with our audited financial statements for the years ended December 31, 2025 and 2024 and related notes and the information contained elsewhere in this Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under \"Forward-Looking Statements\", “Risk Factors” and in other parts of this Annual Report on Form 20-F.Our financial statements have been prepared in accordance with the generally accepted accounting principles in the U.S., or U.S. GAAP.\n\nFor a discussion of our consolidated statements of operations for the years ended December 31, 2024 and 2023 and our cash flows for the years then ended, see the section “Operating and Financial Review and Prospects” in our annual report on Form 20-F (File No. 001-40649), as filed with the SEC on May 15, 2025.\n\n77\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nCompany Overview\n\nWe are an automotive technology company that develops and produces cutting edge SDV technology designed to manage vehicle operations and features through proprietary-developed software, enabling what we believe to be safer, more modular, and better performing vehicles. Our advanced zonal SDV architecture is designed to integrate seamlessly with legacy systems to improve vehicle safety, performance, and reliability. By centralizing key vehicle functions, the architecture seeks to enhance modularity, redundancy, and stability, and to enable what we believe to be safer and more efficient vehicle platforms. Powered by secured AI and deep over-the-air upgradability, REE’s technology allows for continuous updates and improvements throughout a vehicle’s lifespan. This makes Powered by REE® vehicles adaptable\n\nto customer and market changes and designed with future autonomy and connectivity in mind.\n\nReliant upon our patent-protected SDV technology, our full by-wire P7 electric commercial truck is certified under U.S. Federal Motor Vehicle Safety Standards, or FMVSS. Powered by REE® vehicles demonstrate our commitment to offer what we believe to be intelligent, flexible, and scalable mobility solutions while shortening and streamlining the processes, costs and time to market for such vehicles for our customers.\n\nOur approach of “complete not compete” allows original equipment manufacturers, or OEMs, and other customer types to license our technology in order to design and build vehicles tailored to their specific requirements using REE’s scalable, future-ready platform. Our technology and collaborative application programming interface, or API, approach allows our customers to connect their current and future operating systems and application layers having significant input on the design of the system according to their individual needs. In addition, our software flexibility allows delivery and logistics fleets, dealers, Mobility-as-a-Service, or MaaS, providers and others to incorporate their Voice of the Customer, or VoC, input into new vehicle designs and applications. Incorporation of this voice allows these customers to design vehicles that are better tailored to the specific needs of their end-user base and the market in which they service. Additionally, in February 2025, we launched REEai Cloud to provide advanced data analytics based on artificial intelligence capabilities, among others.\n\nOur SDV technology is a combination of software, electrical hardware, and by-wire technology. We aim to offer many customer benefits including a reduced TCO, lower maintenance and spare-part inventory management costs, higher active and passive safety standards, improved vehicle efficiency, ADAS, and increased fleet management system compatibility.\n\nWe further believe that by incorporating our proprietary software through our certified hardware architecture, our potential\n\ncustomers and customers can design and bring to market new vehicles faster and at a lower cost, which may improve their competitiveness in their respective markets. By “completing and not competing”, we believe that we can partner with customers, including OEMs, in the automotive industry where electric and autonomous vehicles will be “Powered by REE”, allowing for what we aim to be a faster and larger adoption of our X-by-Wire technology and electrification at scale.\n\nWe have made progress discussing the integration of our SDV technology into certain OEMs’ model lineups in certain markets and categories, from passenger vehicles to heavy duty commercial trucks.\n\nOn May 15, 2025, REE announced a decision to implement a temporary pause of its previously planned production in light\n\nof significant uncertainty in the global macroeconomic environment and evolving U.S. trade policy impacts on the automotive industry and supply chains, including our P7-S Strip Chassis and P7-C Chassis Cab and Cutaway Chassis products. To-date, the temporary pause remains in effect.\n\nRecent Developments\n\nExcept as otherwise described below, see our discussion under the section titled “Recent Business Developments & Initiatives” in Item 4.B. for further developments with respect to our business.\n\nUnited Kingdom Administration\n\nOn May 5, 2026, REE Automotive UK Limited, a private limited company organized under the laws of England and Wales, or REEUK, and a wholly-owned subsidiary of the Company, commenced an administration process in the United Kingdom. Immediately prior to this process, certain REEUK employees were transferred to REE Software UK Ltd, a newly organized entity in the United Kingdom. Following the appointment of an administrator, such administrator will seek to sell any or all of REEUK’s assets to one or more third parties, in order to maximize recoveries for creditors, and to wind down any of its remaining operations.\n\n78\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nNasdaq Minimum Bid Price Notification\n\nOn July 3, 2025, we received notice from Nasdaq’s Listing Qualifications Department that we were not in compliance with the Minimum Bid Price Requirement. We were provided until December 29, 2025 to regain compliance, which generally requires our Class A Ordinary Shares to close at or above $1.00 for at least 10 consecutive business days.\n\nOn December 29, 2025, REE requested an extension of 180-days to cure the Minimum Bid Price Requirement from Nasdaq. Nasdaq granted REE’s extension request on December 30, 2025 and set June 29, 2026 as the deadline to achieve compliance. We intend to monitor the closing bid price of our Class A Ordinary Shares and to consider available options to regain compliance.\n\n2025 Annual General Meeting and Board Appointment\n\nOn January 22, 2026, we held our annual general meeting for the fiscal year-end 2025, or the Meeting, at which our shareholders approved: (i) a proposal to approve the re-election of each of Hicham Abdessamad, Carlton Rose, Ittamar Givton, Rajesh Goel, Ahishay Sardes and Daniel Barel to serve as directors of the Company, each to hold office until the close of business on the date of the next annual general meeting of shareholders and until his respective successor is duly elected and qualified, or until such individual’s earlier resignation or retirement, (ii) to approve an amendment to the Company’s Articles to increase the authorized share capital of the Company to 75,333,333 Class A Ordinary Shares, and 2,780,570 Class B Ordinary Shares, and (iii) to approve the re-appointment of Kost, Forer, Gabbay & Kasierer, a member firm of Ernst & Young Global, as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025, and its service until the next annual general meeting of shareholders, and to authorize the Board of Directors, upon the recommendation of the Audit Committee, to fix the remuneration of the independent registered public accounting firm.\n\nSpecial General Meeting of Shareholders\n\nOn November 13, 2025, we held a special general meeting of shareholders at which shareholders approved certain\n\namendments to our compensation policy, and a special cash bonus award for 2024 to Daniel Barel and Ahishay Sardes\n\nalong with related amendments to each of their respective employment terms, in each case as described in our proxy\n\nstatement filed with the SEC on October 9, 2025, as supplemented on November 12, 2025.\n\nKey Factors Affecting Operating Results\n\nREE is an early-stage growth company in the early commercialization stage and we believe that our performance and the foreseeable future of our business, including our immediate financial condition constraints depend on several factors that present opportunities for us but also pose significant risks and challenges, including those set forth in Item 3.D. of this Annual Report under the caption “Risk Factors”.\n\nKnown Trends\n\nFinancial Condition & Going Concern Qualification\n\nThe Company’s consolidated financial statements included herein have been prepared on a going concern basis. Therefore, the accompanying consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of these uncertainties. See Note 1 “General” to the consolidated financial statements included as part of this Annual Report for a further discussion of our liquidity and the conditions that raise substantial doubt regarding our ability to continue as a going concern. The Company generated a net loss of $55.8 million for the year ended December 31, 2025, as compared to a net loss of $111.8 million for the year ended December 31, 2024.\n\nIn connection therewith, we expect to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt that we will have sufficient funds to satisfy our obligations for the foreseeable future and through the next 12 months from the date of this Annual Report if we are unable to obtain sufficient additional funding or do not have access to capital to finance our current business plan. We therefore require substantial additional capital to fund our operations for the foreseeable future. Absent any potential strategic transaction, additional revenues, further cost-reduction measures or additional funding, we currently estimate that our existing financial resources will be sufficient to fund our projected operating costs and expected cash requirements into, but not beyond, the middle or the end of the second quarter\n\n79\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nof 2026. Management is actively pursuing additional financing opportunities, including through discussions with existing shareholders, as well as strategic transactions and further cost-reduction initiatives in order to extend the Company’s liquidity runway. However, there can be no assurance that such efforts will be successful or available on acceptable terms. If we are unable to obtain additional funding, consummate a strategic transaction(s), generate additional revenues or further reduce costs, we may need to significantly curtail or modify our operations and strategic plans. While we have taken steps to reduce our cash requirements through our cost reduction plan in an effort to extend our cash runway, we can provide no assurance as to the success of such efforts. See Item 3.D., Risk Factors - “REE has a history of losses, and expects to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt that we will have sufficient funds to satisfy our obligations through the next 12 months.” Until we can generate sufficient revenue and positive gross margins, we expect to finance our operations through the issuance of equity or convertible debt or other equity-linked securities along with debt financings or credit facilities, which would likely include restrictive convents relating to our capital raising activities and other financial and operational matters. The amount and timing of our future funding requirements will depend on many factors, including demand for our SDV products by OEMs and technology companies and expense levels, among others. Because we generally incur the costs and expenses from our efforts before we receive any incremental revenue with respect thereto, if any, our losses in future periods will be significant. In addition, these efforts have been and may continue to be more expensive than we currently anticipate and these efforts may not result in sufficient revenue if we do not achieve design wins or technology companies do not purchase our products in sufficient volume, which would further increase our losses.\n\nAny inability to fund our business could cause our customers, suppliers, strategic partners, or other third parties to decrease the amount of business they do with us or terminate their relationship with us, or we could go into default on our outstanding Convertible Notes, or have our current credit facility revoked, which, in turn, would permit our creditors to enforce remedies against us, which may include taking control of our business, and cause us to consider reducing, discontinuing, or selling operations or seeking protection from creditors, and further raise substantial doubt about our ability to continue as a going concern.\n\nIf we are unable to generate cash flow, we may be required to adopt one or more alternatives, such as winding down or restructuring our business, selling assets, restructuring our Convertible Notes or obtaining additional equity capital on terms that may be onerous or highly dilutive. In the event of the occurrence of any of the above, it would likely qualify as an event of default under our Convertible Notes, unless otherwise waived by the holders thereof, and thereby trigger the acceleration of a payment in an amount equal to one hundred thirty percent (130%) of the outstanding principal amount plus the accrued interest thereof on the date on which the first event of default occurred, together with all costs, including, without limitation, legal fees and expenses, of collection. As of December 31, 2025, the outstanding principal amount of our Convertible Notes was $8.5 million, and the aggregate outstanding balance, including accrued interest, was $10.3 million.\n\nTariffs, Trade Policies, and Import and Export Controls\n\nIn 2025, the Trump Administration imposed, rescinded, modified, rolled-back, and continues to impose/reimpose tariffs and trade barriers, and additional trade restrictions could be implemented on a broad range of products, geographic regions,\n\nand/or raw materials. Such tariffs have led, and may continue to lead, to the imposition of retaliatory tariffs or other measures taken by foreign countries, which may in turn lead to additional tariffs imposed or measures taken by the Trump Administration. Such items can increase the prices associated with vehicle parts and vehicle production and may reduce demand for SDV technology overall due to such costs. It may also limit our ability to procure raw components or raw materials or impede or slow the movement of goods across borders. In addition, tariffs may raise the prices for vehicles, which could reduce demand and thus the need for our SDV technology.\n\nIn August 2025, the U.S. Court of Appeals for the Federal Circuit, or the Court, affirmed a Court of International Trade, or\n\nCIT, ruling that held that the trafficking and reciprocal tariffs imposed by the Trump Administration exceeded the authority\n\ndelegated to the U.S. president. The Court also affirmed the CIT’s grant of declaratory relief that the orders are invalid as contrary to law. However, the Court vacated the CIT’s grant of a permanent injunction universally, allowing such tariffs to\n\nremain in place while an appeal is sought. The Trump Administration appealed the decision to the U.S. Supreme Court, which on February 20, 2026, held that President Trump was not authorized to impose the specified tariffs under the International Emergency Economic Powers Act. Despite the Supreme Court’s decision, significant uncertainty remains, including the imposition of additional tariffs by the Trump Administration subsequent to the Supreme Court decision.\n\nIn addition, while the Trump Administration has announced certain trade deals, including with China, implementation of such agreements may be prolonged, including as a result of the government approval processes, and disagreements between contracting parties may arise. All of the above have increased uncertainty regarding the ultimate effects of tariffs\n\n80\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nand trade policy on economic conditions and its ultimate impact on our industry and business. For additional information, see Item 3.D. Risk Factors in this Annual Report.\n\nGlobal Competition for Automotive Vehicles\n\nThe worldwide automotive market is highly competitive and volatile. The demand for automobiles is affected by a number of factors including social, political and general macroeconomic conditions, introduction of new vehicles and technologies, and costs incurred by customers to purchase or operate vehicles. Additionally, the worldwide automotive industry is in a period of global competition which may continue for the foreseeable future, including significant competition from OEMs and other vehicle manufacturers in China, and in general the competitive environment in which we operate is likely to intensify.\n\nOur business performance is related to global automotive sales and automotive vehicle production by OEMs and technology companies. Economic conditions in North America, Europe and Asia can have a significant impact on production volumes, and, accordingly, have an impact on our future revenue. Such customer production can vary from period to period due to global demand, market conditions and competitive conditions, geopolitical issues including trade restrictions and tariffs, as well as other factors. Continued or future constraints on global automotive production resulting from the effects of economic uncertainty, both global and in specific markets in which we operate, may be a limiting factor on our ability to obtain revenue. We expect to continue to capitalize on our initial discussions with OEMs in order to expand our presence in certain EU countries, Japan, and India and capture the long-term growth opportunities we see from OEMs, in particular.\n\nElectric Vehicle Market Demand\n\nWith electrification on the rise for commercial fleets, we anticipate increased demand for EV solutions. In particular, REE has observed increase support for EVs in recent years as Tesla has become a dominant player in a once insular automotive industry. Additionally, in 2021 traditional OEMs had announced that they will transition their resources to producing EVs. Whereas EVs were traditionally marketed to niche areas, we had seen traditional OEM’s establishing waiting list for customers who want to purchase the electric version of their mainstream vehicles.\n\nIn REE’s view, this trend is driven by several factors. A rising environmental consciousness is encouraging customers to weigh their emission footprint. As a zero-emission alternative to traditional ICE options, an EV that can match or exceed an ICE in performance is a natural choice. Assisting with that choice, local and national governments previously implemented both various forms of rebates and credits for the purchase of an EV and prohibitive ICE regulations to expedite the rise of e-mobility by accelerating the push for zero emission vehicles and increased awareness of the impacts of global warming. As EV sales grow, EV components become more prevalent, allowing automakers to purchase parts at greater availability and lower costs, further accelerating the switch to electric. Additionally, the continuing improvement in battery technology and continuing build-out of electric charging infrastructure are decreasing range anxiety, increasing comfort with EV range capabilities and facilitating EV adoption. Lastly, particularly in the U.S. market, customers must deal with increased gas cost resulting from civil unrest and wars in countries on which they depend for gas. However, the Trump Administration’s recent policy changes could reduce or eliminate supply and demand-side incentives, resulting in slower adoption of EVs.\n\nSoftware-Defined Vehicle Demand\n\nLarge OEMs interest in SDV technology appears to be growing. According to Morgan Stanley’s The Migration to SDVs report, the SDV market is projected to grow at a compound annual growth rate of 41% from $147 billion in 2024 to $1.16 trillion by 2030. SDV accounted for just 3% of automotive production in 2021 and may represent 90% of new vehicle production by 2029. Additionally, in 2024, Rivian established a joint venture with Volkswagen International America Inc. and Volkswagen AG and its affiliate to build electrical architecture and software technology together for future electric vehicles. Additionally, General Motors, completed its acquisition of GM Cruise Holdings LLC, which it uses to lead in autonomous and software-defined vehicles, according to its public reports. Ford Motor Company has similarly expressed, according to its public report, that electric and software-defined vehicles will play an increasingly important role for its future. We have seen and continue to see interest from OEMs in SDV technology capabilities and we therefore anticipate continued demand and growth for our technology.\n\nDesign Wins and Proof-of-Concept\n\nWe believe that global OEMs and technology companies are continuously looking for innovative ways to improve their vehicles and have thus far been unable to product in-house systems with respect to SDV technology. Design wins along with proofs-of-concept with respect to our SDV technology is critical to our future. However, the revenue generated by a\n\n81\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\ndesign win and/or any proof of concept, and the time necessary to achieve a design win or to complete a proof-of-concept can vary significantly, including for several years. To be competitive, we would need to maintain strong SDV technology compared to the industries’ technology and continue to offer solutions that remain superior to the competition’s, including as compared to any in-house technologies developed by OEMs or other technology companies. While we seek to work closely with OEMs and technology companies to understand their system requirements, there is no guarantee that such potential customers will purchase our SDV products in any certain quantity or at any certain price even if we are successful in achieving a design win or proof-of-concept.\n\nRegulation for ADAS and Autonomous Driving Solutions\n\nWe have equipped our products with certain autonomous driving readiness features. Generally, laws pertaining to autonomous driving are evolving globally, and in some cases may create restrictions on advanced driver assistance or autonomous features. It is also subject to considerable regulatory uncertainty as the law evolves to catch up with the rapidly evolving nature of the technology itself, all of which are beyond REE’s control. Currently, we believe that there are no Federal Motor Vehicle Safety Standards that relate to the performance of autonomous technology and no widely accepted uniform standards to certify autonomous technology and its commercial use on public roads. However, NHTSA has established recommended guidelines, including its Standing General Order (as amended on April 24, 2025) requiring reports regarding certain crashes involving vehicles with advanced driver assistance systems. and proposed a regulation for autonomous vehicles. Certain states have legal restrictions on such vehicles, and many other states are considering them. Autonomous driving laws and regulations are expected to continue to evolve in numerous states in the U.S., which increases the likelihood of a patchwork of complex or conflicting regulations or may delay products or restrict autonomous features and availability, which could adversely affect our business. Autonomous products that may be integrated into REE products also may not achieve the requisite level of autonomous compatibility required for certification and rollout to consumers or satisfy changing regulatory requirements, which could require REE to redesign, modify and/or update its products in order to be compatible with autonomous products.\n\nConsumer Adoption of Our ADAS and Autonomous Driving Solutions\n\nWe expect to target what we view as a strong demand for software that can deploy autonomous-ready solutions. In recent years, we have seen that there has been an automotive focus on autonomous driving. We have heard from potential customers that the commercial vehicle market suffers from driver shortages and autonomy is a compelling solution for fleets and operators. However, fleets and operators lack a safe, mature and reliable vehicle architecture to support autonomous driving, once they have identified a proper autonomous software provider. We believe that our successful demonstration with Airbus UpNext positions us to be a leader with autonomous-ready technology to service this market need. As a result, consumers’ demand for, and willingness to adopt, ADAS and autonomous driving technologies will significantly impact our financial performance. We believe that our leadership position in ADAS positions us to continue to set the standard for advanced autonomous solutions and will help us benefit from increasing consumer confidence in and demand for autonomous technology over time.\n\nTax Law and Policy Changes\n\nOn July 4, 2025, the Trump Administration signed the reconciliation bill, commonly known as the One Big Beautiful Bill Act, or OBBBA, into law. Among other items included therein, OBBBA ended EV charging infrastructure tax credits and certain tax credits for electric vehicles. It also extended certain provisions of the Tax Cuts & Jobs Act of 2017, and modified certain international tax provisions, all of which may be subject to further clarification and the issuance of interpretive guidance from the U.S. Internal Revenue Service and the U.S. Treasury. The Company is assessing the legislation and its effect on its consolidated financial statements, including as more clarity is developed with respect to the\n\nOBBBA.\n\nIn addition, certain tax policy changes in the United States may phase out certain demand-side incentives to purchase EVs and reduce certain supply-side benefits to produce EVs, all of which may result in slower adoption of EVs and/or otherwise\n\npotentially disrupt the market for EVs.\n\nPolitical Unrest Armed Conflict in Israel and Other Parts of the Middle East\n\nIn recent years, Israel has engaged in armed conflict with terrorist organizations in the Middle East, including Hamas in the\n\nGaza Strip, Hezbollah in southern Lebanon, and the Houthis in Yemen. For example, Israel has been in a war against Hamas and other terrorist organizations in the Gaza Strip and in armed conflict against Hezbollah in Lebanon since 2024. Although certain ceasefire agreements have been reached, there is no assurance that these agreements will fully mitigate hostilities, be upheld and/or continue in the near future. For example, despite a prior ceasefire, Israel and Hezbollah have\n\n82\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nresumed armed conflict following renewed rocket attacks by Hezbollah in March 2026. It is possible that other terrorist organizations as well as other hostile countries will join the hostilities and that such clashes may escalate in the future into a greater regional conflict. Additionally, it is possible that other terrorist organizations, as well as other hostile countries, may engage in armed conflict with Israel and that such clashes may escalate in the future into a greater regional conflict. Additionally, instability in Syria has led Israel to engage in armed actions therein and it may do so again in the future. Israel is also under current threats from Iran. In particular, for twelve days in 2025 Israel engaged in armed conflict with Iran and the United States launched its own military strikes on Iran. Such conflict ended in a ceasefire agreement. In late February 2026, Israel and the United States attacked Iran, which triggered a broad Iranian military response across the Middle East and has contributed to significant regional instability including with respect to the Straight of Hormuz. The conflict and its impact on the Middle East, in particular, remains highly fluid, and we are unable to predict if, when, or on what terms, it will be fully resolved. Although certain ceasefire agreements have been reached, there is no assurance that these agreements will fully mitigate hostilities, be upheld, be respected, or remain in force, and additional hostilities and escalations may occur at any time.\n\nThe current conflict had led to a deterioration of certain indicators of Israel’s economic standing, including a downgrade in Israel’s credit rating by rating agencies such as by Moody’s, S&P Global, and Fitch. Moreover, there have been and continues to be periods of political disruption in Israel, including through widespread protests regarding various political issues, multiple elections in the past, and a corruption trial of Israel’s Prime Minister.\n\nAny conflict involving Israel, the interruption or curtailment of trade between Israel and its trading partners (including from\n\nembargos), significant downturn in the economic or financial conditions in Israel, or any political instability in the region or in Israel could adversely affect Israel’s economy, business conditions and/or our business operations, results of operations, and financial condition. It may also result in parties with whom we have agreements claiming that they are not obligated to perform their commitments pursuant to force majeure provisions in such agreements. This may make it more difficult for us to enter into customer agreements, to receive purchase orders for our products, and/or to raise capital, which\n\nwould adversely affect REE’s operations and results of operations.\n\n83\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nKey Components of Statements of Operations\n\nRevenue\n\nAside from isolated projects from time-to-time, we have not begun significant commercial operations and currently have no significant revenues. Once we reach commercialization and the sales of our SDV products, which following our current production pause may in the future also include the recommencement of production, we expect that the significant majority of our revenue would likely be derived from any of the following, including a combination of, direct sales to OEMs, dealers, logistics and technology companies and, thereafter, other related products and services within the REE ecosystem.\n\nCost of Revenues\n\nCost of revenues is primarily comprised from the cost of SDVs and includes direct parts, material and labor costs, share-based compensation expenses, production overhead (e.g., depreciation of machinery and tooling), shipping and logistics costs, and reserves including for estimated warranty costs related to the sale of SDVs, inventory write-downs and/or write-offs and adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value, or NRV. In 2025, our cost of revenues also included one-time costs related to the production pause.\n\nResearch and Development Expenses, Net\n\nResearch and development, or R&D, expenses consist of our costs associated with the employment of our R&D and engineering staff, including share-based compensation, third-party engineering consultants, development projects such as corners programs and component programs and program consumables. Such R&D expenses also include expenses related to the testing, validation and certification of our SDV vehicles, UK R&D tax credit and grants received for R&D programs and projects, costs associated with our properties, and depreciation of our fixed assets.\n\nSelling, General and Administrative Expenses\n\nSelling, general and administrative expenses consist of our costs associated with the employment of staff (excluding R&D and engineering staff), 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.\n\nOther Expenses\n\nOther expenses consist of impairment charges of long-lived assets.\n\nFinancial Income (Expenses), Net\n\nFinance income (expenses), net consists primarily of change in fair value of derivatives liabilities, interest expenses and discount of convertible promissory notes and bank fees offset by interest income and foreign currency exchange gains or losses. Foreign currency exchange gains or losses are related to changes in the value of our non-U.S. denominated financial assets and liabilities, primarily cash and cash equivalents and operating lease liabilities related to our leased properties in Israel, the United States, and the UK. Interest income consists of interest earned on our cash, cash equivalents, and short-term investments. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period. Derivative liabilities at fair value are related to our convertible promissory notes. Fair value of derivative liabilities has and is expected to continue to vary depending on the change in stock price, volatility, risk-free rate, cost of debt and other inputs used for the fair value measurements. Interest expenses relate to the accrued interest on our short-term loans under our credit facility and our convertible promissory notes. Discount expenses relate to the amortization of the discount on our convertible promissory notes.\n\n84\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nResults of Operations\n\nYear Ended December 31, 2025 Compared to Year Ended December 31, 2024\n\nThe following table sets forth REE’s historical operating results for the periods indicated:\n\nYear ended December 31,\n\n20252024Change% Changes\n\nUSD in thousands\n\nRevenues$1,297 $183 $1,114 609 %\n\nCost of revenues17,571 3,681 13,890 377 %\n\nGross loss$(16,274)$(3,498)$(12,776)365 %\n\nResearch and development expenses, net45,432 49,460 (4,028)(8)%\n\nSelling, general and administrative expenses19,988 26,171 (6,183)(24)%\n\nOther expenses24,716 — 24,716 \n\nTotal operating expenses90,136 75,631 14,505 19 %\n\nOperating loss$(106,410)$(79,129)$(27,281)34 %\n\nIncome (Loss) from warrants remeasurement37,953 (22,750)60,703 267 %\n\nFinancial income (expenses), net10,658 (7,812)18,470 236 %\n\nNet loss before income tax$(57,799)$(109,691)$51,892 (47)%\n\nTaxes on income (tax benefit)(1,992)2,063 (4,055)(197)%\n\nNet loss$(55,807)$(111,754)$55,947 (50)%\n\n85\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nRevenues\n\nAs previously noted, we have not begun significant commercial operations and currently have no significant revenues. For the year ended December 31, 2025, we recorded revenues in the amount of $1.3 million from SDV engineering and development services. For the year ended December 31, 2024, we recorded revenues in the amount of $0.2 million with respect to the sale of SDV prototypes to a customer.\n\nCost of Revenues\n\nCost of revenues increased by $13.9 million, or 377%, from $3.7 million for the year ended December 31, 2024 to $17.6 million for the year ended December 31, 2025. In the year ended December 31, 2025, cost of revenues was impacted primarily by a one-time non-cash inventory write-off, in the amount of $15.9 million, which had no operational use following our announced pause in production and one-time costs related thereto. This increase was partially offset by adjustments to write down the carrying value of inventory, which exceeded its estimated NRV, as part of material purchasing for preparation to production of SDVs in the year ended December 31, 2024.\n\nResearch and Development Expenses, Net\n\nR&D expenses decreased by $4.1 million, or 8%, from $49.5 million for the year ended December 31, 2024 to $45.4 million for the year ended December 31, 2025. The decrease was primarily attributable to (i) lower non-recurring engineering and materials expenses related to the development of our P7 lineup SDVs, (ii) a decrease of $2.6 million in payroll and related expenses primarily in connection with our cost reduction plan and the reduction-in-force of R&D employees thereunder, and (iii) lower share-based compensation expenses, which decreased to $2.4 million for the year ended December 31, 2025 from $4.2 million for the year ended December 31, 2024. These decreases were partially offset by lower UK R&D tax credits, which were $2.4 million for the year ended December 31, 2025, compared to $5.7 million for the year ended December 31, 2024, the absence of a grant from APC in the UK in the amount of $3.6 million received in the year ended December 31, 2024, which was the final year in which the Company received this grant, and one-time expenses of $1.6 million related to our reduction-in-force for the year ended December 31, 2025. Excluding UK R&D tax credits, share-based compensation expense, and one-time expenses related to our R&D reduction-in-force, our R&D expenses decreased by $7.3 million, or 14%, from $51.0 million for the year ended December 31, 2024 to $43.7 million for the year ended December 31, 2025.\n\nSelling, General and Administrative Expenses\n\nSelling, general, and administrative expenses decreased by $6.2 million, or 24%, from $26.2 million for the year ended December 31, 2024 to $20.0 million for the year ended December 31, 2025. The decrease was primarily attributable to (i) a lower share-based compensation expense of $2.6 million for the year ended December 31, 2025, compared to $5.4 million for the year ended December 31, 2024, (ii) a decrease of $2.7 million in payroll and related expenses primarily in connection with our cost reduction plan and the reduction-in-force of non-R&D employees thereunder, (iii) and a decrease in director and officers insurance expenses. These decreases were partially offset by one-time expenses of $0.5 million related to our non-R&D reduction-in-force for the year ended December 31, 2025. Excluding share-based compensation, and one-time expenses related to our non-R&D reduction-in-force, selling, general and administrative expenses decreased by $3.9 million, or 19%, from $20.8 million for the year ended December 31, 2024 to $16.9 million for the year ended December 31, 2025.\n\nOther Expenses\n\nOther expenses totaled $24.7 million for the year ended December 31, 2025, compared to zero expenses for the year ended December 31, 2024. The increase was attributable to our decision to pause production and the determination therewith that the carrying value of certain long-lived assets may not be recoverable. Accordingly, we performed impairment assessments that resulted in impairment charges of long-lived assets in the amount of $24.7 million.\n\nIncome (Loss) from Warrants Remeasurement\n\nIncome (loss) from warrants remeasurement, increased by $60.8 million, or 267%, from a loss of $22.8 million for the year ended December 31, 2024 to an income of $38.0 million for the year ended December 31, 2025. This increase was due to pre-funded warrants that we issued as part of our September 2024 registered offering and the change in the fair value of such warrant liability, which was mainly impacted by the decline in the price of our Class A Ordinary Shares for the year ended December 31, 2025.\n\n86\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nFinancial Income (Expenses), Net\n\nFinancial income (expenses), net increased by $18.5 million, or 236%, from financial expenses, net of $7.8 million for the year ended December 31, 2024 to financial income, net of $10.7 million for the year ended December 31, 2025. This increase was primarily attributable to changes in the fair value of a derivative liability, which was mainly driven by the decrease in the price of our Class A Ordinary Shares for the year ended December 31, 2025. By comparison, during the year ended December 31, 2024, the Company recognized losses related to changes in the fair value of the derivative liability as a result of an increase in the price of our Class A Ordinary Shares following the Company’s September 2024 registered offering. In addition, financial income was adversely affected by lower interest income earned on bank deposits as a result of lower average cash balances.\n\nTaxes on Income (tax benefit)\n\nTaxes on income (tax benefit) decreased by $4.1 million, from taxes on income of $2.1 million for the year ended December 31, 2024 to a tax benefit of $2.0 million for the year ended December 31, 2025. The change was primarily attributable to changes in deferred tax balances resulting in a tax benefit for the year ended December 31, 2025, compared to taxes on income for the year ended December 31, 2024.\n\nB. Liquidity and Capital Resources.\n\nAs of the date of this Annual Report, we have not yet generated significant revenues from our principal business operations and have generated minimal revenues overall and do not expect to generate sufficient revenues from the sale of products in the near future to cover our costs and capital expenditures.\n\nSince inception, we have incurred losses and have generated negative cash flows from operations and have therefore funded our operations, capital expenditure and working capital needs through capital contributions, the sale of our securities including Class A Ordinary Shares, warrants, pre-funded warrants, and convertible promissory notes to investors, and from the consummation of the merger whereby 10X Capital Venture Acquisition Corp (“10X Capital”), a Delaware corporation and special purpose acquisition company, and Spark Merger Sub, Inc. (“Merger Sub”), our wholly-owned subsidiary, pursuant to which Merger Sub merged with and into 10X Capital.\n\nIn accordance with the ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,\n\nwe evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our\n\nability to continue as a going concern within one year after the date that those consolidated financial statements were issued.\n\nOur ability to continue as a going concern will depend on our ability to obtain additional financing, attain further operating efficiencies, and generate future cash from operations, however, we can provide no assurance that any will occur. These conditions raise substantial doubts about the Company's ability to continue as a going concern. Therefore, the accompanying consolidated financial statements in this Report have been prepared on a going concern basis and do not include any adjustments with respect to the carrying amounts of assets and liabilities and their classification that might be necessary should the Company be unable to continue as a going concern. See Note 1 “General” to our financial statements included as part of this Annual Report for a further discussion of our liquidity and the conditions that raise substantial doubt regarding our ability to continue as a going concern. Our ability to access capital is critical. Until we can generate sufficient revenue to cover our operating expenses, working capital and capital expenditures, we will need to raise additional capital or debt to continue our business operations. Our ability to fund our cash needs is subject to various risks,\n\nincluding as detailed in the risk factor section in Item 3.D. of this Annual Report.\n\nMarch 2025 Registered Direct Offerings & Lock-up Agreements\n\nOn March 18, 2025, we entered into a securities purchase agreement with certain institutional and accredited investors, providing for the issuance of an aggregate of 6,376,631 Class A Ordinary Shares at a purchase price of $4.25 per ordinary share, or the March 18 Offering. The March 18 Offering closed on March 19, 2025, and the offering resulted in gross proceeds of approximately $27.1 million, which, after the deduction of fees and expenses, we intended to use the net proceeds for working capital and general corporate purposes.\n\nAdditionally, on March 26, 2025, we entered into a securities purchase agreement with certain institutional and accredited\n\n87\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\ninvestors, providing for the issuance of an aggregate of 2,219,176 Class A Ordinary Shares at a purchase price of $4.25 per\n\nordinary share. The offering closed on March 27, 2025 and resulted in gross proceeds of approximately $9.4 million, which, after the deduction of fees and expenses, we intended to use the net proceeds for working capital and general corporate purposes.\n\nAs part of each of these transactions, each of the directors and executive officers of the Company entered into lock-up agreements, pursuant to which they agreed not to sell or transfer any of the Company securities which they hold, subject to\n\ncertain customary exceptions, for established periods as set forth in the securities purchase agreements. Additionally, the Company agreed that until September 19, 2025, it will not conduct any sales of ordinary shares or equivalent securities involving a variable rate transaction (as defined in the securities purchase agreement), subject to certain exceptions as described in the securities purchase agreement, which included REE’s at-the-market agreements where the sale of Class A\n\nOrdinary Shares are made at a price per share greater than $6.50.\n\nSeptember 2024 Securities Purchase Agreements\n\nOn September 15, 2024, we entered into a securities purchase agreement, or the September 2024 Offering, with certain investors for the issuance of an aggregate of (i) 7,362,930 Class A Ordinary Shares, at a price of $4.122 per share, and (ii) 3,639,893 pre-funded warrants each to purchase one Class A Ordinary Share. The pre-funded warrants were sold at a price of $4.121 each, representing the per share offering price of $4.122 per Class A Ordinary Share, minus the $0.001 per share exercise price of such pre-funded warrant. The total net proceeds were approximately $44.9 million after deducting transaction costs. We have been using the net proceeds from the September 2024 Offering for working capital and general corporate purposes.\n\nMarch 2024 Public Offering\n\nOn March 1, 2024, REE executed an underwriting agreement, or the Underwriting Agreement, between the Company and Roth Capital Partners LLC, or Roth, pursuant to which the Company conducted an underwritten public offering, or the Public Offering, of 2,000,000 Class A Ordinary Shares at a purchase price of $6.50 per share, for aggregate gross proceeds of approximately $13.0 million, or March 2024 Offering. Pursuant to the terms of the Underwriting Agreement, the Company also granted Roth a 20-day option to purchase Class A Ordinary Shares of up to 300,000 Class A Ordinary Shares, or 15% of the number of Class A Ordinary Shares sold in the March 2024 Offering, solely to cover over-allotments. On March 4, 2024 Roth exercised its overallotment option to purchase an additional 300,000 Class A Ordinary Shares in full. The March 2024 Offering, including the shares issuable upon the exercise of the overallotment option, closed on March 5, 2024.\n\nAt the closing of the Public Offering, we issued 2,300,000 Class A Ordinary Shares, for aggregate net proceeds of approximately $14.135 million to REE, after deducting the underwriting discounts and transaction costs payable by us. REE has used the net proceeds from the March 2024 Offering for general working capital purposes.\n\nATM Agreements\n\nOn August 16, 2022, we entered into the ATM Equity Offering Sales Agreement, or the BofA Agreement, with BofA Securities Inc., or BofA, pursuant to which we may offer and sell, at our option, up to $75.0 million of our Class A Ordinary Shares through an “at-the-market” equity program under which BofA agreed to act as sales agent. As of December 31, 2025, we had not sold any of our Class A Ordinary Shares under the BofA Agreement.\n\nOn July 14, 2023, we entered into the HCW Agreement, pursuant to which we may offer and sell, at our option, up to $35 million of Class A Ordinary Shares through an “at-the-market” equity program under which HCW agreed to act as our sales agent. Throughout the year ended December 31, 2025 we have not sold any of our Class A Ordinary Shares under the HCW Agreement. Throughout the year ended December 31, 2024, the Company sold 310,822 Class A Ordinary Shares, under the ATM Sales Agreement for total net proceeds of $0.2 million.\n\nConvertible Promissory Notes and Warrants    \n\nOn November 27, 2023, we entered into securities purchase agreements, or the November Purchase Agreements, with certain investors, pursuant to which we agreed to issue and sell convertible promissory notes, or the November Notes, in the principal amount of $8 million, in the aggregate, at a conversion price of $5.09 per share (subject to adjustment as provided therein), and warrants, or the November Warrants, to purchase up to an aggregate of 1,571,710 of Class A Ordinary Shares at an exercise price of $4.42 per share (subject to adjustment as provided therein). Closing under the November Purchase Agreements occurred on December 3, 2023, pursuant to which the November Notes and November Warrants were issued to the investors.\n\n88\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nIn addition, on December 6, 2023, we entered into a subsequent securities purchase agreement, or the December Purchase Agreement, dated December 2, 2023, with a certain accredited investor, pursuant to which we agreed to issue and sell an additional convertible promissory note, or the December Note, in the principal amount of $750,000 at a conversion price of $5.74 per share (subject to adjustment as provided therein), and additional warrants, or the December Warrants and together with the November Warrants, the “Warrants”, to purchase up to 130,662 Class A Ordinary Shares, at an exercise price of $5.74 per share (subject to adjustment as provided therein). Closing under the December Purchase Agreement occurred on December 20, 2023, pursuant to which December Note and December Warrants were issued to the applicable investor.\n\nPursuant to the November Purchase Agreement and December Purchase Agreement, the November Notes and December Note, or together the Convertible Notes, each have a term of five-years from the date of issuance, accrue interest at a rate of ten percent per annum (compounding annually) and are convertible into Class A Ordinary Shares at conversion prices of $5.09 and $5.74 per share, respectively. We may not repay any portion of the outstanding principal amount of the November Notes or December Note (or any interest accrued thereon) prior to the maturity date. The conversion price of November Notes and December Note is subject to customary adjustments, and the Convertible Notes contain customary anti-dilution protections (including in the event of (i) certain equity issuances by us at a price less than the conversion price then in effect, provided that the conversion price shall in no event be reduced to less than $1.02 and $1.15 per share, respectively; (ii) stock splits and combinations; and (iii) certain dividends or distributions).\n\nOn December 23, 2024, we received a notice of conversion for $300,000 of the principal amount, including accrued interest, of the Convertible Notes. As a result, we issued 72,780 Class A Ordinary shares at conversation price of $4.122.\n\nThe November Warrants to purchase up to 1,571,710 Class A Ordinary Shares are exercisable at an exercise price of $4.42 per Class A Ordinary Share (subject to customary adjustments) and have a term of five-years from the date of issuance, which was December 3, 2023. The December Warrants to purchase up to 130,662 Class A Ordinary Shares are exercisable at an exercise price of $5.74 per Class A Ordinary Share (subject to customary adjustments) and have a term of five years from the date of issuance, which was December 20, 2023.\n\nAs of December 31, 2025, the Company has Convertible Notes outstanding that can be converted into 2,506,984 Class A Ordinary Shares (including Convertible Notes owed under accrued interest) and Warrants outstanding to purchase up to 1,702,372 Class A Ordinary Shares.\n\nLoan under Credit Facility\n\nOn August 14, 2023, we entered into an agreement with a leading Israeli commercial bank to establish a revolving credit line facility, or the Credit Facility, in the amount of $15 million, which the bank is committed to until December 31, 2024. In December 2023, the terms of the Credit Facility were extended through June 30, 2025. In March 2024, the terms of the credit facility were extended through December 31, 2025. Outstanding loans under the Credit Facility had a variable interest at the rate of the Monthly Term Secured Overnight Financing Rate, or SOFR, plus an annual margin of 3.5%. The interest is payable on a monthly basis. Under the terms of the Credit Facility, we were required to keep unsecured deposits in the aforementioned bank in the amount of $20 million. In November 2024, the agreement was amended to increase the Credit Facility amount to $18,000 while the unsecured deposit amount was reduced to $18,000. Under certain terms, the bank has the right to offset loans drawn under the Credit Facility with the deposits kept in the bank. We were charged a fee of 0.25% per annum on amounts available for draw that are undrawn under the Credit Facility. The Credit Facility expired on December 31, 2025 and was not renewed thereafter.\n\nAs of December 31, 2025 and 2024 we had utilized zero and $18,000, respectively, under the Credit Facility for a short term loan. In January 2025, the short term loan was fully repaid by us. As of December 31, 2024 the annual interest rate for the loan utilized under the Credit Facility was 7.86%.\n\n89\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nCash Flows Summary\n\nPresented below is a summary of our operating, investing and financing cash flows for the years ended December 31, 2025 and 2024:\n\nYear ended December 31,\n\n20252024\n\nUSD in thousands\n\nNet cash provided by (used in)\n\nOperating activities$(68,710)$(68,985)\n\nInvesting activities(6,205)35,969 \n\nFinancing activities16,362 63,548 \n\nNet change in cash and cash equivalents and restricted cash$(58,553)$30,532 \n\nCash Flows from Operating Activities\n\nOur 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 cash outflows on operating activities until we begin to generate sufficient cash flows from our business.\n\nDuring the year ended December 31, 2025, operating activities used $68.7 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $55.8 million before deducting non-cash charges mainly consisting of impairment of long-lived assets of $24.7 million, share-based compensation of $5.1 million, depreciation and amortization expenses including a change in operating right of use asset and liability, net, of $5.0 million, and a decrease in operating working capital (including inventory write-offs) of $2.8 million. These non-cash charges were offset by changes in the fair value of warrant and derivative liabilities of $49.7 million.\n\nDuring the year ended December 31, 2024, operating activities used $69.0 million in cash. The primary factors affecting operating cash flows during this period were a net loss of $111.8 million before deducting non-cash charges mainly consisting of changes in the fair value of warrant and derivative liabilities of $31.9 million, share-based compensation of $9.6 million, depreciation, amortization, and accretion expense and a change in operating right of use asset and liability, net, of $4.0 million. These non-cash charges were offset by an increase in operating working capital of $6.4 million.\n\nCash flows used in operating activities decreased by $0.3 million from $69.0 million for the year ended December 31, 2024 to $68.7 million for the year ended December 31, 2025. The decrease was primarily attributable to the cost reduction plan announced in June 2025. The decrease was partially offset by (i) production-related costs incurred prior to the production pause, which were mainly related to inventory purchases for the P7 program, (ii) lower UK R&D tax credits received during 2025 compared to 2024 and (iii) the absence of UK APC grants for 2025, as compared to 2024.\n\nCash Flows from Investing Activities\n\nOur cash flows used in investing activities to-date have been primarily comprised of cash outflows for tangible fixed assets (plant and equipment).\n\nNet cash used in investing activities was $6.2 million for the year ended December 31, 2025, which was mainly driven by purchases of property and equipment in the amount of $6.3 million.\n\nNet cash provided by investing activities was $36.0 million for the year ended December 31, 2024, which was primarily due to the maturity of short-term investments of $43.5 million, partially offset by cash outflows for purchases of property and equipment of $7.5 million.\n\nCash Flows from Financing Activities\n\nOur cash flows provided by financing activities to-date have been primarily comprised of proceeds from the issuance of Class A Ordinary Shares, proceeds and repayments of short-term loans, and proceeds from the issuance of warrants and pre-funded warrants.\n\n90\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nNet cash provided by financing activities was $16.4 million for the year ended December 31, 2025, which was primarily due to proceeds from issuance of Class A Ordinary Shares, net of $34.4 million, which was partially offset by the repayment of a short-term loan under our Credit Facility in the amount of $18.0 million.\n\nNet cash provided by financing activities was $63.5 million for the year ended December 31, 2024, which was primarily due to proceeds from the issuance of Class A Ordinary Shares, net of $45.5 million, issuance of pre-funded warrants of $15.0 million and proceeds from short-term loan, net of $3.0 million.\n\nContractual Obligations and Commitments\n\nWe currently lease approximately 3,300 square meters (approximately 35,520 square feet) of office space in Glil-Yam, Israel as our headquarters. This facility accommodates its principal executive, research and development, marketing, design, business development, human resources, finance, information technology, and administrative activities. The lease is for a five-year term, which expires in the second half of 2026, with the option to extend for an additional period of five years until 2031. On April 7, 2026, we entered into an agreement with our landlord to permit the use of approximately 11,840 square feet (1,100 meters) of this space by a third party in exchange for a monthly payment (including the associated monthly property taxes) by such party. Additionally, the third party is expected to reimburse the Company monthly for one-third of its average total monthly utility expense (e.g., water, electric). All other terms of the Company’s lease remain unchanged. As a result, the Company’s monthly lease payment will be reduced to two-thirds of the original lease payment amount.\n\nIn the UK, we had a lease agreement for the UK Engineering Centre and Launch Factory, which was located in Coventry, UK. The facility was approximately 130,000 square feet (approximately 12,077 square meters), under a lease agreement that expired in 2032. We had utilized this facility for engineering, process validation activities, along with product assembly operations. As of March 2026, through our wholly-owned UK subsidiary (REE Automotive UK Limited), this lease agreement has been assigned to a third party. As a result, effective March 10, 2026, REE no longer occupies such facility and is therefore no longer making monthly lease payments with respect thereto. As part of the assignment agreement, REE received a gross refund of its rent deposit in the amount of approximately $2.3 million (£1.7 million), and, concurrently, provided a rent deposit in the amount of approximately $0.8 million (£0.6 million) in connection with the assignee’s lease, which will be released upon the expiration of the original lease term in 2032. In addition, REE incurred certain costs in connection with the assignment of the lease in the amount of approximately $0.2 million (£0.2 million). For further information, see Note 20 to our financial statements and Item 4.D above. In addition, REE maintains a lease in Warwickshire with MIRA Technology Park, which it utilizes as an engineering and testing facility. This lease agreement may be terminated by either party upon three months’ notice.\n\nIn the U.S., we had a lease agreement for our Austin, Texas facility. The facility was approximately 118,132 square feet (10,975 square meters) and was under a lease agreement that expired in 2032. In 2025 and 2024, we partially subleased this facility to third parties, which was terminated at the end of 2025. REE has not utilized this facility in 2026 and the landlord retook possession of the property. On May 8, 2026, REE, through its wholly-owned U.S. subsidiary (REE Automotive USA Inc.) entered into an agreement with its landlord to terminate its lease agreement. Such agreement described the final amounts paid or to be paid to the landlord in exchange for the release of all relevant parties from the lease agreement and obligations thereunder. As a result, effective May 8, 2026, REE no longer occupies such facility and is therefore no longer making lease payments with respect thereto. For further information, see Note 20 to our financial statements and Item 4.D above.\n\nIn 2024, we entered into an agreement with Roush Industries to serve as our contract manufacturer for the assembly and integration of our SDVs. The assembly and integration space was located at their Southeast, Michigan facility with approximately 47,200 square feet (approximately 4,385 square meters) of dedicated space for production, warehousing, transfer to production, assembly, testing, and storage, including both inside and outside. Prior to our production pause, this space was being prepared for our vehicle assembly and integration activity. Following our production pause, we are no longer using this facility and we terminated the agreement during 2025.\n\nThe following table summarizes our contractual obligations and other commitments for cash expenditures as of December 31, 2025, and the years in which these obligations are due. Certain obligations are reflected in our balance sheet, while other are disclosed as future obligations. This table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.\n\n91\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nPayments due by period\n\nTotalLess than 1 year1-5 yearsMore than 5 years\n\nUSD in thousands\n\nContractual obligations:\n\nOperating lease obligations$17,780 3,435 9,882 4,463 \n\nPurchase obligations1,603 1,603 — — \n\nTotal$19,383 $5,038 $9,882 $4,463 \n\nPurchase obligations. The amounts listed for purchase obligations in the table above represent agreements (including open purchase orders to purchase inventory) to purchase products and for other expenditures in the ordinary course of business that are enforceable and legally binding and that specify all significant terms.\n\nOpen 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.\n\nIn addition, we entered 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.\n\nC. Research and development, patents and licenses, etc.\n\nWe have invested significant time and expense into research and development with respect to our products. Our research and development activities are primarily located in Israel and in the UK. Our ability to obtain a leadership position in the automotive industry depends in part on our ongoing research and development activities. Our research and development team includes engineers and researchers with a diverse range of expertise, levels of experience, and academic backgrounds. We have a strong combination of engineers with automotive and technology industry experience from Israel, the UK and Germany, who together combine innovative thinking with a common goal of developing a superior SDV product for the automotive market. Our research and development department is comprised of approximately 97 employees and external consultants as of December 31, 2025. In 2025, research and development costs accounted for approximately 50% of our total operating expenses. Following our production pause and shift toward a technology-first approach focused on collaboration with OEMs and strategic partners, we expect to continue to incur expenses from our research and development activities.\n\nIsraeli tax law allows, under certain conditions, a tax deduction for expenditures related to scientific research and development projects, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:\n\n• the expenditures are approved by the relevant Israeli government ministry, determined by the field of research;\n\n• the research and development must be for the promotion of the company; and\n\n• the research and development is carried out by or on behalf of the company seeking such tax deduction.\n\nThe amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Israeli Income Tax Ordinance (New Version), 5721-1961. Expenditures that are unqualified under the conditions above are deductible in equal amounts over three years.\n\nD. Trend information\n\nOther than as disclosed in “Item 5.A. Operating Results — Key Factors Affecting Operating Results” and elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to December 31, 2025 that are reasonably likely to have a material effect on our total revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.\n\n92\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nE. Critical Accounting Estimates\n\nOur financial statements have been prepared in accordance with U.S. GAAP. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates, judgments and assumptions. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period and accompanying notes. Actual results could differ from those estimates. Our management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made.\n\nWhile our significant accounting policies are described in the notes to its financial statements, we believe the following accounting policies are the most critical in fully understanding and evaluating our financial condition and results of our operations under U.S. GAAP.\n\nImpairment of long-lived assets\n\nLong-lived assets of the Company are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.\n\nRecoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.\n\nFor the year ended December 31, 2025, $24.3 million impairment charges were recognized in connection with our production pause, which includes our production lines, equipment, and tooling. For the years ended December 31, 2024 and 2023, no impairment charges were recognized.\n\nInventory\n\nThe Company’s inventory, which includes raw materials, work in-process, and finished goods, is carried at the lower of cost or Net Realizable Value, or NRV. Inventory cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. In the case of produced inventories and work in progress, cost includes an appropriate share of production overheads based on operating capacity.\n\nAt the end of each reporting period, the Company evaluates whether its inventories are damaged, obsolete, or have material changes in price or other causes, and if so, a loss is recognized in the period in which it occurs. Inventory write-downs are also based on reviews for any excess or obsolescence.\n\nThe Company also reviews its inventory to determine whether its carrying value exceeds the NRV upon the ultimate sale of the inventory. NRV is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. At the end of each reporting period, the Company determines the estimated selling price of its inventory based on market conditions. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the years ended December 31, 2025, 2024 and 2023 the Company recorded inventory write-downs of $15,936, $2,276 and $1,970 respectively, to reduce inventories to their net realizable values and for any excess or obsolete inventories, including in connection with the Company’s production pause.\n\nFair value of financial instruments\n\nFair 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. We measure financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.\n\n93\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)\n\nA 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:\n\nLevel 1 — quoted prices in active markets for identical assets or liabilities.\n\nLevel 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.\n\nLevel 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.\n\nFinancial instruments consist, among others, of cash equivalents, other accounts receivable, short-term loan, trade payables and other accounts payable and accrued expenses. These financial instruments are stated at their carrying value, which approximates their fair value due to the short time to the expected receipt or payment date. The Company considers its pre-funded warrants to be Level 2. The warrants and derivative liabilities are measured at fair value using Level 3 inputs.\n\nRecently Issued Accounting Pronouncements\n\nSee Note 2 to our consolidated financial statements included elsewhere in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.\n\nOur status as an emerging growth company\n\nUnder the JOBS Act, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an “emerging growth company” to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies. We meet the definition of an “emerging growth company” and have elected to use this extended transition period for complying with new or revised accounting standards until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements and the reported results of operations contained therein may not be directly comparable to those of other public companies.\n\n94\n\n[Table of Contents](#ib754f8dbfd9a410ebea6292869b01926_7)"}